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Axis Bank counts on digital to expand footprint in rural India

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Axis Bank is working on growing its business in rural and semi-urban markets in India, through what its management calls ‘deep geo strategy’. With its strengths in technology, the bank hopes to grow its assets or lending business in these areas, said Sumit Bali, president and head, retail lending and payments, Axis Bank.

In a conversation with reporters on Thursday, Bali said that the bank has identified about 1,577 branches in its network for the deep geo strategy, through which it has witnessed pretty strong growth. “We are very excited with this initiative going forward and we see strong growth month-on-month and this will, therefore, also help us become a significant strategic player in the overall rural side of the country. It will also generate for us priority-sector and agri assets, going forward,” he said.

Through Common Service Centres, the bank has a network of close to 5,000 village level entrepreneurs who will act as distribution points for funding farmers, disbursing gold loans, home loans and two-wheeler loans. “This is an identified strategy that we want to be a significant player in the rural part of the country and we’ve also made a strategic investment in the CSC (common service centres), which will help us set up a strong distribution footprint across the country,” Bali said.

Banking on digital strengths: According to a December 2020 presentation, the bank believes that public data and digital infrastructures will help transform banking services and lending products going forward, such as sachetisation of financial services and creating an ecosystem of services small businesses. The bank now has a 800-person dedicated digital team and 110-strong tech team that will build on the banks’ digital platforms and ecosystem services.

The bank says that for business loans, through the use of Goods and Services Tax information, it can disburse loans within 5-8 minutes without any paperwork, which also reduces the cost of acquisition by 71%. Further, the bank aims to target kirana stores with financial services for distributors, wholesalers and payments services. It is conducting pilots in seven cities to spearhead its kirana store strategy to on board 15,000 merchants in a six month period, it said.

Rise in retail loan NPAs

While the bank is optimistic that its digital strengths and its partnership-led model to grow the lending business in rural and semi-urban areas, it expects retail non-performing assets (NPA) to rise in the coming  December and March quarter. “When we came off the moratorium, we saw slightly higher bouncing in September, but since then there has been month-on-month improvement. While the numbers are lower than our internal projection, the situation seems to be getting better for us. There could be some slippage in the third and fourth quarter numbers,” Bali said. He added that the bank expects retail NPAs to only go back to pre-COVID levels in the new fiscal year.

As of September 2020, the banks’ NPAs stood at 4.18% compared to 4.72% in June 2020 and 5.03% in September 2019. “Given the fact that lot of people lost their jobs, some had to take salary cuts, some industries were badly affected that will have some impact on delinquency and portfolio collections,” Bali said.

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