Banks chase pot of gold in Slumdog territory

See Business In Squalor,Want To Set Up Branches In Dharavi

Arun Iyer & Abhijit Deb BANGALORE/MUMBAI

 IN February 2007, nearly two years before the Oscar-nominated movie, Slumdog Millionaire, made Mumbai's Dharavi slum an object of international fascination, two government-owned banks got into a row trying to claim credit for being the first to stake a claim in the squalor.
    Chennai-headquartered Indian Bank had just inaugurated its branch in Dharavi, billing it as the first such in an area that combined spectacular poverty with thriving enterprise, but larger rival State Bank of India (SBI) was unimpressed. India's biggest bank said its branch, which it said had been set up in 1975, was the original discoverer of the financial potential of the slum.
    But Indian Bank countered by saying SBI's branch was located on the main road while its was in the "heart of Dharavi". While the argument has gone on, Dharavi has grown in attraction — Canara Bank and the Aga Khan-owned Development Credit Bank are now proud owners of a Dharavi address.
    The banks, clearly, have decided that it's not a good idea to judge a book by its cover — the slum may be a labyrinthine warren surrounded by filth, but lakhs of migrants who run thousands of tiny businesses there send Rs 3,000-4,000 crore every year to hometowns in Tamil Nadu, Uttar Pradesh and Bihar, senior bank officials say.
    "Dharavi is one of the most significant migrant destinations as compared with Surat (in Gujarat) or Punjab. The estimates that I have for remittances from Punjab to Bihar are about Rs 1,000 crore and from Gujarat to Orissa about Rs 2,000 crore. But as there are no official data, comparisons are hard to make," says Priya Deshingkar, a research fellow at London-based Overseas Development Institute whose field of study has included cash remittances by migrant workers.
    MS Sundara Rajan, CMD of Indian Bank, says the opening of the Dharavi branch was a "logical step" because of the large cash remittances to Tamil Nadu from Dharavi through "informal channels", including friends and relatives carrying the money to families back home. Micro enterprises, SHGs seen as business option
    "WITH our wide branch network, we are looking at tapping into this
business," he says.
    Union Bank of India does not have a branch in Dharavi, but it has appointed an intermediary called a banking correspondent to tap into the area's business potential, says its CMD MV Nair. "We are trying to move people from using informal channels to the banking system. By providing facilities such as biometric ATMs, the people of Dharavi will get an opportunity to use the banking network to safely remit money," said an official of Canara Bank. Indian Bank says that it transfers about Rs 5 crore from Dharavi for its customers every month, while a Canara Bank official said that it would be difficult to provide an estimate.
    But there is no doubting the fact that the ATMs are popular — Indian Bank's ATM records some 700 'hits' on average daily, while it's 100-125 for Canara Bank. Bank officials say that typically ATMs in areas such as the nearby residential locality of Matunga average 250-300 hits daily.
    "In places like Nariman Point, there are many ATMs. Also, the number of customers is lesser compared with the number of people who live in Dharavi," a bank official told ET.
    Indian Bank puts the volume of its business in Dharavi at about Rs 30 crore every year and bankers say that funding micro-enterprises and selfhelp groups (SHGs) is the most obvious business option. The slum has a number of enterprises engaged mostly in zari work, leather goods manufacturing and apparel production.
    "Dharavi has a wide range of microenterprises whereas other major migrant destinations have more specialised industries, such as diamond polishing in Surat and the hosiery industry in Tirupur in Tamil Nadu," says Ms Deshingkar of the Overseas Development Institute. Most bankers admit that the process of attracting remittances has been slow to gain momentum and even though they are keen to provide funding, many Dharavi residents who spoke to ET say that gaining entry into the formal financing system is easier said than done.
    "We don't get loans when we give our Dharavi address. Moreover, most of us are illiterate and for any bank to connect with us takes time. So, instead of going through this tedious process, most of us still prefer to get loans from moneylenders who 4-8% per month," says Rashmi Yadav, who runs a centre which sells milk in the slum.