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Study of Business Correspondence Model in India
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Introduction Chapter 1
According to United Nations (2006), financial sector should provide access
to credit for all ‘bankable’ people and firms, insurance for all ‘insurable’
people and firms and savings and payments and services for everyone.
However in emerging economies like India, where about 70% of the
population lives in villages, large number of bankable and insurable
people are left unbanked and uninsured thereby depriving them a chance
of breaking the shackles of poverty. This created the need for moving
from ‘banking the unbanked’ towards ‘financial inclusion’ which may
consist of innovative financial services for this strata of society in rural as
well as urban regions.
The 2011 census states that about 69% of the population lives in villages,
80 million of the population is below poverty line and number of slum-
dwellers in the urban areas is about 94 million. The poor still heavily relies
on the informal financial institutions because of the ease of transactions
and low transactional costs. To go door-to-door explaining those about the
benefits of organized financial services would require a mammoth
manpower and co-ordination skills of an army general. Financial
institutions have been trying to reach the poor with new customized
financial products through innovative channels.
The business correspondent model was introduced by RBI in 2006 to take
the financially excluded people away from the informal financial sector
and introduce them to formal banking services with comparatively less
total cost to the customer.
The Hon’ble Union Finance Minister, in his budget speech, 2010-11
announced that all banks should prepare a roadmap for providing banking
services through a banking outlet in every village with population above
2000 in the Financial Year 2011-12 (NABARD, 2010). The villages with
population between 1000 to 2000 are supposed to be covered in the
Financial Year 2012-13.
There are 4292 Villages in Maharashtra with population above 2000.
These villages were allocated to all commercial banks and the 3 RRBs
according to their presence in various districts. (See Annexure 1 for
details). Out of 4292, BCs were to be appointed in 4071 villages and bank
branches were to be opened in the rest. The State Bank of India has been
allotted maximum number of villages, i.e. 855. The three RRBs viz.
Maharashtra Gramin Bank, Vidarbha Kshetriya Gramin Bank, Wainganga
Krishna Gramin Bank were allotted total 510 villages out of which BCs
were to be appointed in 495 villages and bank branches were to be
opened in the rest. (SLBC 2012)
Buldana district in the state of Maharashtra has 148 villages with
population above 2000. SBI has been allocated 61 villages in the district
under the financial inclusion drive. As on 31st March 2012, BCs are
appointed in 59 villages out of 61 and bank branches have been opened
in the rest two villages. (SLBC 2012) In order to review the
progress/implementation of the scheme, a detailed survey was conducted
in this district. The report of the survey is presented in the subsequent
chapters.
2 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Objectives and Methodology
Chapter 2
2. 1 Objectives
While the importance of the business correspondent model has been
widely recognized, the literature that can be used to measure the extent
of consumer awareness and expectations regarding the presently used
model is lacking. One of the most common indicators used to measure the
extent of financial inclusion is the number of accounts per 100 adult
persons (Sarma,2007). This indicator is however flawed since existence of
bank account does not indicate the necessary awareness among the
customers required to utilize the service. The business correspondents
might seek out new customers to create bank accounts in order to
complete the targets without giving them the complete knowledge about
the benefits of various schemes that the customers can avail.
Knowledge of banks’ implementation of BC model, consumer awareness
and expectations etc. may facilitate efficient allocation of productive
resources and thus reduce the cost of capital making the BC model more
financially viable. Also clients feel secure about their transactions with the
business correspondents if they are well informed and understand their
own banking requirements clearly.
Hence a mapping of the actual implementation of the BC model needs to
be done in the rural regions as well as urban slum areas where the
Business Correspondent model can be successfully implemented in order
to achieve financial inclusion.
The main objective of this research hence is to serve as a fact finding
survey of the BC model from the point of view of all the stake holders.
The research could be useful for following reasons
1. To measure the effectiveness of the existing model
3 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
2. To measure customer satisfaction with the existing model
3. To frame policies for alteration/expansion of the business
correspondent services
Specific terms of reference of the study are as under:
1. To review the present status and working of the business
correspondence model and identify additional requirements/ potential for
improvement in existing model
2. To review the operational and implementation aspects of the schemes
as against its objectives
3. To review the difficulties faced by various banks while implementing
the model
4. To review the difficulties faced by the business correspondents while
providing financial services through the branchless banking model
5. To analyze the impact of the existing model on the end users
6. To map consumer expectations so that the offered services through this
model are in tandem with the requirements of the end users
2.2 Methodology
As the study requires insight into the functioning of BCs and the status of
BCs as a component of financial inclusion, primary data has to be
collected from BCs, district administration, lead bank, clients (account
holder), control sample, bank branches etc. in order to understand their
operational details. For this, a three stage stratified random sampling
technique has been used.
Stage 1: Selection of Bank Branch –
The secondary data is maintained by SLBC regarding the allocation of
villages above population of 2000 (as per RBI guidelines) to various
4 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
commercial as well as regional rural banks was obtained. Based on the
data, one commercial bank – State bank of India was selected for the
survey. The data from SLBC was used to identify a district with high BC
concentration for SBI. Based on the information, Buldana district was
selected. (See Annexure 2)
Stage 2: Selection of 10 BCs of the selected bank – For variation purpose,
BCs were selected from various blocks of Buldana district considering their
profiles i.e. main and secondary occupations, residing village etc. The BCs
were directly appointed by RO, SBI, Buldana and not through any
commercial BC.
Stage 3: 10-15 respondents(including 10 customers who use the services
of the particular BC as well as 5 respondents not having account with
BC(control sample) were selected.
2.3 Sample Size:
Sr. No Stake holders Sample Size
1 Bank 1
2 BCs 10
3 Customers 10 per BC
4 Non-customers 5 per BC
2.4 Data Collection
The primary and secondary data were collected in the following manner.
2.4.1 Primary Data
Primary data was collected from all the stake holders involved in the
implementation of the BC model with the help of open ended structured
questionnaires by personally interviewing the stakeholders. While
selecting the sample, care was taken to give fair representation to all
strata of the stakeholders.
5 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
2.4.2 Secondary Data
Secondary data on the BC model was collected from the concerned RBI
circulars. Financial Inclusion Dept. of NABARD RO, Pune and SLBC, Bank of
Maharashtra, Pune. The information available through various research
papers written on the topic of Financial Inclusion was also referred to draw
various conclusions.
2.5 Data Analysis
The data were tabulated and analysed by using standard tools like
averages tabular analysis etc. in Microsoft Excel.
2.6 Reference Year
The reference year for the study was 2011-12
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Literature Review
Chapter 3
In India, the nationalization of banks marked the beginning of financial
inclusion. One of the prime objectives of bank nationalization (1969 and
1980) was to inflate the flow of credit to agriculture and small industries,
this direction of lending was termed as ‘priority sector’ lending
(Ramachandran and Swaminathan, 2002 and 2005). Rural banks were
setup with the objective of serving the poor but they concentrated mainly
on not-so-poor rural borrowers and not on the larger chunk of the
population which consisted of landless agricultural labourers or 2 acre
farmers who were struggling hard to preserve their tiny piece of land. The
State as well as commercial banks in India were still not well positioned to
meet the demands of these emerging markets.
The report of the committee on Financial Inclusion in India (Chairman C.
Rangarajan) defines Financial Inclusion as “The process of ensuring access
to financial services and timely and adequate credit where needed by
vulnerable groups such as weaker sections and low income groups at an
affordable cost.”
World Bank, in 2008, defined Financial Inclusion as “Broad access to
financial services with an absence of price and non-price barriers.”
Usha Thorat, Deputy Governor, RBI, in her speech, 2007 expressed
Financial Inclusion as “by financial inclusion we mean the provision of
affordable financial services, (viz., access to payments and remittance
facilities, savings, loans and insurance services) by the formal financial
system to those who tend to be excluded”
Also about two decades have passed since microfinance was introduced in
India. Though there are many success stories of how people came out of
poverty with the help of loans offered by MFIs, micro-credit through Bank-
SHG linkages, with NABARD playing a leadership role and micro-finance
institutions, mainly NGOs, playing a catalytic as well as enabling role at
7 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
the gross root level. there are still unbanked households who require easy
access to formal financial services, and not just credit.
MFIs can solve the problem of non-availability of credit to the poor but
large numbers of MFIs are concentrated in a comparatively small region
and a large area still remains unreached. There are about 3.4 million SHGs
in India serving 45 million poor. For-profit MFIs like SKS or Spandana serve
around 14 million poor. About 800 million poor are still deprived of formal
credit (Business today 2008) and rely on local money lenders who exploit
them by charging mammoth interest as compared to 28% offered by MFIs.
Also ‘The State of Sector Report’ authored by N. Srinivasan, former
NABARD executive reveals that even the microfinance firms are gradually
focusing on the ‘wealthier segments of the poor’ instead of below poverty
line people.“In five MFIs out of eight, the proportion of non-poor clients
were more than the poor,” says the report. (Business Today Dec 2008)
The reasons behind this are mainly the high cost of reaching the lower
economic strata and low profits involved in transacting in this stratum.
This led to a conclusion that the financial sector needed other set of
innovative techniques as a fairy dust that would allow millions to come out
of the spell of exploitative informal lending and savings practices.
There are two ways in which financial inclusion can be worked on
1. Product Innovation
2. Service innovation
3.1 Product innovation
8 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
There is a need to keep the financial products simple so that they are
understood by the uneducated poor. Also, financial innovation doesn’t
only mean innovating techniques of lending money to the poor for starting
own business, they should also be able to avail savings, insurance and
pension facilities.
K.C. Chakraborty (RBI Monthly Bulletin, July 2010) proposed following four
basic banking products to be provided by each bank to the poor.
1. A Savings cum overdraft account
2. A Pure Savings Product, ideally a recurring or variable recurring
deposit
3. A Remittance Product for EBT and other remittances
4. Entrepreneurial Credit such as GCC, KCC
These products should be available to poor in urban as well as rural areas
and for that it is necessary to devise services to reach the remotest
regions in the country. Other financial products can also be offered by the
financial institutions along apart from the above mentioned products.
3.2 Service Innovation
Service innovation means designing an innovative channel, thus making it
easier for the poor to be a part of formal banking. This led to a concept of
branchless banking which meant taking bank to the customers instead of
bringing customers to the bank. The CGAP definition of branchless
banking goes as follows,
“Branchless banking as a delivery of financial services outside
conventional bank branches using information and communication
technologies and non bank retail agents, for example, over card-based
networks or with mobile phones”.
9 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Various techniques are being used in many developing countries for
branchless banking in order to achieve financial inclusion. Some of them
are
- Mobile banking implemented in Kenya (M-PESA) and Philippines (SMART)
- Use of the postal service to offer various financial products and
services in Yemen. (Kloeppinger-Tod & Sharma 2010)
- Use of Intermediaries (agents) appointed by financial institutions
where opening a bank branch is not viable.
3.2.1 Intermediaries
Physical access seems to be a very big hurdle in providing financial
services to the poor. It is nearly impossible to establish banks in remote
areas where lack of water and electricity are still major issues. Also the
costs of hiring and training a huge workforce for working in these areas
will be huge.
This problem can be solved by allowing agents to work in the inaccessible
areas. Banks, insurance companies can carry various transactions through
these agents who work according to pre-decided norms and conditions.
Countries like Brazil, South Africa and Mexico have implemented the bank
led model of branchless banking involving intermediaries.
In 2006, the Government of India took some watershed steps for studying
the issue of financial exclusion and devising strategic road map for
financial inclusion for poor, unbanked and underbanked in India,
consequent of which a commission headed by the eminent economist Dr.
C. Rangarajan was formed and it came with its report on financial
inclusion in 2008. The report has come with some fundamental policy
suggestions and chalking out new role play for existing and new
institutions like Cooperatives, Banks, Regional Rural Banks, SHGs, JLGs,
NBFCs and other financial intermediaries like BC and BF .
10 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Chart 3.1
Source : The World Bank, Report of Financial Access, 2009
11 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
The Business Correspondence (BC) Model
Chapter 4
RBI on January 25, 2006 issued guidelines (See Annexure 3) to the banks
allowing two categories of intermediaries, Business correspondents and
Business Facilitators to provide financial services to areas where bank
branches are not viable.
According to the guidelines, while the BCs are permitted to carry out
transactions on behalf of the bank as agents, the BFs can refer clients,
pursue the clients’ proposal and facilitate the bank to carry out its
transactions, but cannot transact on behalf of the bank.
These new guidelines have arrived at the same moment when the
banking system is experiencing a technological revolution enabling new
and inexpensive and convenient ways for transactions to be managed
from remotely located offices. The possible application of such new
technologies such as the CBS (Core Banking Solution), along with the new
guidelines has led to a number of efforts in India to experiment with the
BC/BF model. The other technological applications can be found out in the
effective use of POS Devices and Mobile Phones – to secure and process
transactions. New organizations are being formed to offer BC services.
Some of the efforts also include responding to government policy to open
‘No Frills Accounts’ and to process Government payments (G2P) such as
the National Rural Employment Guarantee Scheme, Pensions and other
social payments.
While all this holds potential, the experiences are still mixed and there is a
general consensus that the scheme has not taken off in the way it was
envisioned. There is some sense that the existing regulations do not allow
sufficient flexibility for the BC arrangement to be viable. However, some
hope prevails, that the existing guidelines do allow just enough space
where viable models could still emerge. The experiments underway offer
an opportunity to examine the different experiences, different models,
12 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
choices of technology and the viability. There is also a feeling that most
banks have not really given the BC arrangement the kind of push it
requires considering its future potential.
To take stock of progress in the field, the following survey has been done.
The survey is sponsored and supported by NABARD. The primary objective
of the survey was to accelerate clear and coherent learning from the
implementation experience (howsoever limited) from pilot schemes
underway to ensure that scalable and sustainable models emerged.
Several banks, business correspondent/facilitators have contributed to the
survey.
4.1 The Basics of the BC Banking Channel
Banks, these days, offer financial services through a number of different
channels as againgt the only brick and mortar model available few years
ago. Now, the branches, ATMs and the internet have become traditional
banking channels. The Business Correspondent option offers a new
channel through which banks can extend services – the guidelines are
written in a way which requires a bank to be involved and is the ultimate
provider of services. (See Annexure 3) While RBI has oversight and
regulatory responsibility for the BC banking channel as part of its
regulatory regime, the principal banks are responsible for the acts of their
correspondents.
13 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Fig 4.1 (Source : CAB 2009)
Bank can collaborate with private partners/ individuals and also the
technology service providers in order to implement this new channel.
These partners mainly include:
1. Business Correspondents which are organizations or individuals that
organize and offer one or more points of transaction outside of bank
branches. The BCs organize and manage a network of such transaction
points in partnership with a bank.
2. Technology Vendors who provide a range of hardware and
processing capacity and connectivity which can link clients to BCs and BCs
to the bank.
2. Customer Service Points are individuals, shops or other outlet
points which are responsible for the direct contact with the clients. CSPs
open bank accounts, conduct KYC, cash out withdrawals, receive
payments and in some cases, extend credit.
14 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Fig 4.2 (Source : CAB 2009)
For the channel to become financially viable, regulations require that all
revenue from the services be collected by the bank. The Tech Vendors,
BCs and CSPs are not permitted to charge fees to clients for the services.
The bank’s revenue may come from the extension of services: accounts,
savings, credit and payments. The Bank under contractual relationships
then makes payment of service charges to the BCs and Technology
Vendors. (CAB 2009)
4.2 Advantages of using BCs
1. A better alternative than bank branches - Normally a rural bank
branch can serve 3,000 to 4,000 families in 12 to 15 villages within a
radius of 15kms. A Public Sector Bank branch may require more than 5
15 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
years to breakeven in unbanked areas in India, while a private sector &
foreign bank with IT connectivity may require about 5 times more.
Further, obtaining permission to open a branch is a long and protracted
process.(CAB 2009) Thus BC option facilitates easier outreach for banks at
relatively low costs.
2. Reaching the unreached - The model is useful in bringing the
financially excluded population in remote areas under the shelter of
formal banking.
3. Doorstep banking - For a poor farmer, going to a bank located in
nearby taluka or village means giving up a day’s or at least half a day’s
wages and additional travelling expenses which is why farmers avoid
frequent visits to bank branches. BC model follows the concept of taking
the bank to the customer instead of bringing the customers to the bank
thus proving beneficial for the customers as well as the bank.
In order for the BC Channel to work, the bank must work in collaboration
with some or all of the different component partners who make up the BC
Banking channel. It is well understood that all the constituent pieces of
the channel will have to work in tandem, be motivated to participate and
receive appropriate revenues in order for the channel to grow and
prosper. While there are many arrangements which are currently being
tested, there is no single successful approach.
Approximately 27 banks have piloted the BC model for expanding their
operations. SBI among the public sector banks has been trying to recruit
as many BCs as possible (and some BFs too). Among private banks, ICICI
Bank and HDFC have taken the lead in making use of the scheme. Several
other banks such as Indian Bank, Canara Bank, Union Bank of India,
Corporation Bank, Punjab National Bank, Oriental Bank of Commerce,
Andhra Bank, Axis Bank have also tested the model.
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Banks have taken on NGOs and MFIs as BCs. In some cases, even
individuals such as village grocers, dealers in agricultural inputs and
retired bank officials have been engaged as BCs.
4.3 Various models employed by banks
Banks have sought out a range of different partners and offered a range
of different banking services through the scheme. In some cases the
banks have used the BC option to open large numbers of ‘No Frills
Accounts’ in response to a policy push from the Government of India. In
some cases this has also been combined with channeling government
payments (G2P) such as NREGS, Pensions and other social payments. In a
few cases, the focus has been on extending credit either in partnership
with an MFI or through a relationship with a SHG Federation or network.
The big difference in performance and partnerships appears to be
between those BC efforts that are account and savings focused, versus
those that focus on delivering credit services. The partners chosen,
products offered, costs incurred and revenues earned under these
different models can be quite different.
4.4 Roadmap to provide banking services through a banking
outlet in every village having population of over 2000 by March
2012:
RBI through its newsletters dated 27.11.2009 and 26.02.2010 (see
Annexure 4 & 5) had issued guidelines to commercial banks advising them
to draw up an achievable roadmap for financial inclusion in their area of
operation. NABARD (FID) had issued a circular dated 25 March 2010 to
RRBs and to SCBs dated 01 April 2010 in this regard. Further, in the
circular dated 06 September 2010 NABARD (FID) had indicated that
district-wise roadmap for FI has to be prepared by consolidation of block-
wise financial inclusion plan. Such plans by all banks operating in the
block, i.e. commercial banks, RRBs, co-operative banks should include,
among other, plan for financial literacy, opening of outlets including BC
17 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
outlets, issue of KCC/GCC/SCC to all eligible borrowers, identification of
BCs/BFs etc
4.5 ICT Intervention for Financial Inclusion in RRBs and Co-
operatives:
Based on the recommendations of the interim report of the committee on
Financial Inclusion, GOI has decided to create two funds, viz. Financial
Inclusion Fund and Financial Inclusion Technology Fund in NABARD. These
funds will have a corpus of Rs. 500 crore each with contribution from GOI,
RBI and NABARD in the ratio of 40:40:20. FIF is meant for meeting the
cost of developmental and promotional interventions, whereas FITF is
meant to meet the cost of technology innovation and adoption. The pilot
project is under implementation in Varna village in Khamgaon block..
4.6 Support to Commercial Banks under FITF For ICT solution for
Financial inclusion : In terms of FID Circular dated 11.01.2011 , the
Advisory Board of FIF and FITF has decided to provide support to Financial
Inclusion Plans of Commercial Banks approved by RBI. The support from
FITF would cover the cost of smart cards and POS devices, including their
personalization, incurred from 1.12.2010. The support would cover 100%
of these expenses in the Ner and 60% in 266 excluded and disturbed
districts. The identified districts in Maharashtra are: Ahmednagar,
Aurangabad, Beed, Buldana, Dhule, Gadchiroli, Gondia, Hingoli, Jalgaon,
Jalna, Kolhapur, Latur, Nagpur, Nanded, Nandurbar, Nasik, Osmanabad,
Parabhani, Washim, Yavatmal. Support in these areas would be available
irrespective of viability analysis. In all other areas support based on
viability gap would continue as hitherto.
4.7 Support to Lead Banks from FIF for setting up of Financial
Literacy and Credit Counseling Centres (FLCCs) :As advised in
18 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
NABARD HO Circular dated 09 December 2010, the Advisory Board of FIF
has decided to support Lead Banks in 256 financially excluded districts
and 10 disturbed districts for setting up of FLCC, subject to certain
conditions. The broad features of the FLCC are as under
a) To provide financial counseling service through face to face
interaction and other available media.
b) To educate people in rural and urban areas with regards to various
financial products and services
c) To make people aware of advantages of being connected with the
formal financial sectors
d) To take up any activity that promotes financial literacy, financial
planning etc.
4.8 Business Facilitators (BF)/Business Correspondents (BC) :
Using BCs/BFs is now crucial to speed up the process of financial inclusion
as also to consolidate the gains there under. If a pool of competent,
informed and trained persons could be created who could be engaged as
BCs / BFs by the banks or as Customer Service Providers (CSPs) by the
agencies engaged by the banks, it would fasten the process of FI.
Accordingly, NABARD in collaboration with Indian Institute of Banking and
Finance (IIBF) decided to support capacity building of BC/BFs through a
certification course for BC/BFs.
Survey - Buldana District Details
Chapter 5
5.1 District Profile
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The total geographical area of buldana district is 9661 sq. km which is
3.14% of the total geographical area of the Maharashtra state. The
population of the district is around 25.88 lakh as per 2011 census. The
average density of population is 268 per sq. km., as against State’s
position of 365 per sq. km. The rainfall ranged between 626 and 890 mm
during last three years and 95% of it occurs during June – October period.
About 79% of the population of the district resides in the rural areas. The
SC and SC population contributes 10.84% and 5.15% respectively of the
total population of the district. About 82.09% of the population is literate.
There are 1433 villages and 13 semi-urban centres and one municipal
council situated at Buldana. The district has black soil which is highly
fertile. Vainganga, Purna, Khadakpurna and Painganga are the major
rivers flowing in the district.
5.2 District Economy
Agriculture is the prime activity of the district with Bajra, Jowar, Maize,
Wheat and Pulses as major food crops. Other crops cultivated include
Cotton, Soyabean, Sugarcane and Banana as well as short duration crops
like Groundnut, Sunflower and Vegetables. 23% of land holdings are
categorized as small and fragmented land and this has influenced the
cropping pattern as small farmers prefer food crops to cash crops. The
coverage of horticultural crops is limited and is expected to pick up as the
programme is under auspices of National Horticultural mission. There is
scope for development of Agro based activities, Forest based units,
Artisan units in the district. During 2009-10, per capita net income of the
district was at Rs. 40,527/- as against State’s per capita income of Rs.
74027/- The district is industrially backward and placed in D+ index by the
State Government.
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5.3 Banking Sector
The District has a well spread banking network with 15 commercial banks,
1 regional rural bank, viz Vidarbha Kshetriya Gramin Bank and one
District Central Co-operative Bank operating with total 225 branches.
There are 570 primary agricultural co-operative societies (PACs). Credit
Deposit Ratio of all the Credit Agencies functioning was 66.52% as on
31.3.2011. Banks lending to priority sector have shown an increasing
trend, however, achievements under the Annual Credit Plan is uneven.
5.4 Financial Inclusion in Buldana
As per Rangarajan Committee on Financial Inclusion, 51.4% of farmer
households are financially excluded from both, formal and informal
sources. Of the total formal households, only 27% have access to formal
sources of credit; one-third of this group also borrows from non-formal
sources. Overall 73% of farmer households have no access to formal
sources of credit. The recent developments in Banking Technology have
transformed banking from traditional brick and mortar infrastructure like
staffed branches to a system supplemented by other channels like
Automated Teller Machines, Internet Banking, Credit/ Debit Cards, Online
money transfer etc. While these systems meet the needs of modern
21 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
District - Division -
9661
5
13
1433
866
326 Total Male Female Rural Urban28 2588 1342 1246 NA NA
400 NA NA NA NA NA
11 NA NA NA NA NA
8 1858 1057 801 NA NA
172 NA NA NA NA NA
446 NA NA
358 NA 91547
186 451 NA
No. of Villages (Inhabited)Soil Type
1. PHYSICAL & ADMINISTRATIVE FEATURES 2. SOIL & CLIMATE
District Profile Appendix I
BULDANA State - MAHARASHTRA AMRAVATI
Total Geographical Area (Sq.km)Agro-climatic Zone Western Plateau and Hills Region-Plateau Zone North
No. of Sub Divisions
No. of Blocks Climate Hot and dry, Semi Arid (Wetter Half)
Deep Black, Medium Black, Medium Red and Black, Shallow RedNo. of Panchayats
Cultivators Category
6. WORKERS PROFILE [in '000] 7. DEMOGRAPHIC PROFILE [in '000]
8. HOUSEHOLDS [in '000] 9. HOUSEHOLD AMENITIES [Nos. in '000 Households]
Of the above, Small/ Marginal Farmers Population
Agricultural Labourers Scheduled Caste
Workers engaged in Household Industries Scheduled Tribe
Having radio/ tv sets
Workers engaged in Allied Agro-activities Literate
Other workers BPL
Total Households Having brick/ stone/ concrete houses Having electricity supply
Rural Households Having source of drinking water Having independent toilets
BPL Households Having access to banking services
Sources (if not mentioned against the respective item): Item Nos. 1, 3, 4,6- Census 2001; Item Nos. 2 - Dept. of Agr/ Dir. of Eco. & Stat.; Item No. 5 - BPL Survey 2002.
economy, they leave the financially excluded sector of population
untouched. These systems pose a high entry barrier for the financially
excluded section. This call for a conscious attempt to build simple, user
friendly and cost effective products and services that cater to the needs of
the poor and excluded sectors of the society.
Overview of the status of availability of financial services in the district :
The details of financial inclusion in the district are as follows:
Sr No. Bank Total
Household
s
Total
Household
s having
A/Cs with
Banks
No Frill
A/Cs
opened
Leftover
household
s as per
survey
1 SBI 171,788 109166 62075 547
2 CBI 95,549 88052 7497 0
3 BOM 63,504 43172 20007 325
4 BOB 2440 2378 22 0
5 SBH 7,398 6932 466 0
6 IDBI 9,171 9171 0 0
7 PNP 3,863 3819 44 0
8 VKGB 99000 48535 49756 709
Total 452673 311225 139867 1581
Table 5.1
(Source : Lead Bank)
22 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
District - State -
Total Rural Semi-urban Urban mFIs/ mFOs SHGs/ JLGs BCs/ BFs Villages Households
Commercial Banks 15 95 47 48 NA NA NA NA NA
Regional Rural Bank 1 24 12 12 NA NA NA NA NA
District Central Coop. Bank 1 106 93 13 NA NA NA NA NA
Coop. Agr. & Rural Dev. Bank NA NA NA NA NA NA NA NA NA
Primary Agr. Coop. Society 570 570 570 NA NA NA NA NA NA
Others NA NA NA NA NA NA NA NA NA
All Agencies 587 795 722 73 NA NA NA NA NA
31-Mar-08 31-Mar-09 31-Mar-10 Growth(%) Share(%) 31-Mar-09 31-Mar-10 31-Mar-11 Growth(%) Share(%)
Commercial Banks NA NA NA NA NA 11833700 13950718 17181590 23.16 62.95
Regional Rural Bank NA NA NA NA NA 1386400 1607890 1940696 20.70 7.11
Cooperative Banks NA NA NA NA NA 7293300 7845686 8173560 4.18 29.94
Others NA NA NA NA NA
All Agencies NA NA NA NA NA 20513400 23404294 27295846 16.63 100
31-Mar-09 31-Mar-10 31-Mar-11 Growth(%) Share(%) 31-Mar-09 31-Mar-10 31-Mar-11 Growth(%) Share(%)
Commercial Banks NA NA NA NA NA 8549700.00 10260474.00 12267768.00 19.56 67.57
Regional Rural Bank NA NA NA NA NA 924600.00 985381.00 1056665.00 7.23 5.82
Cooperative Banks NA NA NA NA NA 3790400.00 3696864.00 4832144.00 30.71 26.61
Others NA NA NA NA NA NA NA NA NA NA
All Agencies NA NA NA NA NA 13264700.00 14942719.00 18156577.00 21.51 100.00
31-Mar-09 31-Mar-10 31-Mar-11 Deposit Credit Deposit Credit
Commercial Banks 72.25 73.55 71.4NA NA NA NA
Regional Rural Bank 66.69 61.28 54.45NA NA NA NA
Cooperative Banks 51.97 47.12 59.12NA NA NA NA
Others NA NA NA NA NA
All Agencies 64.66 63.85 66.52NA NA NA NA
Commercial Banks 3735983 58 3147830 61 4218073 73 13230 100 1062687 80
Regional Rural Bank 553204 9 489320 10 139676 2 NA NA 78246 6
Cooperative Banks 2098383 33 1491588 29 1434455 25 NA NA 181945 14
Others NA NA NA NA NA NA NA NA NA NA
All Agencies 6387570 100 5128738 100 5792204 100 13230 100 1322878 100
2008-09
Target [Rs.'000]
Ach'ment [Rs. '000]
Ach'ment [%]
Commercial Banks 2702000.00 1695500.00 62.74 3023643.00 3323886.00 109.93 4057604.00 3735983.00 92.07 88.25
Regional Rural Bank 533600.00 146300.00 27.41 579559.00 414606.00 71.54 517370.00 553204.00 106.93 68.62
Cooperative Banks 1554400.00 282600.00 18.18 15353.36 21210.72 138.15 2039045.00 2098383.00 102.91 86.41
Others NA NA NA NA NA NA NA NA NA NA
All Agencies 4790000.00 2124400.00 44.35 5138528.00 5859574.00 114.03 6614019 6387570 96.58 84.99
2008-09
Target [Rs.'000]
Ach'ment [Rs. '000]
Ach'ment [%]
Crop Loan 3332851 1380500.00 41.42 3579242 4273823.00 119.41 4033734 4590037.00 113.79 91.54
Term Loan (Agr) 937219.00 377600.00 40.29 1010733.00 484298.00 47.92 1466181.00 538701.00 36.74 41.65
Total Agri. Credit 4270070.00 1758100.00 41.17 4589975.00 4758121.00 103.66 5499915 5128738 93.25 79.36
Non-Farm Sector 120024.00 97300.00 81.07 129252.00 272284.00 210.66 355087.00 463962.00 130.66 140.80
Other Priority Sector 399918 269000 67.26 419301.00 829169.00 197.75 759017.00 794870.00 104.72 123.24
Total Priority Sector 4790012.00 2124400.00 44.35 5138528.00 5859574.00 114.03 6614019 6387570 96.58 84.99
2008-09
Demand [Rs. '000]
Recovery [Rs. '000]
Recovery [%]
Commercial Banks NA NA NA NA NA NA NA NA NA NA
Regional Rural Bank 2445364 1075469 43.98 2412822 1943097 80.53 3277933 2299453 70.15 64.89
Cooperative Banks 1448409.00 1216686.00 84.00 5037429.00 3004771.00 59.65 4131226.00 2383535.00 57.70 67.12
Others NA NA NA NA NA NA NA NA NA NA
All Agencies 3893773.00 2292155.00 58.87 7450251.00 4947868.00 66.41 7409159.00 4682988.00 63.21 62.83
Sources : Lead Bank & SLBC
1. NETWORK & OUTREACH (As on 31/03/2011)
Banking Profile Appendix II
BULDANA MAHARASHTRA Lead Bank - Central Bank of India
AgencyNo. of accounts Amount of Loan [Rs.'000]
AgencyNo. of
Banks/ Soc.
No. of Branches No. of non-formal agencies assoiated Per Branch Outreach
2. DEPOSITS OUTSTANDING
AgencyNo. of accounts Amount of Deposit [Rs.'000]
3. LOANS & ADVANCES OUTSTANDING
4. CD-RATIO 5. PERFORMANCE UNDER FINANCIAL INCLUSION (No. of A/cs)
AgencyCD Ratio
AgencyDuring 2010-11 Cumulative
% of Total Loans
Amount [Rs.'000]
% of Total Loans
Commercial Banks
Regional Rural Bank
Cooperative Banks
Others
All Agencies
6. PERFORMANCE TO FULFILL NATIONAL GOALS (As on 31/03/2011)Priority Sector Loans Loans to Agr. Sector Loans to Weaker Sections Loans under DRI Scheme Loans to Women
Amount [Rs.'000]
% of Total Loans
Amount [Rs.'000]
% of Total Loans
Amount [Rs.'000]
Amount [Rs.'000]
% of Total Loans
7. AGENCY-WISE PERFORMANCE UNDER ANNUAL CREDIT PLANS
Agency
2009-10 2010-11 Average Ach[%] in last 3 years
Target [Rs.'000]
Ach'ment [Rs. '000]
Agency
Ach'ment [%]Target
[Rs.'000]Ach'ment [Rs.
'000]Ach'ment
[%]
8. SECTOR-WISE PERFORMANCE UNDER ANNUAL CREDIT PLANS
Broad Sector
2009-10 2010-11 Average Ach[%] in last 3 yearsAch'ment [%]
Ach'ment [Rs. '000]
Average Rec. [%] in last 3
years
Target [Rs.'000]
Demand [Rs. '000]
Recovery [Rs. '000]
Ach'ment [Rs. '000]
Ach'ment [%]
Recovery [%]Demand [Rs.
'000]Recovery [Rs. '000]
Recovery [%]
Target [Rs.'000]
9. RECOVERY POSITION
Agency
2009-10 2010-11
23 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
There are 148 villages in the district having population over 2000. These
villages have been allocated block-wise to the banks as detailed below:
Sr No. Name of the
bank
Number of villages
allocated to the
banks
1 VKGB 25
2 SBI 61
3 CBI 26
4 BOM 22
5 SBH 03
6 PNB 04
7 IDBI 04
8 BOB 02
9 Dena 01
Total 148
Table 5.2 Bankwise Allocation of Villages
The respective bank is responsible for financial inclusion in the allotted
villages through opening of either a bank branch or a kiosk and
undertaking various financial literacy measures.
State Bank of India has opened 61 customer care centres which are
operated by Business Correspondents. These customer Care Centres are
providing banking services to the clients. Per day cash withdrawals and
cash deposits can be made up to the limit of Rs. 10000/-. The remittance
facility is also allowed through SB accounts. The accounts are operated
through identification of finger impressions.
24 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Vidarbha Kshetriya Gramin Bank has proposed to provide ICT based
solutions through BCs in 23 villages. One such ICT based unit has become
operational in Varna Village in Khamgaon Block.
25 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Functioning of BC Model, SBI
Chapter 6
SBI uses the kiosk banking model for business correspondence instead of
using the portable Point of Sale (PoS) devices. Kiosk Banking BC model is
the closest it can get to real time user friendly banking services at your
neighbourhood locations, and it is hassle free- without involvement of
complex technology and elaborate account opening procedures
The Banking Kiosk owner requires an Internet enabled PC with a low
cost Biometric reader, webcam and printer.
The PC’s machine-I.D is then pre-registered and authorized by a
bank to make transaction completely secure.
Kiosk owner can log-in directly to the “Core Banking” of SBI using
his/her credentials and can carry out customer transactions with
biometric authentication.
No ATM card, swipe card or any other password is required by
customer to carry out transactions.
A very simple one page form is used to open customer’s bank
account (known as “No Frills account”) and customer’s finger prints
are then registered for identification, authentication and
authorization of banking transactions.
Customers/ BC Account Holders can
Deposit cash,
Withdraw cash
Get loans
Transfer money to another account
26 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Get transaction Information like A/C balance, A/C statement etc.
instantly.
SBI provides financial support to the BCs in form of loans upto 50000 in
order to purchase equipments like laptop, inverter, finger print reader.
Once the kiosk is set up, BC’s laptop is directly linked to the bank’s CBS
and all the transactional entries made are immediately updated on the
server.
The BC has two accounts with the Bank. viz
1. Transactional Account
2. Personal Account
The BC is required to maintain certain balance in the transactional
account. The limit on daily deposit transactions allowed for the BC is equal
to the balance in his account on that particular day.
When the BC performs any withdrawal transaction for the customer’s
account, BC gives the cash present with him to the customer. At the same
time, this cash gets transferred from customer’s account to BC’s
transaction account in the bank.
Exactly opposite process takes place in case of deposit transactions. While
performing a deposit transaction for any customer, BC gets cash in hand.
As soon as the entry is made, equivalent amount from the BC’s
transaction account gets transferred to the Customer’s account.
This helps the Bank to regulate flow of money and ensure that the BC
doesn’t misuse the surplus available with him.
Thus BC can accept deposits only till he has balance in his transaction
account which can be transferred to customer’s account. Overdraft is not
allowed on this account. When he balance is low, BC can go to the linked
27 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
branch and deposit the cash present with him into the transaction account
and the cycle goes on.
Customers who already had accounts with the bank branches cannot
operate those accounts from the kiosk. A separate account has to be
opened with the BC if such customers are willing to avail services of the
BC.
28 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Data Analysis
Chapter 7
7.1 Sample Profile
Sr. No Stake holders Sample Size
1 Bank 1
2 BCs 10
3 Customers 10 per BC
4 Non-customers 5 per BC
Table 7.1
7.2 Selected Bank - State Bank of India, District buldana, Maharashtra
7.3 List of Selected Business Correspondents and their respective linked
bank branches
Sr. No Name of Village Linked Branch
1 Shelud Chikhli
2 Peth Chikhli
3 Pimpalgaon Sarai Buldana
4 Mhasrur Dhad
5 Shirpur Kelwad
6 Dongar Shewali Buldana
7 Karvand Undri
8 Janori Shegaon
9 Pimparimali Mehkar
10 Shara Lonar
Table 7.2
7.4 Data Analysis for bank branches
29 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
7.4.1. Number of villages allotted under financial inclusion drive
as against the number of villages actually covered by the
respective bank branches
Bank BranchNo. of villages
allotedNo. of villages
coveredSBI Buldana 2 2SBI Chikhli 5 5SBI Dhad 5 2SBI Kelwad 1 1SBI Lonar 3 3SBI Mehkar 1 1SBI Shegaon 3 3SBI Undri 1 1Grand Total 21 18
Chart 7.4.1
Fig. 7.4.1
From the figure 7.4.1, we see that 90% of the branches have achieved the
targets with respect to the villages allotted to them. The villages left out
under Dhad branch will have separate bank branches within one year,
hence no BCs have been appointed.
7.4.2. Financial Products offered through the BCs
30 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Name of the Bank Deposit Micro Credit
Remittance Micro-insurance
Micro Pension
SBI Chikhli Yes No Yes No Yes
SBI Kelwad Yes No Yes No Yes
SBI Dhad Yes No Yes No Yes
SBI Buldana Yes SHG Yes No No
SBI Mehkar Yes No Yes No No
SBI Lonar Yes No Yes No Yes
SBI Shegaon Yes No Yes No Yes
SBI Undri Yes No Yes No Yes
Table 7.4.2
From the table 7.4.2, we observe that Deposit accounts (Savings, RD and
Fixed Deposits) as well as remittance facilities are available through the
kiosk accounts. Micro-credit and Micro-insurance are the two services not
offered through the SBI kiosks. On interacting with the BCs, it was found
out that the BCs do not have any idea regarding these products. Pension
facilities can be availed through the kiosk accounts and most BCs have
opened accounts for people who withdraw Government Pensions in their
kiosk accounts. However availability of these accounts also depends upon
certain external factors which will be discussed later in this chapter.
7.4.3 Compensation Paid to the BCs
Compensation paid to the BCs is strictly transaction based. The pay
structure is as mentioned below.
Rs.20 per new a/c, 0.5% per withdrawal and remittance transaction
No commission paid for deposit transactions
31 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
This amount sums up to be quite low taking into account, the number of
transactions taking place at the kiosk per day.
7.4.4 KYC norms adopted by the Bank
Apart from the Photo Identity proof, All the Branches accept proof of
Residence certified by Block/ Village Panchayat. Some branches also
accept residential proofs certified by BCs.
7.4.5 Problems faced by bank branches in Implementation of the
BC model
1. Lukewarm response from customers
To gain the trust of the customers, SBI has appointed local youth as BCs.
these BCs use several marketing strategies to make people aware of the
facilities that can be availed through the SBI kiosk.
However customers still trust the brick and mortar structure and come to
bank branch in spite of availability of BC in their respective village.
Customers believe that the BC model is a temporary arrangement by the
Bank and it might be shunned any time. This leads into a general
reluctance to open new accounts at the Kiosk.
The roots of this problem lie in the fact that the customers are asked to
open a new account at the kiosk, in spite of the existing account at the
bank branch.
Also non-availability of passbooks for the accounts opened at kiosk adds
upto the problem. Villagers insist for passbook entries after every deposit
or withdrawal even at the bank branch. Non-availability of passbooks
create a little mistrust in their minds and they prefer going to the bank
branch for carrying out transactions.
2. Technical problems in payments
32 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Fingerprints of farmers fade over a period of time due to excessive
contact with soil and rough and heavy farm instruments. As a result, the
fingerprint detection technique used at the kiosk to verify the person’s
identity fails at times. The customers then have to come to the Bank
Branch for carrying out transactions.
7.5 Data Analysis – Business Correspondents
7.5.1 BC Selection process
BC Selection Process No. of BCs
Individually appointed CSP 9
Through BC 1
Table 7.5.1
33 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Fig. 7.5.1
From the figure 7.5.1, we understand that majority of the BCs are directly
appointed through personal interviews by SBI through SBI Regional office
located at the district place. There is a separate officer with designation of
Manager, Alternate Channel at the Regional Office. Though the BCs are
linked to the respective SBI branches and report to the respective
branches, the Manager, Alternative channel regulates and manages the
BCs. In a few cases, BC designation is given to an organization/NGO etc
who in turn appoint CSPs. Pragati Adivasi Gramin Vikas Sanstha, Shegaon is one
such example.
7.5.2. BC as occupation
BC as Occupation CountMain 8Secondary 2
Table 7.5.2
34 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Fig 7.5.2
From the Figure 7.5.2, we observe that in most of the villages, local youth
appointed by SBI undertake BC as their sole occupation. This dedication
enables them to encourage people to open accounts at the kiosk. This
situation has also enabled SBI to do the NPA Recovery in the particular
village through BCs thus benefitting the business. However this also
creates a need to rethink the commission offered by SBI to these BCs as it
seems less. The commission offered by SBI to BCs is as under :
- 0.5% per transaction (withdrawal and remittance, with a ceiling of
Rs 12)
- Rs. 20 foe every new account opened.
7.5.3. Number of hours per day for which the BC is available
No of a/c served by the
CSP
No of Hours CSP is available in each village
6 Hours 28 Hours 39 Hours 1
35 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
12 Hours 4
Table 7.5.3
Fig 7.5.3
From the figure, we observe that majority of the CSPs are available for 8
to 12 hours per day. This is possible because most of the CSPs reside in
the same village which they serve. The only problem sometimes
obstructing the BC service timings is non-availability of electricity and
absence of inverter. BCs have to invest in the infrastructure on their own
and as shown above, since for most BCs main occupation is BC, making
additional investment is not financially possible. SBI might consider taking
care of this problem in order to increase the business.
7.5.4. Number of accounts served by CSPs as on the date of survey
Name of the village served by the CSP
No. of a/cs per village
Dongarshevli 600Janori 570
Karvand 433Mhasrur 1430
Peth 2000Pimpalgaon Sarai 789
Pimpremali 1150Shara 2561Shelud 3500
36 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Shirpur 1500Grand Total 14533
Table 7.5.4
Fig 7.5.4
From fig. 7.5.4, we observe that the average number of accounts served
per BC is approximately 1453 which is acceptable given the population of
village i.e. around 2000. The villages with less number of accounts come
under the Bank Branches which do not allow Government payments such
as old age pension, widow pension to be transferred to the kiosk accounts.
7.5.5. Number of inoperative accounts per linked branch
Name of the Bank TotalSBI Buldana 0SBI Chikhli 500SBI Dhad 750SBI Kelwad 335SBI Lonar 420SBI Mehkar 680SBI Shegaon 450SBI Undri 150Grand Total 3285
Table 7.5.5
37 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Fig. 7.5.5
The percentage of inoperative accounts is considerably high in many
villages. This can be accounted mainly to the skewed income patterns and
saving habits of the farmers. The daily wage earners seldom save.
However they wish to save and have opened the accounts at the kiosk.
The old age pension and widow pension are also no transferred to kioak
accounts of customers due to reasons discussed in the graph below. This
also leads to many accounts remaining inactive.
Another reason for which Farmers approach the bank is for loans.
However loan disbursement is not done to the kiosk accounts. This again
leads to the duality of accounts since farmers use their bank branch
accounts for withdrawing loan amount.
7.5.6 Facilities availed by customers through the kiosk accounts
Name of the village
Count of Deposit accounts
Count of Loan accounts
Count of Pension
Count of Remittance
Dongarshevli 9 1 1 2Janori 10 Karwand 9 1 2Mhasrur 8 3 3Peth 10 2Pimpalgaon Sarai 7 6 2Pimpremali 10 6Shara 10 2 2
38 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Shelud 9 2 3Shirpur 4 7 Grand Total 86 3 20 22
Chart 7.5.6
Fig. 7.5.6
From Fig 7.5.6 we see that sizeable number of accounts have been
opened by SBI CSPs in their respective villages thus meeting the targets.
However the above figure shows that majority of people open savings
accounts and since many of them seldom do any savings, large number of
accounts remain inoperative.
Also it can be observed that the old age and widow pension schemes
cannot be availed through the kiosk accounts in some villages due to
absence of passbooks. This leads to many accounts remaining inactive.
People availing this scheme withdraw the pension money from nearby
bank branch. This leads to withdrawal of entire amount at 1 time since
customers can’t afford frequent visits to branch. If the bank comes up with
a solution to the mentioned problem, customers can withdraw money as
39 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
and when required and the bank can also enjoy the availability of deposits
for a comparatively longer time.
7.6 Data Analysis for account holders
7.6.1. Village wise details of accounts of sample population
Name of the village
Inoperative Operative
Dongarshevli 70% 30%Janori 20% 80%
Karwand 0% 100%Mhasrur 0% 100%
Peth 20% 80%Pimpalgaon Sarai 0% 100%
Pimpremali 0% 100%Shara 0% 100%Shelud 10% 90%Shirpur 0% 100%
Grand Total 12% 88%
Table 7.6.1
40 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Fig. 7.6.1
7.6.2. Average no. of accounts per household in a village
Name of the village Average no of a/c per gousehold
Dongarshevli 1.4Janori 2.7Karwand 1.6Mhasrur 1.9Peth 1.9Pimpalgaon Sarai 1.6Pimpremali 3.1Shara 2.1Shelud 1.9Shirpur 1.1Total Average 1.93
Table 7.6.2
41 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Fig. 7.6.2
From Fig. 7.6.2, we observe that many households have 2 accounts with
the kiosk. One account is usually of the head of the family and other
either of the spouse or a parent who avails benefits from the Government
pensions. Students who receive scholarships also avail the BC facilities
through their personal savings accounts.
7.6.3. Number of customers who came to know about the kiosk banking through BCs
Name of the village
Total
Dongarshevli 9Janori 10Karwand 10Mhasrur 8Peth 10Pimpalgaon Sarai 9Pimpremali 10Shara 10Shelud 8Shirpur 4Grand Total 88
Table 7.6.3
42 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Fig. 7.6.3
The shaded area in Fig. 7.6.3, indicates the number of customers who
became aware of the kiosk banking through BCs. It is evident that
majority of the customers received information about the model through
the BC. At some villages, it was observed that the BC travels from house
to house educating people about the Facilities available at the kiosk. BCs
also announce about the services over the loudspeaker through a
rickshaw (‘Dawandi’ in Marathi). Hiring local youth as BCs has its own
advantages since people can walk into the kiosk and enquire about the
services without any apprehensions.
7.6.4. People satisfied with the door-step deposit services
Name of the village No. of customersDongarshevli 7
Janori 9Karwand 10Mhasrur 8
Peth 4Pimpalgaon Sarai 3
Pimpremali 10Shara 9Shelud 6Shirpur 6
43 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Grand Total 72
Table 7.6.4
Fig. 7.6.4
From the fig. 7.6.4, we observe that majority of customers who availed
the kiosk banking facilities were satisfied with the door-step deposit
services. Women especially gave a very positive feedback about the
service since now they can deposit whatever small amount they save and
can withdraw it at the time of emergency even when the head of the
family is unavailable.
7.6.5. Customers availing remittance services Vs. Customers satisfied
with the charges
Name of the villageCustomers availing Remittance services
Customers finding the service charges reasonable
Dongarshevli 2 Janori Karwand 2 Mhasrur 3 Peth 2 Pimpalgaon Sarai 2 Pimpremali 6 1Shara 2 1Shelud 3 1
44 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Shirpur Grand Total 22 3
Table 7.6.5
Fig. 7.6.5
In Fig. 7.6.5, the area in blue indicate the number of people using the
remittance facility at the kiosk and the area in red indicate the number of
people satisfied with the fee charged for using the remittance facility.
Majority of customers who use the remittance facility at the kiosk are not
satisfied with the fee charged per remittance transaction. The bank
charges
- Rs 25 as fee for transaction of Rs 100 (Minimum)
- Rs 100 for transaction of Rs 10000 (Maximum)
45 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
7.7 Data Analysis for Non-Customers
7.7.1. Profile of non-customers
Occupation TotalAgri-labourer 4Alms 1Barber 1Driver 1Driver, travels 2Farming 37Service Engineer 1Shikshak Sevak 1Teacher 1Tiffins 1Grand Total 50
Table 7.7.1
46 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Fig. 7.7.1
Majority of respondents had agriculture as their occupation. Other 9 %
included people working as drivers, teachers, service engineers etc. Some
owned shops e.g. grocer, barber.
7.7.2. Number of accounts per family
No. of accounts per family Total1 272 53 1
No a/c 17Grand Total 50
Table 7.7.2
47 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Fig. 7.7.2
Majority of the non-customers of SBI already had accounts with other
banks or co-operative societies. Buldana District Central Co-operative
bank had most of these accounts followed by SBI bank branches at nearby
villages. Due to the duality of accounts, (separate account at the bank and
the kiosk), many customers of SBI bank branch refused to open kiosk
accounts.
Another major chunk of non-customers consists of the financially excluded
population, never introduced to formal banking. People in this group are
mostly agri-labourers, daily wage earners or small scale farmers who
seldom do any savings. This group first needs inculcation of saving habit
through SHGs before persuading them to open individual accounts with
banks.
However as indicated by the chart below, very few people are part of the
SHG groups.
7.7.3 Whether members of SHGs
whether a member of any SHG/JLG
No. of respondents
No 44Yes 6Grand Total 50
48 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Table 7.7.3
Fig. 7.7.3
People who do not have an account with any bank in the district and are
not even a part of the SHG groups characterize the financially excluded
population. 28% of the sample falls into this category. Following table
gives us a comprehensive view of the situation.
14/50 (28%) are
financially
excluded
Whether a member of any SHG/JLG
No YesGrand
Total
No.
of
accou
nts 1 25 2 27
2 5 5
3 1 1
No a/c 14 3 17
49 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Grand Total 44 6 50
Chart 7.7.3a
7.7.4. Facilities availed by non-customers of SBI on other bank
accounts
Facilities No. of people availing facility
Deposit accounts 47
Loan accounts 29
Remittance 23
Micro Insurance 19
Pension 20
Table 7.7.4a
Fig. 7.7.4a
50 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
From Fig. 7.7.4a it is evident that about 65% of the non-customers of SBI
have accounts with other banks. Some villages have branches of Buldana
Urban Bank or BDCC. Else people open accounts with SBI branches in
nearby Town. Majority of people open savings accounts but seldom
operate the accounts. Loan accounts are also comparatively high in
number, however per month transactions are rare on these accounts.
Some customers prefer accounts with SBI branches in nearby towns to
save the high service charge which has to be paid to avail remittance
service through the kiosk account.
As mentioned earlier, pension services are not offered through the kiosk
accounts in all villages due to lack of passbooks. As a result, people need
to use the SBI Bank Branch account for such transactions.
Account Status No of accountsInoperative 3operative 29
Not applicable (No account) 18Grand Total 50
Table 7.7.4b
Fig. 7.7.4b
51 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
From Fig. 7.7.4b, we observe that customers availing various facilities
(such as loan accounts, remittance etc.) from other banks usually operate
the accounts. These are usually the customers who were aware of the
banking facilities since long and transacted through bank branches at
nearby towns. The limit of 10000 on withdrawal and remittance and the
duality of accounts prevents them from approaching the kiosks. A part of
this can be accounted to the long presence of the respective bank
branches or co-operative societies in the particular village.
7.7.5 No. of times the respondent visits the bank every month
Number of times the respondent visits the bank (say in a month)
No of respondents
1 132 73 34 25 18 1
10 115 1
NA (No account) 200 1
Grand Total 50
Table 7.7.5
52 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Fig. 7.7.5
Fig. 7.7.5 gives us the better perspective on the operative bank accounts
with other branches. Majority of customers, who have bank accounts, go
to the bank once or twice a month. The following chart 7.7.5a indicates
that most customers have deposit accounts followed by loan accounts and
inward and outward remittances.
7.7.5a Facilities availed by respondents (non-customers)
Facility availed Yes No NATotal
respondentsDeposit Accounts 33 17 50
Loan Accounts 10 23 17 50Remittance 5 28 17 50
Micro-insurance 33 17 50Pension 2 31 17 50
Table 7.7.5a
53 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Fig. 7.7.5a
7.7.6 Whether or not respondent is aware about the services offered by
the BC
Whether aware about the services provided by BC/CSP (Yes/No) Total
No 19
Yes 31
Grand Total 50
Table 7.7.6
54 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Fig. 7.7.6
From Fig. 7.7.6 we observe that majority of the non-customers are aware
of the services offered through the kiosk. The following chart elucidates
the reason for their availing the services in spite of their awareness.
7.7.7 Reasons for not availing the services of BC/CSP
Reasons for not availing the services of BC/CSP No. of respondents
Not aware of the services offered 18
BC is not approachable/ doesn’t trust the concept (Acceptability) 2
Doesn’t find it convenient 6
Limit on Transactions 5
Already an account with another bank 19
Table 7.7.7
55 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Fig. 7.7.7
The class “Doesn’t find it convenient” includes the non-provision of
passbooks, lack of overdraft facility and duality of accounts. A few people
refused to open accounts with BCs citing the limit of 10000. Their
accounts with other bank branches served their remittance requirements.
People not aware about the services again consisted of the financially
excluded people who seldom do savings and never paid attention to the
bank facilities.
7.7.8 Whether the respondents are interested in availing the
services of the BC
If interested in availing the services of the BC/CSP
No. of respondents
No 17Yes 33
Grand Total 50
Table 7.7.8
56 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Fig. 7.7.8
When asked whether people are interested in availing the services of the
BC, majority of people said “yes”. However, the ‘ifs’ attached with the
answers mostly echoed the need for passbooks, increased transaction
limits and less remittance charges.
Findings and Conclusions
Chapter 8
8.1 Findings
The findings consist of the suggestions of various stakeholders, viz.
Branch Managers, Business Correspondents and Account Holders.
Conclusions drawn from the suggestions and on-field observations follow
the findings.
8.1.1 Suggestions by the Branch managers
SuggestionsMNAREGA payments can be done through kiosks 3Crop Loan/Gold Loan disbursement through BC 2
All govt payments to be done through kiosks 4Micro-insurance products to be made available 2
Farmers' clubs 1GCC/KCC facilities to be made available 2
Loan recovery cases can be handed over to BCs 2
57 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Table 8.1.1
Fig 8.1.1
Findings
1. Currently MNAREGA payments are not done through kiosk accounts of
SBI. From Bank’s point of view, including MNAREGA payments will
increase business for the BCs, at the same time reducing the load on the
branch.
From customer’s point of view, it will save the customer’s time to go the
bank branch, thereby preventing the loss of his half a day’s wages.
2. Crop loan disbursement is the busiest time of the year for the bank
branches as farmers come in huge numbers for crop loans. Bank can
disburse loans upto a specified limit through the BCs. this will again
reduce the load on the Branch and will be beneficial from customer’s point
of view.
58 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
3. All Government payments are not done through the kiosk accounts due
to Tehsildar’s refusal to transfer payments to these accounts due to non-
provision of passbooks. This results in customer travelling to the branch in
spite of availability of kiosk in his/her village.
4. Customers as well as the BCs in the district lack awareness about the
micro-insurance products. Availability of these products through the kiosk
will benefit the customers as well as enhance bank’s business.
5. A unique practice of handing over NPA recovery cases to the BCs was
observed at couple of branches. At one branch, 68 out of 70 cases were
converted by the BC. This enables the customers to avail further loans
and improves bank’s NPA recovery percentage.
6. GCC/KCC are not provided on the kiosk accounts. Provision of the
facility on kiosk account will save customers from increased trips to bank
branch.
8.1.2 Suggestions by BCs
Data TotalPassbooks should be provided to customers, 5
Limit of 10,000 per a/c per day should be removed. 7
Branch a/c balance enquiry to be made possible at CSP
2
Provide monetary support for equipment and stationery
3
Better replacement for finger print detection 2
Low connectivity and electricity problem should be solved,
2
Loan disbursement to be done at CSP 2
Table 8.1.2
59 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Fig. 8.1.2
Findings
1. Non provision of passbooks has led to several accounts turning
inoperative. The reason being that the Tehsildar doesn’t allow transferring
of money coming in form of old age or widow pensions to kiosk accounts
due to lack of passbooks.
2. Several customers have are forced to go to the bank branches for
withdrawals and money transfers above Rs. 10000. Increasing the limit
would increase business for the BCs. BCs do not have any objections to
depositing the additional money in their transaction accounts as would be
required by bank.
60 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
3. Customers who have accounts with the BC as well as with the bank,
cannot check their bank account’s balance at the kiosk. Since the laptops
are directly linked with the CBS, enabling this facility would save the
customers from trips to bank branch only to check the balance.
4. BCs also expect financial support for the purchase of equipments like
inverter which will help increase their business.
5. At times, the finger print detector fails to detect the finger prints of
customers. This happens as the finger prints of farmers become unclear
over a period of time due to hard labour and the machine fails to match
the prints with those on record. In such cases, customers have to travel to
bank branch for carrying out the transactions.
6. Connectivity is always a big issue in remote areas and so is the absence
of electricity for major part of the day. This leads to slow carrying out of
transactions ar inability to connect to the server. High speed internet
service providers are costly and BCs cannot afford them without financial
support from banks. This also emphasizes the need for inverters.
7. If loan amount is transferred to customer’s kiosk account, he/she can
withdraw the money as and when required instead of travelling to the
bank branch every time.
8.1.3 Suggestions of account holders
SuggestionsCustomers
in %
Limit of 10000 per day is insufficient 13
A/c should be linked to base branch a/c
1
Passbooks should be provided 3
Overdraft should be allowed 1
Service charge for remittance is too high
4
Problem with fingerprint detection unit
1
Loan disbursement should be in kiosk a/c
3
Table. 8.1.3
61 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Fig 8.1.3
Findings
Customers echo the BCs’ demands of
1. Increase in limit of 10000 on withdrawal and remittance
2. Provision of passbooks
3. Linking accounts to base branch
4. Resolving problem with finger print detection system
5. Loan disbursement through kiosk account
Apart from these, customers suggest that
6. Reduction of service charge for remittance –
62 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
As previously mentioned, Bank charges
- Rs 25 as charge for remittance transaction of Rs. 100
(Minimum)
- Rs 100 as charge for remittance transaction of Rs 10000
(Maximum)
These charges are too high, especially for low value transactions by the
villagers. Bank might consider reducing the charges.
7. Provision of overdraft on the kiosk account
8.2 Conclusions
Mentioned hereunder, are the conclusions drawn regarding the BC Model
of SBI in a summarized form. These conclusions are drawn from the
information collected through extensive questionnaire and on-field
observations of the surveyor.
On a positive note,
1. SBI has allotted 1 BC per village (otherwise a bank branch in some
cases) above the population of 2000 thus meeting the targets given to
them.
2. Appointment of local youth as BCs has led to availability of BC for 10-12
hours per day thus satisfying the purpose of facilitating bank transactions
from customers’ point of view.
63 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
3. The presence of Manager, Alternate Channel, at the Regional bank
Office (RBO) facilitates in the monitoring and regulation of the BC channel
efficiently. The BCs can directly report to the RBO in case of any difficulty
thus making the channel more consistent.
4. Majority of customers availing the BC services are satisfied with the
Door-step Banking Services made possible by this model.
5. There are no issues regarding the timely payment of commission to the
BCs with the condition that BC submits the monthly reports by 2nd of the
next month.
6. BCs are assisting the recovery of loans outstanding of the Bank, and
also the NPA cases.
However, there are certain difficulties (as mentioned in ‘Findings’) faced
by the Bank Branch Managers, the Business Correspondents and the
customers. Following are a few points which SBI can consider for further
improvements thus making the channel more financially viable and
beneficial for all stakeholders.
1. The commission is on very low side
The commission provided to the BCs is strictly per transaction. The structure of commission is as
follows
On deposits Nil
On withdrawal 0.5% (Min. Re. 1/- Max Rs. 12/-)
On remittance 2/5 : 3/5 ratio (Bank : B.C.)
On Account opening Rs. 20/- per account opened
64 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
On loans 0.75% to 1% conditional
(however it depends totally on
link Branch whether to sanction
loan or not)
This might barely sum upto 2000-3000 Rs per month, given the number of
accounts each BC caters to. However the BC has to take care of several
recurring expenses such as stationery, internet bill, kiosk rent (if not in his
own house). After subtracting these, the BC is left with too less an amount
to use.
SBI may consider certain fixed salary for the BCs apart from the
transaction based commission.
2. Provision of Financial Support for the BCs
Apart from buying a laptop and finger print detector, BC has to incur many
additional expenses such as purchasing the inverter, better connectivity
internet modem etc. There are also certain recurring costs such as rent
and stationery cost. The current financial aid provided by Bank is a
personal loan of Rs 50000/- to each BC, the repayment period of which is
4 years, with an annual interest of 13.5%. Bank might consider
restructuring the provision of financial support to the BCs to help cover all
these expenses.
3. Fee charged on Remittance is irrational
The remittances are charged at the rate of Rs 2.00 /- per 100, Mininum Rs.
25 and Maximum Rs. 100 /-. This fee is too high in comparison to what the
regular Bank Branches charge i.e. Rs. 2 per 1000 /-.
65 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Bank must consider that this charge becomes too high for the rural
people.
4. Provision of Passbook is unavailable
Only Identity Cards are provided to the customers and not pass books.
The printed copy of the last transaction or all previous transactions to be
kept by him for ever does not seem to be a feasible option. Moreover, in
the print copy of transaction, net balance is not shown.
Also, in some villages, customers cannot receive the Government Pension
Payments through kiosk accounts due to non-provision of passbooks since
the Tehsildar refuses to transfer cheques to these accounts.
Bank might consider provision of passbooks for the accounts opened at
the kiosks. Such a step will help in increasing customers’ belief in the
stability of the BC model.
5. Transaction Limit of 10000 is too low
The per day limit of Rs. 10000 makes many customers travel to the bank
branch for transactions above the specified amount. This results in loss of
business for the BCs and inconvenience for the customers. BCs are ready
to increase their deposits with the linked Bank Branch as will be required
to accommodate the increased transact tio limits. Hence Bank might
consider increasing the limit to upto Rs. 25000 /- in near future.
6. Loan disbursement through kiosk accounts
Bank might consider disbursement of loan amount upto a specified limit
through kiosk accounts. This will reduce the load at the bank branch and
also will prove convenient for small farmers.
66 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
7. All other suggestions such as provision of overdraft, GCC/ KCC, all
Government payments including MNAREGA and micro-insurance products
can be considered over a period of time.
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Census 2011, “Office of Registrar General and Census Commissioner” “Ministry of Home Affairs”
Chakrabarty “Financial Deepening by putting Financial Inclusion Campaign into Mission Mode” RBI Monthly Bulletin July 2010
Ramachandran V K and Swaminathan Madhura (Eds.) (2002), “Financial Liberalization and Rural Credit in India” Tulika Books, New Delhi
Rangarajan (2011), “Speech on Financial Inclusion”, “St. Xavier’s College” 2011
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Thorat Usha (2009), “Report of the Working Group to Review the Business correspondent model” RBI Aug 2009
“Business Correspondents and Facilitators - Pathway to Financial Inclusion?” RBI/ 2008-2009 /141 DBOD. No. BL.BC. 35 /22.01.009/2008-2009
Karnani 2007, “The mirage of marketing at the Bottom of the Pyramid: How private sector can alleviate poverty”, California Management Review, Vol 49, No 4, pp 90-111
“Nabard Newslertter” Vol 21, No. 1, April 2010
67 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
Pearce 2011, “Financial Inclusion in the Middle East and North Africa” The World Bank Middle East and North Africa Region Financial and Private Sector Development Unit, March 2011
Rajiv Rao “Poverty’s New Saviour” Business Today Dec 14, 2008
Kloeppinger-Tod & Sharma 2010 “Innovations in Rural and Agriculture Finance” IFPRI
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Circular No. NB.FID / 2495 / FI-01/2010-11 dated 21 January 2011 Circular No. 68/FID-9/2010 dated 25 March 2010
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68 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
Annexure 1
Bankwise summary of allotted villages (above population 2000) in Maharashtra
Sr. No.
BankNo. of
Allotted Villages
1 Allahabad Bank 332 Andhra Bank 13 Bank of Baroda 1764 Bank of India 5065 Bank of Maharashtra 8536 Canara Bank 407 Central Bank 4368 Corporation Bank 39 Dena Bank 15810 HDFC Bank 111 ICICI Bank 7212 IDBI 8213 Indian Bank 1114 Indian Overseas Bank 2115 Karnataka Bank 116 Maharashtra Gramin Bank 35517 Oriental Bank of Commerce 618 Punjab National Bank 2619 Ratnakar Bank 2120 State Bank of Hyderabad 21521 State Bank of India 85522 Syndicate Bank 5023 Union Bank of India 189
69 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e m o d e l
24 UCO Bank 2325 Vijaya Bank 326 VKGB 6327 WKGB 92 Total 4292
Annexure 2
70 | F i n a n c i a l I n c l u s i o n t h r o u g h B u s i n e s s C o r r e s p o n d e n c e M o d e l
AURA
NGABA
D BEED
HINGO
LIJAL
NALAT
URNA
NDED
OSMA
NABAD
PARBH
ANI
THAN
EBU
LDHAN
AWA
SHIM
YAVATM
ALCH
ANDR
APUR
GADC
HIROL
IGO
NDIA
RATN
AGIRI
SINDH
UDUR
GSO
LAPUR
Allahabad Bank 1 1 3 2 4 3 4Andhra Bank 1
Bank of Baroda 2 3 1 1 2 6 2 5 2 1 10Bank of India 20 23 7 27 29 19 85
Bank of Maharashtra 40 12 3 27 18 6 29 4 66 22 7 8 15 7 21 14 9 35Canara Bank 1 2 2 7 1 1
Central Bank of India 9 1 2 8 2 20 25 12 16 2 9 7Corporation Bank
Dena Bank 1 1 2 24 25 1 12 3Indian Bank 2
Indian Overseas Bank 1Oriental Bank of Commerce 2
Punjab National Bank 1 1 5 4 3 1State Bank of Hyderabad 26 27 11 11 30 39 39 28 4
State Bank of India 13 34 20 9 29 27 28 19 26 59 23 21 14 12 21 19 10 49Syndicate Bank 2 15 1 1 2
Union Bank of India 2 4 1 9 7 2 8 1 12UCO Bank 2Vijaya Bank 1 1IDBI Bank 1 1 4 4 4 5 3
Total Public Sector Bank (A) 95 77 36 60 94 99 101 55 204 123 45 64 58 30 94 83 41 205MGB 32 52 16 32 60 107 31 20 5VKGB 25 9 29WKGB 8 14 2 13 6 49
Total Gramin Bank (B) 32 52 16 32 60 107 31 20 5 25 9 29 8 14 2 13 6 49HDFC BankICICI Bank 1 5 7
Ratnakar BankKarnataka Bank Ltd.
Total Private Sector Bank (C) 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 5 0 7Grand Total 127 129 52 92 154 206 132 76 209 148 54 93 66 44 96 101 47 261
Annexure 3
RBI/2005-06/288
DBOD.No.BL.BC. 58/22.01.001/2005-2006
January 25, 2006
Magha 5, 1927 (S)
The Chairmen & CEOs
(All Scheduled Commercial Banks including RRBs)
Dear Sir,
Financial Inclusion by Extension of Banking Services - Use of Business Facilitators and Correspondents
With the objective of ensuring greater financial inclusion and increasing
the outreach of the banking sector, it has been decided in public interest
to enable banks to use the services of Non- Governmental Organisations/
Self Help Groups (NGOs/ SHGs), Micro Finance Institutions (MFIs) and
other Civil Society Organisations (CSOs) as intermediaries in providing
financial and banking services through the use of Business Facilitator and
Correspondent models as indicated below.
2. Business Facilitator Model: Eligible Entities and Scope of
Activities
2.1 Under the “Business Facilitator” model, banks may use intermediaries,
such as, NGOs/Farmers' Clubs, cooperatives, community based
organisations, IT enabled rural outlets of corporate entities, Post Offices,
insurance agents, well functioning Panchayats, Village Knowledge
Centres, Agri Clinics/ Agri Business Centers, Krishi Vigyan Kendras and
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KVIC/ KVIB units, depending on the comfort level of the bank, for providing
facilitation services. Such services may include (i) identification of
borrowers and fitment of activities; (ii) collection and preliminary
processing of loan applications including verification of primary
information/data; (iii) creating awareness about savings and other
products and education and advice on managing money and debt
counselling; (iv) processing and submission of applications to banks; (v)
promotion and nurturing Self Help Groups/ Joint Liability Groups; (vi) post-
sanction monitoring; (vii) monitoring and handholding of Self Help Groups/
Joint Liability Groups/ Credit Groups/ others; and (viii) follow-up for
recovery.
2.2 As these services are not intended to involve the conduct of banking
business by Business Facilitators, no approval is required from RBI for
using the above intermediaries for facilitation of the services indicated
above.
3. Business Correspondent Model: Eligible Entities and Scope of Activities
3.1 Under the "Business Correspondent" Model, NGOs/ MFIs set up under
Societies/ Trust Acts, Societies registered under Mutually Aided
Cooperative Societies Acts or the Cooperative Societies Acts of States,
section 25 companies, registered NBFCs not accepting public deposits and
Post Offices may act as Business Correspondents. Banks may conduct
thorough due diligence on such entities keeping in view the indicative
parameters given in Annex 3.2 of the Report of the Internal Group
appointed by Reserve Bank of India (available on RBI website:
www.rbi.org.in) to examine issues relating to Rural Credit and Micro-
Finance (July 2005). In engaging such intermediaries as Business
Correspondents, banks should ensure that they are well established,
enjoying good reputation and having the confidence of the local people.
Banks may give wide publicity in the locality about the intermediary
engaged by them as Business Correspondent and take measures to avoid
being misrepresented.
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3.2 In addition to activities listed under the Business Facilitator Model, the
scope of activities to be undertaken by the Business Correspondents will
include (i) disbursal of small value credit, (ii) recovery of principal /
collection of interest (iii) collection of small value deposits (iv) sale of
micro insurance/ mutual fund products/ pension products/ other third
party products and (v) receipt and delivery of small value remittances/
other payment instruments.
3.3 The activities to be undertaken by the Business Correspondents would
be within the normal course of the bank's banking business, but
conducted through the entities indicated above at places other than the
bank premises. Accordingly, in furtherance of the objective of increasing
the outreach of the banks for micro-finance, in public interest, the Reserve
Bank hereby permits banks to formulate a scheme for using the entities
indicated in paragraph 3.1 above as Business Correspondents. Banks
should ensure that the scheme formulated and implemented is in strict
compliance with the objectives and parameters laid down in this circular.
4. Payment of commission/ fees for engagement of Business Facilitators/ Correspondents
Banks may pay reasonable commission/ fee to the Business Facilitators/
Correspondents, the rate and quantum of which may be reviewed
periodically. RBI Master Circular DBOD.Dir.5/13.07.00/2005-06 dated July
1, 2005 may be treated as modified to that extent. The agreement with
the Business Facilitators/ Correspondents should specifically prohibit them
from charging any fee to the customers directly for services rendered by
them on behalf of the bank.
5. Other Terms and Conditions for Engagement of Business
Facilitators and Correspondents
5.1 As the engagement of intermediaries as Business Facilitators/
Correspondents involves significant reputational, legal and operational
risks, due consideration should be given by banks to those risks. They
should also endeavour to adopt technology-based solutions for managing
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the risk, besides increasing the outreach in a cost effective manner. In
formulating their schemes, banks may be guided by the recommendations
made in the Khan Group Report as also the draft outsourcing guidelines
released by Reserve Bank of India on December 6, 2005 (available on RBI
website: www.rbi.org.in).
5.2 The arrangements with the Business Correspondents shall specify:
(a) suitable limits on cash holding by intermediaries as also limits on
individual customer payments and receipts,
(b) the requirement that the transactions are accounted for and reflected
in the bank's books by end of day or next working day, and
(c) all agreements/ contracts with the customer shall clearly specify that the bank is responsible to the customer for acts of omission and commission of the Business Facilitator/ Correspondent.
6. Redressal of Grievances in regard to services rendered by
Business Facilitators/ Correspondents
(a) Banks should constitute Grievance Redressal Machinery within the
bank for redressing complaints about services rendered by Business
Correspondents and Facilitators and give wide publicity about it through
electronic and print media. The name and contact number of designated
Grievance Redressal Officer of the bank should be made known and
widely publicised. The designated officer should ensure that genuine
grievances of customers are redressed promptly.
(b) The grievance redressal procedure of the bank and the time frame
fixed for responding to the complaints should be placed on the bank's
website.
(c) If a complainant does not get satisfactory response from the bank
within 60 days from the date of his lodging the compliant, he will have the
option to approach the Office of the Banking Ombudsman concerned for
redressal of his grievance/s.
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7. Compliance with Know Your Customer (KYC) Norms Compliance with
KYC norms will continue to be the responsibility of banks. Since the
objective is to extend savings and loan facilities to the underprivileged
and unbanked population, banks may adopt a flexible approach within the
parameters of guidelines issued on KYC from time to time.
The KYC guidelines issued vide our circulars dated November 29, 2004
and August 23, 2005 provide sufficient flexibility to banks. In addition to
introduction from any person on whom KYC has been done, banks can
also rely on certificates of identification issued by the intermediary being
used as Banking Correspondent, Block Development Officer (BDO), head
of Village Panchayat, Post Master of the post office concerned or any other
public functionary, known to the bank.
Yours faithfully,
(
P. Vijaya Bhaskar)
Chief General Manager
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Annexure 4
________________RESERVE BANK OF INDIA______________
RBI/ 2009-10/233
RPCD.CO.LBS.HLC.BC.No.43 /02.19.10/2009-10 November 27, 2009
CMDs of all SLBC Convenor Banks
(As per list)
Dear Sir,
High Level Committee to Review Lead Bank Scheme – Providing banking services in every village having population of over 2000 by March 2011
As you may be aware, the High Level Committee on Lead Bank Scheme
constituted by the Reserve Bank of India with Smt. Usha Thorat, Deputy
Governor, as Chairperson has submitted its Report on August 20, 2009,
which is available on our website (www.rbi.org.in). The Committee, inter-
alia, recommended broadening of the scope of the Scheme to specifically
cover financial inclusion, role of State Governments, financial literacy and
credit counselling, 'credit plus' activities, formulation of time bound
Development Plans to facilitate 'enablers' and remove /minimise
'impeders' for banking development for inclusive growth and debt
settlement and grievance redressal mechanisms. On the basis of
recommendations of the Committee and as announced in Paragraph 147
of the Governor’s statement on Second Quarter Review of the Monetary
Policy 2009-10, it is advised that the lead banks may
“constitute a Sub-Committee of the District Consultative Committees
(DCCs) to draw up a roadmap by March 2010 to provide banking services
through a banking outlet in every village having a population of over
2,000, by March 2011. Such banking services may not necessarily be
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extended through a brick and mortar branch but can be provided through
any of the various forms of ICT- based models, including through BCs”
2. A monitoring review mechanism may be instituted by DCCs to
periodically assess and evaluate the progress made in achieving the
roadmap. This may be taken up for review in each meeting of the DCC. It
is advised that a Sub-Committee of DCC may be formed which may meet
on monthly basis and arrange to furnish progress made in this regard in
the enclosed format by 10th of the following month to the respective SLBC
Convenor banks. The SLBC Convenor banks may furnish a consolidated
position of the progress achieved in respect of each district of the State by
15th of the following month to the respective Regional Offices of Rural
Planning & Credit Planning Department of the Reserve Bank.
3. Please ensure monitoring of the progress in identification of villages as
also in provision of banking facilities within the time frames envisaged in
the policy.
4. You may advise the DCCs/all member banks accordingly.
Please acknowledge receipt.
Yours faithfully,
(Deepali Pant Joshi)
Chief General Manager
Encl: As above
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Annexure 5
_______________RESERVE BANK OF INDIA_____________
RBI/2009-10/329
RPCD.CO.LBS.HLC.BC.No.56 /02.19.10/2009-10
February 26, 2010
CMDs of all SLBC Convenor Banks
Dear Sir,
Report of the High Level Committee to Review Lead Bank Scheme
-Implementation of the recommendations
Over a period of four decades, since the inception of the Lead Bank
Scheme (LBS), several changes have taken place necessitating a relook at
the scheme to make it more effective in the changed economic scenario
with sharper focus on financial inclusion and recent developments in the
banking sector. A High Level Committee to review Lead Bank Scheme
was, therefore, constituted by Reserve Bank of India.
2. The Committee recommended that the LBS is useful and needs to
continue. The overarching objective of the Scheme is to enable banks and
State Governments to work together for inclusive growth.
3. All the action points emanating from the recommendations of the
Committee requiring action to be taken by the SLBC convenor banks at
the state level and lead banks/commercial banks at the district level are
appended at Annex I & II respectively. You are advised to initiate actions
for speedy implementation of the recommendations and also closely
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monitor the progress made by the lead banks / commercial banks in this
regard.
4. The SLBC plays a very important role in development at state level,
There is, therefore, a need for streamlining and strengthening of the
same. With a view to improving the efficacy of the Lead Bank Scheme, we
advise that the various fora under the Lead Bank Scheme need to be
strengthened. We draw your attention specifically to the
recommendations of the Committee relating to strengthening of
implementation of the Lead Bank Scheme at state and district level.
Illustrative guidelines on the conduct of State Level Bankers Committee
(SLBC) meetings are detailed below:
I. Conduct of SLBC Meetings
i) The SLBC meetings may be held regularly at quarterly intervals and
they should be chaired by the Chairman & Managing Director (CMD) of the
convenor bank. Additionally, the SLBC meetings may be co-chaired by
Additional Chief Secretary or Development Commissioner of the State
concerned.
ii) In view of the large membership of the SLBC, it would be desirable for
the SLBC to constitute Sub-Committees for specific tasks. The sub
committees may examine the specific issues in-depth and devise
solutions/recommendations for consideration of the SLBC. The
composition of the sub-committee and subjects/ specific issues
impeding/enabling financial inclusion to be deliberated upon, may vary
from State to State depending on the specific problems/issues faced by
the States.
iii) The secretariat/offices of SLBC should be sufficiently strengthened to
enable the SLBC convenor bank to effectively discharge its functions. Each
SLBC may have its own website. In each State, a full day sensitisation
workshop may be convened by the SLBC convenor bank in April/May
every year.
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iv) The various fora at lower levels may give adequate feedback to the
SLBC on issues that need to be discussed on a wider platform.
v) Several institutions and academicians are engaged in research and
studies etc. that have implications for sustainable development in
agriculture and MSME sector. Engaging with such research institutions and
academicians would be useful in 3
bringing in new ideas for furthering the objectives of the Lead Bank
Scheme. The SLBC/DCC may, therefore, identify such academicians and
researchers and invite them as 'special invitees' to attend SLBC/DCC
meetings occasionally both for adding value to the discussion and also
associate them with studies for product formulation appropriate to the
State/District. Other 'special invitees' may be invited to attend SLBC
meetings depending on the agenda items/issues to be discussed in the
meetings.
vi) The activities of NGOs in facilitating and channeling credit to the low
income households are expected to increase in the coming years. Several
Corporate houses are also engaged in Corporate Social Responsibility
activities for sustainable development. Bank's linkage with such
NGOs/Corporate houses operating in the area to ensure that the
NGOs/Corporates provide the necessary 'credit plus' services can help
leverage bank credit for inclusive growth. Success stories could be
presented in SLBC/DCC meetings to serve as models that could be
replicated.
Agenda Items
While all SLBCs/Lead Banks are expected to address the problems
particular to the concerned states, some of the important areas which are
common to all States on which the SLBCs/Lead Banks should invariably
discuss in the fora are as under:
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i. monitoring mechanism to periodically assess and evaluate the progress
made in achieving the road map to provide banking services within the
time frame prescribed
ii. identification of unbanked/under banked areas for providing banking
services in a time bound manner with a view to achieve 100% financial
inclusion
iii. the specific issues inhibiting and enabling IT enabled financial inclusion
iv. issues to facilitate 'enablers' and remove/minimise 'impeders' for
banking development for inclusive growth
v. monitoring initiatives for providing 'Credit Plus' activities by banks and
State Governments such as setting up of Credit Counselling Centres and
RSETI type Training Institutes for providing skills and capacity building to
manage businesses
vi. review of performance of banks under Annual Credit Plan (ACP)
vii. regional imbalances in deployment of credit to various sectors of the
economy
viii. Credit - Deposit Ratio of the State
ix. flow of credit to priority sector and weaker sections of the society
x. assistance under Government sponsored schemes
xi. grant of educational loans
xii. progress under SHG - bank linkage
xiii. SME financing & bottlenecks thereof, if any
xiv. steps taken for improving land record and recovery mechanism
xv. timely submission of data by banks
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xvi. review of relief measures (in case of natural calamities wherever
applicable) and
xvii. issues remaining unresolved at the DCC/DLRC meetings
The above list is illustrative and not exhaustive. The SLBC convenor banks
may include any other agenda item considered necessary.
The Chief Minister/Finance Minister and senior level officers of the
State/RBI (of the rank of Deputy Governor / Executive Director) may be
invited to attend the SLBC meetings.
5. Further, we draw your attention the following major recommendations:
5
I. BANKING PENETRATION
i) SLBC convenor banks / lead banks are advised to focus attention on the
urgent need for achieving 100% financial inclusion through penetration of
banking services in the rural areas. Such banking services may not
necessarily be extended through a brick and mortar branch but can be
provided through any of the various forms of ICT- based models, including
through BCs. However, ICT connectivity should not be an issue of
constraint for not pursuing financial inclusion by commercial banks/RRBs.
In this connection you may be guided by our Circular
RPCD.CO.LBS.HLC.BC.No.43/ 02.19.10/2009-10 dated November 27, 2009.
ii) SLBC convenor banks may take up impeders with the State
governments as issues of road/digital connectivity, conducive law and
order situation, uninterrupted power supply and adequate security etc. for
ensuring banking expansion at all centres where penetration by the
formal banking system is required. However, these should not inhibit the
introduction of financial inclusion initiatives.
II. GREATER ROLE FOR PRIVATE SECTOR BANKS
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The private sector banks should involve themselves more actively by
bringing in their expertise in strategic planning and leveraging on
Information Technology. The Lead banks, on their part, should also ensure
that private sector banks are more closely involved in the Lead Bank
Scheme, both while drawing up and in implementing the ACP/DCP.
III. PREPARATION OF DISTRICT CREDIT PLAN/ANNUAL CREDIT
PLAN
i) NABARD prepares PLPs for all the districts of the country. These plans
must be prepared by October-November every year and so as to serve as
inputs to the district planning authorities for preparing their budgetary
plans and to the lead banks for preparing the District Credit Plans (DCP).
Preparation of PLP is to be advanced to be completed by August every
year to enable the State Governments to factor in the PLP projections.
While preparing the PLP for districts, NABARD should take into account the
firm commitments given by the State Government/ banks/other
stakeholders for the year.6
ii) The Zonal/controlling offices of banks, while finalizing their business
plans for the year, should take into account the commitments made in the
ACP which should be ready well in time before the performance
budgets are finalized. It may be ensured that there is little or no
divergence between the PLP and the DCP/ACP.
IV. QUARTERLY PUBLIC MEETING AND GRIEVANCE REDRESSAL
The Lead District Manager may convene a quarterly public meeting at
various locations in the district, in coordination with banks having a
presence in the area and other stakeholders to generate awareness of the
various banking facilities, policies and regulations which impact the
common person, obtain feedback from the public and provide grievance
redress to the extent possible at such meetings or facilitation for
approaching the appropriate machinery for grievance redress.
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V. CAPACITY BUILDING/TRAINING/SENSITIZATION PROGRAMMES
i) There is a need for sensitising the District Collectors and CEOs of Zilla
Parishads on banks and banking in general as also on the specific scope
and role of the Lead Bank Scheme. Such sensitisation should form part of
the probationary training of such officers. Further, as soon as they are
posted in a district, the SLBC may arrange for exposure visits for the
District Collectors to the SLBC convenor’s office for sensitisation and
understanding of the Lead Bank Scheme.
ii) Staff at the operational level of banks and government agencies
associated with implementation of the Lead Bank Scheme need to be
aware of the latest developments and emerging opportunities. There is
need for staff sensitisation/ training/seminars, etc. at periodic intervals on
an ongoing basis.
VI. LIAISON WITH STATE GOVERNMENT
As the effectiveness of the Lead Banks Scheme depends on the dynamism
of the District Collector and the LDM, with supportive role of the
Regional/Zonal Office, you are advised to follow up with the respective
State Governments for extending necessary support as it may be
impossible for the banks to achieve the objective of financial inclusion in
its most comprehensive sense. 7
6. All other instructions issued prior to this circular will continue to remain
operative /effective.
7. We shall be glad if you will please keep our respective Regional Offices
informed of the action taken by you on the various recommendations at
quarterly intervals.
Please acknowledge receipt.
Yours faithfully
Sd/-
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(Deepali Pant Joshi)
Chief General Manager
Encl: As above
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Recommended