Cost of Delivering Rural Credit in India

Authors: Anand Sahasranaman & Deepti George, IFMR Finance Foundation

This note takes a first principles look at the costs incurred for various lending channels: namely direct lending by public and private banks though branches, and lending by banks via intermediaries such as SHGs and MFIs. The note attempts to build up the total cost of credit delivery by assessing 4 components: cost of debt, cost of equity, loan loss reserves and transaction costs.

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