Canara Bank is the second largest bank in India. It has a prominent presence through its network of branches in most parts of South India, particularly the states of Karnataka and Kerala. It has promoted several Regional Rural Banks (RRBs or Grameens) and is a lead banker in several districts. The bank is credited with introducing several innovative rural financial products in India. It also finances group lending through linkages with Self Help Groups, and hence can advance loans to the poorest .
Syndicate Bank is another major Indian bank, headquartered in Karnataka State, which has made deep inroads in rural areas of Karnataka and Kerala State. The Bank is known for its innovative products and progressive management. The bank has promoted several RRBs and is the lead banker in several districts of the two States. Syndicate Bank, along with its sponsored South Indian Grameen Banks, has the maximum exposure to solar loans among all banks in India, although this experience is still nascent.
Rationale for selection
Large size: The selected banks have a significant physical presence in both states and good brand equity. They have a substantial fund base and have the net worth and ability to significantly leverage UNEP support. Both have considerable experience in designing, customizing, launching and implementing special loan programs in rural areas in their command areas. They are keen partner with UNEP because it gives them an opportunity to expand their loan product range in the environmental sector and widen their customer base. They have systems in place for handling special loan programs and do not see any major policy constraints in working in partnership with UNEP.
Access to Rural areas: The Banks have vast branch networks in rural areas in Karnataka and Kerala States. Having the 'lead banker' designation in certain districts gives them the infrastructure to work in a focussed manner in these areas as well as influence other banks operating in the same district. Between them and their associated grameen banks, every district in Karnataka State can be effectively served.
Ability to replicate: Replication of the loan programs on a sustainable basis will be possible due to their position as lead bankers in the states. Canara and Syndicate Bank also have a national presence, therefore the reach to offer similar loan products in other parts of the country. Besides their own branches and the grameen networks they support, their leadership often also influences other banks. In the past a number of innovative programs launched by both Canara Bank and Syndicate Bank have later been taken up nationally by the Reserve Bank of India (RBI) and the National Bank of Agriculture and Rural Development (NABARD).
UNEP support will be leveraged six times by partner bank financing. As a result, the major financiers in the project will be the participating banks, not UNEP. Vendors are also keen that the credit availability created by the UNEP facility will help them expand their customer base. Therefore, the project is expected to have high commitment from both banks and vendors, two crucial stakeholders.