THINK ANDHRA PRADESH and there’s a good chance the first thing that comes to mind is agriculture. While some of the farmers in the state are rich, most are marginal and need funds for even basic agricultural inputs.

Saptagiri Grameena Bank (SGB), jointly owned by Central government, Andhra Pradesh government and Indian Bank, is lending a helping hand. When it was set up in 2006, its mandate was clear — bringing financial inclusion and economic empowerment in rural India. That is exactly what it has been doing for the past 18 years. For this, it is important to bridge the gap between the need for hassle-free access to finance and demands of the formal banking system. It has managed to strike a balance.

Today, SGB has 245 branches in Chittoor, Krishna, Eluru, Annamaya, NTR and Tirupati districts. The management says what makes the bank unique is its deep understanding of needs and challenges of rural communities. “Around 85% business comes from agricultural loans and lending for allied activities such as milk production, animal rearing and tractor buying,” says Prakash Ratna Babu, regional manager, SGB.

Realising that farmers need affordableand timely credit more than anything else, SGB has streamlined the loan application process. It works with four counsellors in six districts to educate farmers and help them manage risks. One of its USPs is hand-holding the farmer through repayments so that he achieves financial stability and avoids the debt trap.

“Our team members have a sound understanding of the (agriculture) process and can calculate crop yields. This minimises (repayment) risk for them as well as us,” says Babu. As a result, SGB has zero net non-performing assets (NPAs). The magic trick lies in developing an understanding of the local community, says the management. Most employees are local residents who empathise with farmers. The bank also spends time educating the customer and building trust. All this helps it provide farmers solutions for specific financial needs. In fact, 15% of the bank’s business comes from non-priority loans such as housing and vehicle (including tractors).

The Collateral

SGB’s biggest success has been managing complications on the ground. For example, the farmers may not have any asset for getting a loan. In such a case, how has SGB managed zero NPAs in spite of giving collateral-free loans? Officials say they work closely with the local community. “It is only during harvesting that we try to take premium or interest from the farmer,” says Babu. The logic is that this is the only time the farmer has some disposable income.

Babu also makes an effort to travel in the hinterland to meet farmers for loan recovery. “There are farmers who do not have PAN or any other identity document. Often, one has to calculate their potential income and crop yield before the big decision,” says Babu.

Having a varied product portfolio also helps. Apart from loans, the bank provides micro-insurance products such as Pradhan Mantri Jeevan Jyoti Beema Yojana under which an annual premium of ₹436 gets you a ₹2 lakh life cover in case of death from natural causes. Similarly, under the Pradhan Mantri Suraksha Beema Yojana, ₹20 each year provides a cover of ₹2 lakh for accidental death.

SGB is upbeat about the future. A NABARD report says the 43 RRBs posted a consolidated net profit of ₹4,974 crore in FY23, up 54.5% from FY22. Gross NPAs were at a seven-year low of 7.28%. Consolidated business crossed ₹10 lakh crore during the year. The performance encouraged government to take steps to infuse ₹10,890 crore in RRBs in FY22 and FY23. Half came from government of India, 15% from state governments and 35% from sponsor banks. SGB earned a net profit of ₹351 crore in FY23. Gross NPAs were 0.73%.

Experience in an agrarian economy makes RRBs like SGB stand tall. Those with a sound understanding of RRBs say there is a need to look at the business through a different lens. It should be viewed as an inseparable part of the rural lending framework where credit, internet banking, digitisation and better governance are provided. The rural economy must be made to prosper if we are to develop as a nation. And SGB is doing just that, one account at a time.

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