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 slumdwellers 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 Honble 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 31 st 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 |Financial Inclusion through Business Correspondence

Model

Objectives Chapter 2
2. 1 Objectives

and

Methodology

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.
3|Financial Inclusion through Business Correspondence model

The research could be useful for following reasons 1. To measure the effectiveness of the existing model 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.
4 |Financial Inclusion through Business Correspondence
Model

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 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 1 2 3 4 Stake holders Bank BCs Customers Non-customers Sample Size 1 10 10 per BC 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

5|Financial Inclusion through Business Correspondence model

selecting the sample, care was taken to give fair representation to all strata of the stakeholders.

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

6 |Financial Inclusion through Business Correspondence

Model

Literature Chapter 3

Review

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
7|Financial Inclusion through Business Correspondence model

poverty with the help of loans offered by MFIs, micro-credit through BankSHG linkages, with NABARD playing a leadership role and micro-finance institutions, mainly NGOs, playing a catalytic as well as enabling role at 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

8 |Financial Inclusion through Business Correspondence

Model

3.1 Product innovation There is a need to keep the financial products simple so that they are understood by the uneducated poor. Also, financial innovation doesnt 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,

9|Financial Inclusion through Business Correspondence model

Branchless

banking

as

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. 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
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
Model

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 .

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 model

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
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
Model

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, 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 model

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
Model

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 banks 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 model

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 days or at least half a days 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.

16 | 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
Model

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 blockwise 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 model

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 Cooperatives: 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
Model

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
Chapter 5

Buldana

District

Details

5.1 District Profile

19 | 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 model

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 States 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 States per capita income of Rs. 74027/- The district is industrially backward and placed in D+ index by the State Government.

20 | 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
Model

District Profile
District BULDANA

Appendix I

State -

MAHARASHTRA

Division - AMRAVATI
2. SOIL & CLIMATE

1. PHYSICAL & ADMINISTRATIVE FEATURES

Total Geographical Area (Sq.km) No. of Sub Divisions No. of Blocks No. of Villages (Inhabited) No. of Panchayats 9661 5 13 1433 866 Agro-climatic Zone Climate Soil Type

Western Plateau and Hills Region-Plateau Zone North Hot and dry, Semi Arid (Wetter Half) Deep Black, Medium Black, Medium Red and Black, Shallow Red

6. WORKERS PROFILE [in '000]

Cultivators Of the above, Small/ Marginal Farmers Agricultural Labourers Workers engaged in Household Industries Workers engaged in Allied Agro-activities Other workers 326 28 400 11 8 172 Category Population Scheduled Caste Scheduled Tribe Literate BPL

7. DEMOGRAPHIC PROFILE [in '000]

Total 2588
NA NA NA NA

Male 1342
NA NA

Female 1246
NA NA NA

Rural
NA NA NA NA NA

Urban

1858
NA NA

1057
NA

801

NA NA

8. HOUSEHOLDS [in '000]

Total Households Rural Households BPL Households 446 358 186

9. HOUSEHOLD AMENITIES [Nos. in '000 Households]

Having brick/ stone/ concrete houses Having source of drinking water Having access to banking services
NA NA

Having electricity supply Having independent toilets 451 Having radio/ tv sets

NA 91547 NA

Source (if not me s ntione against the d Item Nos. 1, 3, 4,6- Census 2001; Item Nos. 2 - Dept. of A gr/ Dir. of Eco. & Stat.; Item No. 5 - BPL Survey 2002. re ctiveite spe m):

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
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 model

money transfer etc. While these systems meet the needs of modern 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 A/Cs 1 2 3 4 5 6 7 8 SBI CBI BOM BOB SBH IDBI PNP VKGB Total 171,788 95,549 63,504 2440 7,398 9,171 3,863 99000 452673 with 62075 7497 20007 22 466 0 44 49756 139867 No A/Cs Frill Leftover household s as per survey 547 0 325 0 0 0 0 709 1581 Table 5.1

having opened

Banks 109166 88052 43172 2378 6932 9171 3819 48535 311225

(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
Model

Banking Profile
District BULDANA

Appendix II

State -

MAHARASHTRA

Lead Bank -

Central Bank of India

1. NETWORK & OUTREACH (As on 3 1/03/20 11)

Agency Commercial Banks Regional Rural Bank District Central Coop. Bank Coop. Agr. & Rural Dev. Bank Primary Agr. Coop. Society Others All Agencies No. of Banks/ Soc. 15 1 1
NA

No. of Branches Total 95 24 106

NA

No. of non-formal agencies assoiated Urban mFIs/ mFOs

NA NA NA NA NA NA NA

Per Branch Outreach Villages

NA NA NA NA NA NA NA

Rural 47 12 93
NA

Semi-urban 48 12 13
NA

SHGs/ JLGs
NA NA NA NA NA NA NA

BCs/ BFs
NA NA NA NA NA NA NA

Households
NA NA NA NA NA NA NA

570
NA

570
NA

570
NA

NA
NA

587

795

722 No. of accounts

73

2 DEPOSITS OUTSTANDING .
Agency Commercial Banks Regional Rural Bank Cooperative Banks Others All Agencies A mount of Deposit [Rs.'000] Growth(%)
NA NA NA NA NA

31-Mar-08
NA NA NA NA NA

31-Mar-09
NA NA NA NA NA

31-Mar-10
NA NA NA NA NA

Share(%)
NA NA NA NA NA

31-Mar-09 11833700 1386400 7293300 20513400

31-Mar-10 13950718 1607890 7845686 23404294

31-Mar-11 17181590 1940696 8173560 27295846

Growth(%) 23.16 20.70 4.18 16.63

Share(%) 62.95 7.11 29.94 100

3. LOANS & ADVANCES OUTSTANDING

Agency Commercial Banks Regional Rural Bank Cooperative Banks Others All Agencies No. of accounts 31-Mar-09
NA NA NA NA NA

Amount of Loan [Rs.'000] Growth(%)

NA NA NA NA NA

31-Mar-10
NA NA NA NA NA

31-Mar-11
NA NA NA NA NA

Share(%)
NA NA NA NA NA

31-Mar-09 8549700.00 924600.00 3790400.00

NA

31-Mar-10 10260474.00 985381.00 3696864.00

NA

31-Mar-11 12267768.00 1056665.00 4832144.00

NA

Growth(%) 19.56 7.23 30.71

NA

Share(%) 67.57 5.82 26.61

NA

13264700.00

14942719.00

18156577.00

21.51 Cumulative Deposit

NA NA NA NA NA

100.00

4. CD-RATIO
Agency Commercial Banks Regional Rural Bank Cooperative Banks Others All Agencies CD Ratio 31-Mar-09 72.25 66.69 51.97
NA

5. PERFORMANCE UNDER FINANCIAL INCLUSION (No. of A/cs)

31-Mar-10 73.55 61.28 47.12 63.85 31-Mar-11 71.4 54.45 59.12 66.52 Loans to A gr. Sector A mount % of Total [Rs.'000] Loans 3147830 489320 1491588
NA NA

A gency Commercial Banks Regional Rural Bank Cooperative Banks Others A ll A gencies Loans to Weaker Sections Amount % of Total [Rs.'000] Loans 4218073 139676 1434455
NA NA

During 2010-11 Deposit

NA NA NA NA NA

Credit
NA NA NA NA NA

Credit
NA NA NA NA NA

64.66

6. PERFORMANCE TO FULFILL NATIONAL GOALS (As on 31 /2 1) /03 01

Agency Commercial Banks Regional Rural Bank Cooperative Banks Others All Agencies Priority Sector Loans Amount % of Total [Rs.'000] Loans 3735983 553204 2098383
NA NA

Loans under DRI Scheme Amount % of Total [Rs.'000] Loans 13230

NA NA NA

Loans to Women Amount % of Total [Rs.'000] Loans 1062687 78246 181945

NA NA

58 9 33 100

61 10 29 100

73 2 25 100

100
NA NA NA

80 6 14 100 Average A ch[%] in last 3 years 88.25 68.62 86.41

NA

6387570 2008-09 Target [Rs.'000] 2702000.00 533600.00 1554400.00

NA

5128738

5792204 2009-10

13230

100 2010-11

1322878

7. AGENCY-WISE PERFORMANCE UNDER ANNUAL CREDIT PLANS

Agency Commercial Banks Regional Rural Bank Cooperative Banks Others All Agencies A ch'ment [Rs. '000] 1695500.00 146300.00 282600.00
NA

Ach'ment [%] 62.74 27.41 18.18

NA

Target [Rs.'000] 3023643.00 579559.00 15353.36

NA

Ach'ment [Rs. '000] 3323886.00 414606.00 21210.72

NA

Ach'ment [%] 109.93 71.54 138.15

NA

Target [Rs.'000] 4057604.00 517370.00 2039045.00

NA

Ach'ment [Rs. '000] 3735983.00 553204.00 2098383.00

NA

A ch'ment [%] 92.07 106.93 102.91

NA

4790000.00 2008-09 Target [Rs.'000] 3332851 937219.00 4270070.00 120024.00 399918 4790012.00 2008-09 Demand [Rs. '000]
NA

2124400.00

44.35

5138528.00

5859574.00 2009-10

114.03

6614019

6387570 2010-11

96.58

84.99 Average A ch[%] in last 3 years 91.54 41.65 79.36 140.80 123.24 84.99

8. SECTOR-WISE PERFORMANCE UNDER ANNUAL CREDIT PLANS

Broad Sector Crop Loan Term Loan (Agr) Total Agri. Credit Non-Farm Sector Other Priority Sector Total Priority Sector A ch'ment [Rs. '000] 1380500.00 377600.00 1758100.00 97300.00 269000 2124400.00 Ach'ment [%] 41.42 40.29 41.17 81.07 67.26 44.35 Target [Rs.'000] 3579242 1010733.00 4589975.00 129252.00
419301.00

Ach'ment [Rs. '000] 4273823.00 484298.00 4758121.00 272284.00 829169.00 5859574.00 2009-10

Ach'ment [%]
119.41 47.92 103.66 210.66 197.75 114.03

Target [Rs.'000] 4033734 1466181.00 5499915 355087.00

759017.00

Ach'ment [Rs. '000] 4590037.00 538701.00 5128738 463962.00 794870.00 6387570

A ch'ment [%]
113.79 36.74 93.25 130.66 104.72 96.58

5138528.00

6614019

9. RECOVERY POSITION
Agency Commercial Banks Regional Rural Bank Cooperative Banks Others All Agencies Recovery [Rs. '000]
NA

Recovery [%] Demand [Rs. '000]

NA NA

Recovery [Rs. '000]

NA

2010-11 Average Rec. [%] in last 3 Demand [Rs. Recovery [Rs. Recovery [%] Recovery [%] years '000] '000]
NA NA NA NA NA

2445364 1448409.00
NA

1075469 1216686.00
NA

43.98 84.00
NA

2412822 5037429.00
NA

1943097 3004771.00
NA NA

80.53 59.65 66.41

3277933 4131226.00
NA

2299453 2383535.00
NA NA

70.15 57.70 63.21

64.89 67.12
NA

3893773.00

2292155.00

58.87

7450251.00

4947868.00

7409159.00

4682988.00

62.83

Sources : Lead Bank & SLBC

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 model

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 25 61 26 22 03 04 04 02 01 148

1 2 3 4 5 6 7 8 9

VKGB SBI CBI BOM SBH PNB IDBI BOB Dena Total

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
Model

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 model

Functioning Chapter 6

of

BC

Model,

SBI

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 PCs 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 customers bank account (known as No Frills account) and customers 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
Model

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, BCs laptop is directly linked to the banks 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 customers account, BC gives the cash present with him to the customer. At the same time, this cash gets transferred from customers account to BCs 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 BCs transaction account gets transferred to the Customers account. This helps the Bank to regulate flow of money and ensure that the BC doesnt 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 customers 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 model

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
Model

Data Chapter 7
7.1 Sample Profile Sr. No 1 2 3 4 Stake holders Bank BCs Customers Non-customers Table 7.1 Sample Size 1 10 10 per BC 5 per BC

Analysis

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
1 2 3 4 5 6 7 8 9 10

Name of Village
Shelud Peth Pimpalgaon Sarai Mhasrur Shirpur Dongar Shewali Karvand Janori Pimparimali Shara

Linked Branch
Chikhli Chikhli Buldana Dhad Kelwad Buldana Undri Shegaon Mehkar 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 model

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 Branch SBI Buldana SBI Chikhli SBI Dhad SBI Kelwad SBI Lonar SBI Mehkar SBI Shegaon SBI Undri Grand Total

No. of villages alloted 2 5 5 1 3 1 3 1 21

No. of villages covered 2 5 2 1 3 1 3 1 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
Model

Name of the Bank

SBI Chikhli SBI Kelwad SBI Dhad SBI Buldana SBI Mehkar SBI Lonar SBI Shegaon SBI Undri

Deposit Micro Remittance MicroMicro Credit insurance Pension

Yes Yes Yes Yes Yes Yes Yes Yes No No No SHG No No No No Yes Yes Yes Yes Yes Yes Yes Yes No No No No No No No No Yes Yes Yes No No Yes Yes 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 model

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
Model

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 persons 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 Individually appointed CSP Through BC 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 model

No. of BCs 9 1

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 Main Secondary

Count 8 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
Model

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 6 Hours 8 Hours

No of Hours CSP is available in each village 2 3

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 model

9 Hours 12 Hours

1 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 Dongarshevli Janori Karvand Mhasrur Peth Pimpalgaon Sarai Model No. of a/cs per village 600 570 433 1430 2000 789

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

Pimpremali Shara Shelud Shirpur Grand Total

1150 2561 3500 1500 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 SBI Buldana SBI Chikhli SBI Dhad SBI Kelwad SBI Lonar SBI Mehkar SBI Shegaon SBI Undri Grand Total Total 0 500 750 335 420 680 450 150 3285

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 model

Table 7.5.5

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 Dongarshevli Janori Karwand Mhasrur Peth Model Count of Deposit accounts 9 10 9 8 10 Count of Loan accounts 1 Count of Pension 1 1 3 Count of Remittance 2 2 3 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

Pimpalgaon Sarai Pimpremali Shara Shelud Shirpur Grand Total

7 10 10 9 4 86

6 2 2 3 7 20

2 6 2 3 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 cant 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 model

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 Dongarshevli Janori Karwand Mhasrur Peth Pimpalgaon Sarai Pimpremali Shara Shelud Shirpur Grand Total Inoperative 70% 20% 0% 0% 20% 0% 0% 0% 10% 0% 12% Operative 30% 80% 100% 100% 80% 100% 100% 100% 90% 100% 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
Model

Fig. 7.6.1

7.6.2. Average no. of accounts per household in a village

Name of the village Dongarshevli Janori Karwand Mhasrur Peth Pimpalgaon Sarai Pimpremali Shara Shelud Shirpur Total Average Average no of a/c per gousehold 1.4 2.7 1.6 1.9 1.9 1.6 3.1 2.1 1.9 1.1 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 model

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 Dongarshevli Janori Karwand Mhasrur Peth Pimpalgaon Sarai Pimpremali Shara Shelud Shirpur Grand Total Total 9 10 10 8 10 9 10 10 8 4 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
Model

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 customers Dongarshevli 7 Janori 9 Karwand 10 Mhasrur 8 Peth 4 Pimpalgaon Sarai 3 Pimpremali 10 Shara 9 Shelud 6 Shirpur 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 model

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 village Dongarshevli Janori Karwand Mhasrur Peth Pimpalgaon Sarai Pimpremali Shara Shelud Model Customers availing Remittance services 2 2 3 2 2 6 2 3 Customers finding the service charges reasonable

1 1 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

Shirpur Grand Total

22

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 model

7.7 Data Analysis for Non-Customers 7.7.1. Profile of non-customers

Occupation Agri-labourer Alms Barber Driver Driver, travels Farming Service Engineer Shikshak Sevak Teacher Tiffins Grand Total Total 4 1 1 1 2 37 1 1 1 1 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
Model

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 1 2 3 No a/c Grand Total Total 27 5 1 17 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 model

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 Yes
Model

No. of responde nts 44 6

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

Grand Total

50

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 No. of accounts 1 2 3 No a/c Grand Total

Whether a member of any SHG/JLG No 25 5 1 14 44 3 6 Yes 2 Grand Total 27 5 1 17 50

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 model

Chart 7.7.3a

7.7.4. Facilities availed by non-customers of SBI on other bank accounts

Facilities Deposit accounts Loan accounts Remittance Micro Insurance Pension

No. of people availing facility 47 29 23 19 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
Model

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 Inoperative operative Not applicable (No account) Grand Total

No of accounts 3 29 18 50

Table 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 model

Fig. 7.7.4b 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) 1 2 3 4 5 8 10 15 NA (No account) 0 Grand Total No of respond ents 13 7 3 2 1 1 1 1 20 1 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
Model

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)
Total responde nts 50 50 50 50 50

Facility availed Deposit Accounts Loan Accounts Remittance Microinsurance Pension

Yes 33 10 5

No

NA 17 17 17 17 17

23 28 33 31

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 model

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) No Yes Grand Total

Total 19 31 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
Model

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
Not aware of the services offered BC is not approachable/ doesnt trust the concept (Acceptability) Doesnt find it convenient Limit on Transactions Already an account with another bank No. of respondents 18 2 6 5 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 model

Fig. 7.7.7 The class Doesnt 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 Yes Grand Total

No. of respondents 17 33 50

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
Model

Table 7.7.8

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
Suggestions MNAREGA payments can be done through kiosks Crop Loan/Gold Loan disbursement through BC All govt payments to be done through kiosks Micro-insurance products to be made available Farmers' clubs 3 2 4 2 1

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 model

GCC/KCC facilities to be made available Loan recovery cases can be handed over to BCs

2 2

Table 8.1.1

Fig 8.1.1 Findings 1. Currently MNAREGA payments are not done through kiosk accounts of SBI. From Banks point of view, including MNAREGA payments will increase business for the BCs, at the same time reducing the load on the branch. From customers point of view, it will save the customers time to go the bank branch, thereby preventing the loss of his half a days 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 customers 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
Model

3. All Government payments are not done through the kiosk accounts due to Tehsildars refusal to transfer payments to these accounts due to nonprovision 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 banks 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 banks 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 Passbooks should be provided to customers, Limit of 10,000 per a/c per day should be removed. Branch a/c balance enquiry to be made possible at CSP Provide monetary support for equipment and stationery Better replacement for finger print detection Low connectivity and electricity problem should be solved, Loan disbursement to be done at CSP Total 5 7 2 3 2 2 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 model

Fig. 8.1.2 Findings 1. Non provision of passbooks has led to several accounts turning inoperative. The reason being that the Tehsildar doesnt 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
Model

3. Customers who have accounts with the BC as well as with the bank, cannot check their bank accounts 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 customers 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
Suggestions Limit of 10000 per day is insufficient A/c should be linked to base branch a/c Passbooks should be provided Overdraft should be allowed Service charge for remittance is too high Problem with fingerprint detection unit Loan disbursement should be in kiosk a/c Customers in % 13 1 3 1 4 1 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 model

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
Model

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 model

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 On withdrawal On remittance On Account opening Nil 0.5% (Min. Re. 1/- Max Rs. 12/-) 2/5 : 3/5 ratio (Bank : B.C.) 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
Model

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 model

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
Model

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.

Bibliography
Bansal & Srinivasan (2009) Business Correspondents and Facilitators: The Story So Far CAB-Calling April-June 2009 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. Xaviers College 2011 Sarma (2007), index of Financial Inclusion, Indian Council for Research on International Economic Relations, Dec 2007 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/ 20082009 /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 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 model

Nabard Newslertter Vol 21, No. 1, April 2010 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 Povertys New Saviour Business Today Dec 14, 2008 Kloeppinger-Tod & Sharma 2010 Innovations in Rural and Agriculture Finance IFPRI Access to fin world bank Circular No. NB.FID / 2495 / FI-01/2010-11 dated 21 January 2011 Circular No. 68/FID9/2010 dated 25 March 2010 Circular No.72 / FID-10 /2010 dated 01 April 2010

Circular No. NB. CPD. BPD./ H-1878-1912 / BP-12 / 2010-2011 dated 06 September 2010 Circular No. DO. No. MCID 217/FI-01/2008-09 dated 14 May 2008 Circular No 02/FID 02/2010 dated 4.01.2010 Circular No.07/FID/2011 dated 18.01.2011 Circular No.NB.FID/2326/FI-01/2010-11 Circular No.239/FID-19/2010 dated 09 December 2010

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
Model

Annexure 1
Bankwise summary of allotted villages (above population 2000) in Maharashtra

Sr. No.

Bank

No. of Allotted Villages

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank Corporation Bank Dena Bank HDFC Bank ICICI Bank IDBI Indian Bank Indian Overseas Bank Karnataka Bank Maharashtra Gramin Bank Oriental Bank of Commerce Punjab National Bank Ratnakar Bank State Bank of Hyderabad State Bank of India

33 1 176 506 853 40 436 3 158 1 72 82 11 21 1 355 6 26 21 215 855

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 model

22 23 24 25 26 27

A l l a h a b a d B 1a n k 1 3 2 4 A n d h ra B a n k 1 B a n k o f B a r 2 d a3 1 1 2 o B a n k o f In d ia B a n k o f M a h 4 0 a 1s 2h t 3r a 2 7 1 8 6 2 9 4 ar C a n a ra B a n k 1 2 2 C e n t r a l B a n k 9 o f I n d 1i a 2 8 2 C o r p o r a t io n B a n k D e n a B a n k1 1 2 24 In d ia n B a n k In d ia n O v e r s e a s B a n k O r ie n ta l B a n k o f C o m m e r c e P u n j a b N a t i o n1 a l B a n k 1 S t a t e B a n k o f 2 H6 y 2d 7e r1 a 1 b 1a 1d 3 0 3 9 3 9 2 8 S t a t e B a n k o1 f 3 I n3 d4 i a2 0 9 2 9 2 7 2 8 1 9 S y n d ic a te B a n k 2 U n i o n B a n k o2 f I n d i a 4 1 U C O Bank V ija y a B a n k ID B I B a n k 1 T o t a l P u b l i c S 9e 5c t7 o7 r 3B 6 a 6n 0k 9 ( 4A )9 9 1 0 1 5 5 M G B 3 2 5 2 1 6 3 2 6 0 1 0 73 1 2 0 VKG B W KG B T o t a l G r a m i n3 2B 5 n k1 6( B3 )2 6 0 1 0 73 1 2 0 a2 H D FC Bank IC IC I B a n k 1 R a tn a k a r B a n k K a rn a ta k a B a n k L td . T o t a l P r i v a t e S 0 e c 0t o r 0 B a0 n k 0 ( C 0) 0 1 G r a n d T o t 1a 2l 71 2 9 5 2 9 2 1 5 42 0 61 3 2 7 6

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
Model

AURANGABAD BEED HINGOLI JALNA LATUR NANDED OSMANABAD PARBHANI THANE BULDHANA WASHIM YAVATMAL CHANDRAPUR GADCHIROLI GONDIA RATNAGIRI SINDHUDURG SOLAPUR 3 4 1 29 19 14 9 1 9 10 85 35 1 7 3 6 2 5 2 20 23 7 27 66 22 7 8 15 7 21 7 20 25 12 16 2 25 1 2 1 2 5 4 3 4 26 59 23 21 14 15 9 7 2 1 1 4 4 2 0 41 2 3 4 5 6 4 5 8 5 25 9 29 8 5 25 9 29 8 12 1 12 21 19 10 49 1 1 2 2 8 1 12 1 4 5 3 30 94 83 41 205 14 2 13 6 49 14 2 13 6 49 5 7 0 0 0 0 0 0 0 5 0 7 2 0 91 4 8 5 4 9 3 6 6 4 4 9 6 1 0 1 4 7 2 6 1

Syndicate Bank Union Bank of India UCO Bank Vijaya Bank VKGB WKGB Total

50 189 23 3 63 92 4292

Annexure 2

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 KVIC/ KVIB
71 | 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 model

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 MicroFinance (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.

72 | 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
Model

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
73 | 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 model

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.

74 | 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
Model

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

75 | 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 model

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, interalia, 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 Governors 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
76 | 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
Model

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

77 | 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 model

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

78 | 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
Model

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 of draw the your attention relating specifically to to the of recommendations Committee strengthening

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 composition of the for consideration and of the SLBC. The issues sub-committee subjects/ specific

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.
79 | 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 model

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:

80 | 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
Model

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

81 | 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 model

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

82 | 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
Model

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.
83 | 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 model

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 convenors 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/84 | 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
Model

(Deepali Pant Joshi) Chief General Manager Encl: As above

85 | 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 model