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9 Thus ICICI has sold some of its bought-out assets to Development Credit Bank which enabled it to meet
priority sector targets. There could develop a demand for such assets in the future from institutions
such as mutual funds if they receive high ratings in view of the safety of the underlying assets.
10 For a description see Ananth et al 2004 and Mor and Ruchismita (undated, mimeo). ICICI is reported
to be considering making greater use of portfolio buyouts in the future, at the expense of partnership
lending.
11 Much of this paragraph relies on Mor and Ananth (2006). For a comprehensive survey of the status,
challenges and opportunities of extending technology applications in Indian microfinance see Intellecap
(2006). Both Intellecap (2006) and Sinha and Rasmussen (Forthcoming) contain forceful reminders
that most MFIs are still putting in place basic Information Systems to track lending operations and
automate accounting and management reporting. For MFIs, this first stage of technology application
is the foundation for more advanced technology applications such as POS (point of sale) devices which
promise to reduce costs and improve accuracy in the field. A shared technology platform with connectivity
to MFIs and their branches such as that being proposed by FINO could reduce the hardware costs of
such IS systems while preserving confidentiality by ensuing data separation for the various users
(including cooperative and rural banks).
12 CASHE has incubated 35 MFIs in Madhya Pradesh, Orissa and West Bengal (as well as AP) with grants
for operational expenditures and capacity building, along with revolving fund assistance, and has
prepared some of them for transformation. For ICICI's tie-up with CASHE/ACCESS for incubating new
partners in MP see Chapter 6.
13 ICICI is experimenting with using MFIs such as KAS and Grameen Koota as BCs for opening and
administering savings accounts. The BCs help fill in the account opening form and satisfy KYC requirements
(e.g. checking identity cards and proof of address) some of which are cost-raising irritants. An e-
passbook is issued to the account holder and all transactions are done only on an authentication
device. Four free savings and withdrawal transactions are allowed a month. The challenge is to reduce
costs below those of mobilizing much larger savings from regular bank customers.
14 The cost of a basic hand-held device is still Rs 10,000 to 15,000.
15 Another problem that has been pointed out is that the Khan Committee Report recommends that while
BF/BCs can have relationships with different banks in different areas, only one contractual relationship
is permissible with one bank in a defined geographical area. This modality of exclusion would require
(i) the areas to be defined and (ii) monitoring to maintain geographical exclusions, therefore indicating
the involvement of a regulator. Credit information on borrowers would be shared by the banks through
the proposed National Microfinance Information Bureau (NMIB). The NMIB is a body proposed to be
established under NABARD to collect and store data on clients.
16 HDFC Bank was reported to be considering this option.
17 This interest has generally been the PLR less 0.5 per cent.
18 See Sanjay Sinha, in "Debate: Cap the interest rate on microfinance", Economic Times, March 21,
2006, who anticipates a massive expansion of bank lending to the poor if the banks were allowed to
recover their costs of 18-21 per cent of making small loans directly to the poor.
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