Why are banks rushing to Dharavi?

By Nupur Acharya and Vivin Mathew/CNBC-TV18

Asia's biggest shantytown Dharavi remained unbanked for the last 60 years. But in the last 16 months a rush of banks have opened branches here. So, what attracted bankers to this slum?
 
It is a stretch of slum spread in a 2 km radius. In the heart of Mumbai, Dharavi stands out as clear evidence of economic exclusion within a prosperous finance driven city. Until last year, there wasn't a single commercial bank here, but just a couple of co-operative banks. In the last 16 months, four nationalised banks have thought it fit to open shop in this congested landscape. These include Canara Bank, Indian Bank, Union Bank of India, and now Development Credit Bank.
 
Praveen Kutty, Head-Consumer Banking, DCB, said, "There are close to one million people, 75% of which are unbanked. So, it is a great opportunity for someone looking for lifetime loyalty, sustainable profitability, and financial inclusion conservatively. If we can get 10% of the families to bank with us in the first 15 months, we would be extremely happy."
 
Even public sector Canara Bank believes that Dharavi famous for its leather industry offers growth in almost all kinds of business lines.
 
PN Murthy, GM-Mumbai, Canara Bank, said, "They have a disposable surplus with them. There is trade, there is an industry, and there is services activity. The size of the business turnover is Rs 4,400 crore. In three years, we look at capturing 10% of the market."

Not too long ago banks used to shy away by the mere mention of the name Dharavi. But a lot has changed now. Banks today are extending loans to leather goods manufacturers like these to help them expand their business. 

Ravi Kodam of Sai Garments said, "Nationalised banks were not ready to open branches. It was difficult to open accounts, if we used to give our Dharavi address. We thought it was better to keep our savings at home."

Kodam carries out a readymade garment job work for leading retail companies. He has today helped over 1,000 people open accounts in Indian Bank. Of these, many have taken small size loans of Rs 20,000 for their businesses.  Wakeel Ahmed Khan is one such manufacturer.

Wakeel Ahmed Khan, ARF Leather, Dharavi, said, "I can now make fast payment to the party through the support of banks. With fast payments, my sales have increased."

As top banks zero in on this under-banked urban pocket, cooperative players like Abhyudaya with 40,000 depositors are likely to feel the heat.

M Shetty, Managing Director, Abyudaya Cooperative Bank, said, "Dharavi is expanding day by day and banks are attracted. So, there would be competition, but healthy competition is always welcome."
 
As more banks descend on the shantytown, Dharavi can finally hope to be included in the financial mainstream.