ESAF Small Finance Bank Creates Micro Banking Vertical with 5,200 Staff

Kochi, July 1, 2024: ESAF Small Finance Bank (ESAF SFB) has absorbed about 5,200 employees from ESAF Swasraya Multi-State Agro Co-operative Society Limited (ESMACO), a corporate business correspondent of the bank, as part of a strategic business restructuring. The bank will now directly manage the micro loan portfolio that was previously managed by ESMACO through banking outlets. This move aims to mitigate concentration risks while allowing ESMACO, a promoter group entity of the bank, to continue managing business operations at the Customer Service Centers.

The micro banking vertical, created with a 5,197-strong workforce, will primarily serve the needs of the rural population through micro loans, agriculture loans, vehicle loans, and home loans, ESAF Small Finance Bank Managing Director K. Paul Thomas said. The bank is also designing liability products to suit the needs of low and middle-income savers, he added.

Explaining in detail, Thomas said the bank decided last month to discontinue certain specific parts of the existing scope of business correspondent services provided by ESMACO, one of the promoter group entities of the bank.

Explaining in detail, Thomas said the bank decided last month to discontinue certain specific parts of the existing scope of business correspondent services provided by ESMACO, one of the promoter group entities of the bank.

Despite the business restructuring, ESMACO will remain the bank's largest business correspondent, overseeing 14.90% of gross advances. Furthermore, the bank will manage 66.14% of gross advances directly, reducing the cumulative percentage of gross advances managed by all its business correspondents to 33.86%, he noted.

"This decision is part of the bank’s strategy to mitigate concentration risk associated with reliance on a single business correspondent and to bring the business operations in-house," he explained. "This move aligns with our risk management and operational efficiency objectives to further improve our control and visibility over these operations."

As a result of the discontinuation, nearly 5,200 identified staff of ESMACO transitioned into the bank effective July 1, 2024.

It is notable that the bank's board, in its meeting held on June 14, 2024, decided to reduce concentration on individual business correspondents. They also approved discontinuing specific parts of the existing scope of business correspondent services provided by ESMACO. Additionally, the board approved the absorption of ESMACO employees who were part of the discontinued business correspondent arrangement, including selected supervisory, support, and business operations staff, ensuring uninterrupted and continuous service to customers for a one-time consideration, as communicated by ESMACO.