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Explained-Banking - Business Correspondent Agents - Financial Inclusion
Explained-Banking - Business Correspondent Agents - Financial Inclusion
Explained-Banking - Business Correspondent Agents - Financial Inclusion
http://mrunal.org/2013/01/economy-banking-business-correspondents-...
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1. Give formal banking services to poor people in urban & rural areas.
2. Promote habit of money-savings, insurance, pension-investment among poor-people.
3. Help them get loans at reasonable rates from normal banks. So they dont become victims in the
hands of local moneylender cum thugs.
Three important initiatives taken by RBI for nancial inclusion:
2005
2006
No frills account.
Poor people can open bank accounts with very low balance e.g. Rs.5 only.
Business Correspondents (BC) system. Discussed in this article.
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http://mrunal.org/2013/01/economy-banking-business-correspondents-...
If Financial inclusion means open bank accounts for poor people. Then whats the big deal, just
open a damn account!
Not so easy. India has around 6 lakh villages. Most of them dont have bank branches.
Ok so Why cant banks open branches in every village?
No profit
Because Administrative costs will be high= Building rent, telephone, electricity, sta salary,
security guards.
On the other hand volume of business is very low in village areas=amount of money
deposited, loans taken.
Means there is No prot. Actually itll lead to heavy losses.
Reluctant staff
In many villages, there is no electricity, no good schools/drinking water, naxalite problem= Bank
sta doesnt want to serve there.
Therefore banks dont like to open branches below district HQ or Tehsil level. Now comes the
problem
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http://mrunal.org/2013/01/economy-banking-business-correspondents-...
1. Banks
2. poor
people
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1. Non-Governmental
Organisations(NGOs)
2. Self Help Groups (SHGs),
3. Micro Finance Institutions (MFIs)
4. Post Oces
5. Insurance agents
6. Panchayats
7. Civil Society Organisations (CSOs)
8. farmers clubs
9. Community based organisations
10. Cooperatives societies
11. Village Knowledge Centres,
12. Agri Clinics/ Agri Business Centers,
13. Krishi Vigyan Kendras
14. Khadi and Village Industries units
15. corporate entities with IT outlets in rural
parts.
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http://mrunal.org/2013/01/economy-banking-business-correspondents-...
home-address etc.
6. Help the Self Help Groups (SHG), to get loans.
7. Help the bank to collect EMIs and recover loan money.
Swabhimaan
Initiative by the Finance Ministry + Indian Banks Association
launched in 2011
To bridge economic gap between rural and urban India.
Objectives of Swabhimaan
Make banking facilities available to every habitat with a population >2000 (by March 2012.)
Banks will provide basic services like deposits, withdrawal, Kisan Credit Card (KCCs) etc via
Business Correspondents (BCs) also known as Bank Saathi.
Banks will also working together with the Unique Identication Authority of India (UIDAI) for
opening new bank accounts.
Government will send subsidies and social security benets (pension etc.) directly to
beneciarys account.
Beneciary can withdraw the money from the Business Correspondents (BCs) in their village
itself.
Government has provided 500 million rupees to banks for taking these ^initiatives.(e.g. paying
Commissions to Bank Saathi, their training cost, doing paperwork with UID.)
Reforms in BC model
Common BC
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http://mrunal.org/2013/01/economy-banking-business-correspondents-...
Old system
New system
under MNREGA.
2. Government gives cash to bank.
3. Bank gives it to B.C.
4. B.C. deposits it into MNREGA
workers account.
system.
2. So, cash directly goes from Government > Bank
>MNREGA workers bank account.
3. Villagers will have the freedom to make their
withdrawals from any BC they choose.
Kiosk Banking
The D.I.Y. (Do it yourself) banking services e.g. ATM, internet kiosks = still expensive.
There is also lack of education + awareness in rural areas about such things.
So even if Government /bank installs such automatic ATM, internet kiosks=> most of the time
they just gather dust.
Therefore, technology-based self-service model (e.g ATM, internet kiosks) is not useful at this
stage.
And hence we need Personnel (these Business Correspondents=middlemen). Because often
villagers are illiterate, so they cant even ll up the forms for opening bank accounts or
loan-application or lling the deposit slips etc. Business Correspondents are essential at this
stage.
But again problem: The cost per transaction remains high. (Because Bank has to pay
commission to B.C.agent.)
Therefore, Chindu has suggested following solution for long term:
Migrate from banking correspondent model to Kiosk banking = mobile vans tted with ATM
machines+ biometric devices.
Theyll provide banking services in remote areas.
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http://mrunal.org/2013/01/economy-banking-business-correspondents-...
Mock questions
Q1. Financial inclusion involves
1. Covering rural poors in banking net.
2. Covering urban poors in banking net.
3. Providing jobs to poor people.
4. Providing vocational training to poor people.
5. Spreading banking awareness among poor people.
Ans.choices
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a. Only 1, 3 and 5
b. Only 1,2 and 5
c. Only 3 and 4.
d. All of them
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http://mrunal.org/2013/01/economy-banking-business-correspondents-...
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1. Apart from what is already being done, what new initiatives should be taken to achieve 100%
nancial inclusion?
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