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New Delhi, 29th November, 2012
International WorkshopEnhancing Delivery of G2P Payments
for Rural Areas
The number of bank branches multiplied ten-fold - from 8,000+ in 1969 when the first set of banks were nationalized to 80,000+ today.
But clearly, these are not enough.
Major barriers to providing banking services include:Lack of reachHigher cost of transactions and time taken in providing those services. The existing business model does not pass the test of convenience, reliability, flexibility and continuity.
BASIC INFRASTRUCTURE FOR DELIVERY – PRESENCE OF BANK OUTLETBASIC INFRASTRUCTURE FOR DELIVERY – PRESENCE OF BANK OUTLET
3
ACCESS TO BANKING FACILITIESACCESS TO BANKING FACILITIES
Source: World Bank Financial Access Survey 2010
Country Number per 1 lakh population
Branches ATMs
USA 35.74 173.75
France 43.11 110.07
UK 25.51 64.58
Austria 11.81 48.16
Brazil 13.76 120.62
Mexico 15.22 47.28
Philippines 7.69 14.88
India 10.91 5.44
Afghanistan 2.25 0.50
ALLIANCES (or Partnerships) help the Banks in reaching the last mile in a reliable and cost effective manner.
These are:
Self Help Groups (SHGs)
Micro Finance Institutions
Business Correspondents
SO, WHAT ARE THE ALTERNATIVES?SO, WHAT ARE THE ALTERNATIVES?
BUSINESS CORRESPONDENT (BC) CHANNELBUSINESS CORRESPONDENT (BC) CHANNEL
BCs are agents employed by Banks to deliver services in unbanked/under-banked areas.Positives:Low cost vis-à-vis branch channel
Capital investment about Rs. 30,000Revenue expenditure Rs. 5-6,000 per month
Easier to scale up (~75,000 BC outlets set up by banks in the last 2 years.
Limitations: Not all products can be offered.KYC, Credit decision, etc. cannot be outsourced.Risks of outsourcing.
In a nutshell,BC channel is useful for rapid scale up of banking outfits in areas with low business potential.Even in other locations, can be used for decongestion of branches from low value – high volume customers.
GeographyBranches
Outlets of BCs31-03-10 30-09-12
Growth (in last 2.5 years)
Rural 4,857(37.3)
5,448(38.3)
591 25,216
Semi Urban 3,797(27.2)
4,027(28.3)
230 2,176
Urban 2,303(17.7)
2.523(17.7)
220 2,141
Metro 2,059(15.8)
2,232(15.7)
173 2,017
Total 13,016 14,230 1,114 31,550
Figures in brackets indicate percentage share in total branches
OUTREACH THROUGH BRANCHESOUTREACH THROUGH BRANCHES
6
More than 53% of new branches are in rural areasAll BC outlets set up in the last 5 years.
Features of Business Correspondent ChannelFeatures of Business Correspondent Channel
7
Products available:i.SB-cum-Overdraft/GCCii.(Flexi) Recurring Depositiii.Micro Chanel Finance (Overdraft for small shop keepers)iv.Remittances.v.Credits to branch based accountsvi.SHG Savings Bank accounts
Technology:All products are technology enabled.Accounts on CBS platform.Both ‘on line’ and ‘off line’ transactions allowed. ‘On line’ is the preferred mode.Central authentication.Ease of operation and cost effectiveness are the parameters for choice of technology.
Basic Bank AccountsBasic Bank Accounts
8
Number – in Lakh
Mar '10 Mar '11 Mar '12 Oct '12
BC
Branch
37
39 56
41
95
41
127
41
BC channel outpaced branch channel
7697
168
136 Strategy:
Account opening campaigns involving students andlocal Panchayats.•Special monetary incentives to BCs for meeting stretched targets.
9
Proof of Pudding is in eating Proof of Pudding is in eating
Mar '10 Mar '11 Mar '12 Oct '12
Total Balance
Average Balance
24
438
248
57
Total Balance Rs. CroresAverage balance per account Rupees
345
267
9862
Rs. 438 crore low cost deposits mobilized through BC channel.5 fold rise in ‘Average balance per account’
24
10
Utility of Basic Bank Accounts in BC channel Utility of Basic Bank Accounts in BC channel
Number Lakh; Amount Rs. Crores
2009-10 2010-11 2011-12 Apr-Oct12
No. of Transactions
2009-10 2010-11 2011-12 Apr-Oct12
Amount of Transactions
203
217203
140
100
7,026
5,392
2,107
About 50% CAGR growth in No. of transactions
MEETING REMITTANCES NEEDS OF MIGRANTS (P2P) MEETING REMITTANCES NEEDS OF MIGRANTS (P2P)
11
3,9193,888
1,360
908826
G2P – SERVING THE RURAL POOR G2P – SERVING THE RURAL POOR
12
123
293
138
32
98
44
ISSUES AND CHALLENGES (1) ISSUES AND CHALLENGES (1)
13
Internal: Winning over staff: Staff sensitization – to the BC channel in general and to G2P projects in general. Training on Monitoring and Mentoring the Channel.Mitigation of risks associated with outsourcing.
Technology:Technologies are multiple and is still evolving. Many of the current Technical Service Providers are start-up Companies.
Banks need to procure their own technology/technologies to De-link BCs from TSPsGive uniform experience for Customers across BCsEnable inter-operability.
ISSUES AND CHALLENGES (2) ISSUES AND CHALLENGES (2)
14
Infrastructure: Roads, Power, Telecommunications, Law & Order, etc. which affect other sectors of economy affect Financial Inclusion projects also.
Business Case:Standalone G2P projects can not be viable.They need to be dovetailed into overall FI efforts.
Manage stake holders’ (remitting Governments, BCs and Customers) expectations
Viability of BC (short run) and Bank (long term)Increase number of Products (RD, TDR, Micro Loans, etc.)
Introduce customer charging (and share these with BC)
Run special campaigns periodically to keep the BCs enthused.
15
All Banks Data from RBI
16
17
6,658
28
1,513
1,569
1,600
2,219
903
3,027
1,882
827
2,362
1,186
459
326
205
98
2,133
1,000
623
72
12
25
42
Outreach through BC ChannelOutreach through BC Channel
3315
67
25
Outlets Spread across
all geographies
25,794 villages covered through BC channel
4,550 link branches & 113 FICs supervise the outlets
All CSP operators are trained
A Grievance Redressal Mechanism for complaints is in place.
7
Innovative advertisement/customer campaigns through comic books, ‘Nukkad Natak’, etc. Financial Literacy programs in Factories.
Customer awareness and financial literacy go hand in hand.
INNOVATIONS – AWARENESS CAMPAIGNSINNOVATIONS – AWARENESS CAMPAIGNS
18