RCF model of Indian Bank for micro credit

Abstract

Purpose

Indian Bank, a major commercial bank in South India, has launched Rural Credit Franchisee (RCF) model for lending money to small borrowers in villages. The study aims to study the business model, the profile of ultimate borrowers and their credit requirements and to study the economics of the model.

Design/methodology/approach

Data used for the study are mostly primary in nature collected from the RCFs and the rural borrowers. In addition, bank officials were interviewed and also data on loan accounts of RCFs were collected from the sample bank branches and the RCFs.

Findings

The RCF scheme is a novel micro finance scheme and it has showcased that the informal institutions can be linked with the formal credit institutions. The scheme has benefited all the stakeholders including the bank, the RCFs and the rural poor.

Research limitations/implications

The study has covered majority of the RCFs of the bank in terms of number and volume of business under the scheme and hence the results indicate the performance of the entire portfolio of the bank under the scheme.

Practical implications

The study finds that the scheme has benefited all the stakeholders. It has particularly helped in creating competition amongst the rural moneylenders and thereby bringing down the cost of credit in rural hinterlands. Findings are strongly in favour of expanding/replicating the model by the other commercial banks and in all parts of the country, rather across the entire world.

Originality/value

The RCF model is one of its kind and the policy makers and regulators may encourage the scheme in order to attain inclusive economic growth. This is a first of its kind study investigating the operation of such a model.

Citation

Dasgupta, R. and Malai, M. (2013), "RCF model of Indian Bank for micro credit", Journal of Asia Business Studies, Vol. 7 No. 1, pp. 57-67. https://doi.org/10.1108/15587891311301025