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Financing Self Help Groups of Syndicate Bank Under the Concept of Micro Finance in Bangalore Division KRpuram

Financing Self Help Groups of Syndicate Bank Under the Concept of Micro Finance in Bangalore Division KRpuram

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Published by Prashanth Banu

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Published by: Prashanth Banu on Aug 29, 2012
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Banking in India originated in the last decades of the 18th century. The first banks were TheGeneral Bank of India, which started in 1786, and the Bank of Hindustan, both of which are nowdefunct. The oldest bank in existence in India is the State Bank of India, which originated in theBank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This wasone of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company.For many years the Presidency banks acted as quasi-central banks, as did their successors. Thethree banks merged in 1925 to form the Imperial Bank of India, which, upon India'sindependence, became the State Bank of India.The first fully Indian owned bank was the Allahabad Bank, established in 1865. When theAmerican Civil War stopped the supply of cotton to Lancashire from the Confederate States,promoters opened banks to finance trading in Indian cotton. With large exposure to speculativeventures, most of the banks opened in India during that period failed. The depositors lost moneyand lost interest in keeping deposits with banks. Subsequently, banking in India remained theexclusive domain of Europeans for next several decades until the beginning of the 20th century.Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoired'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;branches in Madras and Pondicherry, then a French colony, followed. Calcutta was the mostactive trading port in India, mainly due to the trade of the British Empire, and so became abanking center. Around the turn of the 20th Century, the Indian economy was passing through arelative period of stability. Around five decades had elapsed since the Indian Mutiny, and thesocial, industrial and other infrastructure had improved. Indians had established small banks,most of which served particular ethnic and religious communities.
The presidency banks dominated banking in India but there were also some exchange banks anda number of Indian joint stock banks. All these banks operated in different segments of theeconomy. The exchange banks, mostly owned by Europeans, concentrated on financing foreigntrade. Indian joint stock banks were generally undercapitalized and lacked the experience andmaturity to compete with the presidency and exchange banks. This segmentation let Lord Curzonto observe, "In respect of banking it seems we are behind the times. We are like some oldfashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersomecompartments."By the 1900s, the market expanded with the establishment of banks such asPunjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of whichwere founded under private ownership. Punjab National Bank is the first Swadeshi Bank foundedby the leaders like Lala Lajpat Rai, Sardar Dyal Singh Majithia. The Swadeshi movement inparticular inspired local businessmen and political figures to found banks of and for the Indiancommunity. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.
“Microfinance” is often defined as financial services for poor and low
-income clients. Inpractice, the term is often used more narrowly to refer to loans and other services from providers
that identify themselves as “microfinance institutions” (MFIs). The
se institutions commonly tendto use new methods developed over the last 30 years to deliver very small loans to unsalariedborrowers, taking little or no collateral. These methods include group lending and liability, pre-loan savings requirements, gradually increasing loan sizes, and an implicit guarantee of readyaccess to future loans if present loans are repaid fully and promptly.In the development paradigm, micro-finance has evolved as a need-based policy and programmeto cater to the so far neglected target groups (women, poor, rural, deprived, etc.). Its evolution isbased on the concern of all developing countries for empowerment of the poor and thealleviation of poverty. Micro-finance programmes have, in the recent past, become one of themore promising ways to use scarce development funds to achieve the objectives of povertyalleviation. The basic idea of micro-finance is simple: if poor people are provided access tofinancial services, including credit, they may very well be able to start or expand a micro-enterprise that will allow them to break out of poverty.For development practitioners, the success of micro-finance programmes is encouraging. Toooften in the past, costly large-scale development initiatives have failed to achieve any sustainablebenefits, especially after funds have dried up. Thus, micro-finance has become one of the mosteffective interventions for economic empowerment of the poor.
The first major demonstration of this kind of lending came from Bangladesh, a country whichwas virtually synonymous with poverty. During 1976, Muhammed Yunus, then a professor of economics at Chittagong University, began an experiment aimed at helping impoverishedvillagers. Defying the usual rules, he lent them unsecured money to start small enterprises,such as rice processing, rickshaw-driving and weaving. Instead of collateral, the borrowers wereto form small groups( called Self Help Group) and agree to a fact of mutual liability, in

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