Suvalaxmi Chakraborti of ICICI Bank is a busy woman. Sifting through rural banking strategy papers behind glass-and-steel doors of the ICICI Bank headquarters in Mumbai’s Bandra Kurla complex, her immediate concern is to touch the lives of women in remote and inaccessible areas who do not know what a bank branch looks like.

“We have to be present in the remote areas where the real potential for small loans lies,” says Chakraborti who heads ICICI Bank’s rural banking. “We have a network of 102 partners who identify the customers for micro-finance and make them credit-ready for us to lend money.”

Thanks to low default rates and high margins, bankers like Chakraborti are rushing to identify micro-finance customers in rural India where millions live below the poverty line. The initial feedback from the ground, say bankers, is that there is a huge potential for micro-finance but a lot needs to be done.

Self-help groups have come up across the country and as of March 2006, 2.2 million such groups have received loans worth Rs 11,400 crore. ICICI itself has lent close to Rs 2,350 crore for micro-credit which includes loans against jewellery.

But while micro-credit has the potential to reduce poverty, it is fast taking the fancy of Indian banks as a tool to make money. Interest rates charged for these small loans, ironically, is as high as 18 to 19 per cent as against say, 9.75 per cent for a home loan. The default rate among the customers — especially women — is also low thus opening a new profit stream for the banks.

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