Axis Bank plans to tap urban poor

Axis Bank has tied up with south-based microfinance institution Janalakshmi Social Services to provide banking services to the urban poor.

Janalakshmi, promoted by Ramesh Ramanathan will use its client base to provide banking services of Axis bank and will work as business correspondent to sell other products of the bank.

“It solves two purposes for us. Firstly, it is part of the bank’s financial inclusion plan that will come through this effort. Secondly, unbanked population in urban areas is a big and faster growing segment, which the bank intends to tap,” Axis Bank Managing Director and CEO Shikha Sharma said at launch of this new initiative here.

She also said that Bangalore would be the first city to start with, which would be spread to 50 other cities in the near future. Axis Bank will provide facilities like ‘No Frills Savings Bank Account’ to the urban poor through this initiative, along with marketing of other financial products. She, however, declined to give any figure of target for deposit and credit in this segment.

“The migrant and informal sector population in urban cities undertakes viable economic activity and creates productive assets, yet, they can’t access formal sources of credit or take care of their savings through formal channels. We are happy to be a part of this urban financial inclusion initiative by Axis Bank to reach out to the huge unbanked and underbanked population in urban India starting with Bangalore,” Ramesh Ramanathan, promoter and chairman of Janalakshmi Social Services said, adding that this plan would be extended to other cities by end of 2010-11.

India’s third-largest private lender, Axis Bank is one of the fastest growing banks of the country. As per analysts, this step would help the lender to enter into micro finance space, which was till now largely untapped by commercial banks. However, the bank has to stay invested in this model for some time before attaining operating profit.

“We don’t hope to make operating profit from this segment for next two years but are likely to reach sustainable level in the third year of operation,” Sharma said. Axis Bank has more than 1,070 branches across the country with a customer base of over one crore as of now.

The bank posted a net profit of Rs 742 crore, up 32 per cent in the April-June quarter of 2010-11.

Net interest income of the bank rose 45 per cent to Rs 1,514 crore during this period.