Assessing Market Potential and Business Models of Banks in Rural India

Background and Challenge

The client was one of India’s largest international banks having a combined customer base of 2.1 million in retail banking and over 1,000 top corporate relationships. In light of the exponential growth expected in rural financing and given the client’s strong commitment to the Indian market, the top management was evaluating entry in semi urban and rural markets.

Approach and Recommendations

To assess the market potential and business models, UC adopted the following approach:

  • Conducted in-depth primary research across eight locations – Sangrur, Guntur, East Godavari, Ganganagar, Kota, Belgaum, Bellary and Sitapur. Parameters used for identifying locations were food and cash crop production, extent of agricultural loans, demand and consumption trends for agri-related products like tractors and fertilisers, concentration of organised retail chains (E-choupal, Haryali Kisan Bazar), concentration of potential distribution channels like post offices and extent of microfinancing
  • Identified key financial products - crop loans (Kisan Credit Card), land development loan, commodity financing, working capital loan, jewel loan and micro financing
  • Segmented shortlisted locations’ rural customers into R1, R2, R3 and R4 based on their demographic profiles and incomes. Analysed customer preferences for different types of products
  • Analysed average interest rates and delinquency rates across product categories
  • Analysed the following for financial entities operating in rural markets, i.e. regional rural banks (RRBs), commercial banks, co-operatives, self-help groups and microfinance institutions

    1) product portfolio

    2) market share and presence

    3) customer preferences

    4) distribution channels and technology platform

    5) organisation structure

    6) cost structure – capital and recurring

  • Categorised districts by assessing product and market attractiveness. Estimated the potential of rural finance in identified districts. Extrapolated sizing for other key districts in the state. Estimated the overall potential for rural credit in India


UC identified key elements of the rural financing business model – product portfolio, customer segments, alliance partners, distribution channel and technology platforms. We rolled up implementation plan for the client.