YES Bank-Business World Transformational Series 2.

Institute Name: Institute of Management Technology, Ghaziabad

Institute Address: Institute of Management Technology, RajNagar,
Hapur Road, Ghaziabad-201001.
Participants Name: Srikanth Konduri (Finance), S Bharadwaj
Adibhatla(Marketing)
Phone Numbers: 7838590567, 9953901018
E-mail Ids: srikanthkonduri@live.co.uk, satyabharadwaj@yahoo.com
Team Name: Path Makers

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YES Bank-Business World Transformational Series 2.0

Executive Summary:
Though India boasts of being a fastest growing economy and consistently
clocking a GDP of 8-9%, it is still struggling to include the people from
lower income strata in its growth story. Many subsidies and incentives
sanctioned to uplift them are either not reaching to the intended
beneficiaries or diverted by the middle men. Moreover, the tendency to
borrow from local moneylenders at high interest rates is aggravating the
existing situation.
Need of the hour is to provide financial services to those excluded
sections in the urban & rural areas at an affordable cost .However, it is
difficult & costlier to establish a bank in every village. So, the RBIs new
policy initiatives for connecting people with banking system can be driven
forward through the widely penetrated Mobile services complemented by
expertise of Information Technology.
Branchless banking models using mobile telephones can be developed
and the business correspondents like local kirana stores, retired teachers,
self-help groups etc. can be utilized to provide financial services like
remittances, deposits and withdrawals. M-Pesa is one such successful
solution in Kenya, which has a low penetration of banking services, led to
21% of its GDP transferred through mobile services.

Exhibit 1: Earners having Bank Accounts (Percentage

of total earners)
Annul Income (INR) Urban Rural Total
34.
<50,000

1
75.

26.8

28.3

50,000100,000
100,000

5
91.

71.2

73

200,000
200,000

8
95.

87.4

89.9

93.6

94.9

400,000
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YES Bank-Business World Transformational Series 2.0

>400,000

98
61.

96.3

97.6

38

44.9

All

Source: RBI report on Currency &

Finance 2006-08
Exhibit 2: Population per Bank Branch
(in thousands)
Year Rural Urban Total
1969(June)
82
1981(Marc

33

63

h)
1991(Marc

20

17

19

h)
2001(Marc

14

16

14

h)
2007(Marc

16

15

16

h)

17

13

16

The above exhibits indicate that very less no. of earners in rural areas
have bank accounts and large no. of people per bank branch. So, a system
like mobile banking is really helpful not only to include them in the formal
banking sector but also provides a huge market potential for the bank.
Partnerships with mobile payment gateways like Obopay which will
facilitate the secured monetary transactions.
BCs (people/units like retailers, retd. Govt. teachers who can encourage or
help out to perform mobile transactions) can be utilized to spread the
awareness cum usage among people through community meetings
wherein knowledge about better farming & harvesting techniques can be
taught along with the financial benefits of using m-banking systems
Spreading awareness and benefits of this solution through BCs like
panchayats Office, wise families in the village, communicating govt.
benefits through school teachers and self-help groups.
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YES Bank-Business World Transformational Series 2.0

Aim is to keep the NPAs minimum, by using the model of MFIs who usually
assign loan to a group of people and make the entire group as a whole
responsible for clearing the debt so that all the members will make sure
that no other member from their group is defaulting
Use of third part outlets, such post officers and small retailers, that act as
agents for financial services providers and that enable customers to
perform functions that require their physical presence, such as cash
handling and customer due diligence for account opening.
Hence the adoption of mobile banking service by banks, reduces their
operating costs, by eliminating the need for costly call centres and
customer service help. Using a mobile platform such as SMS text
messaging for simple and repetitive tasks such as reminders about
payments due or balance requests can reduce the burden on IT and
personnel resources. Using secure and integrated messaging platforms
means reducing the costs and errors associated with paper-based
payments. The saving in the costs of microfinance loans to rural poor can
be observed from the experiences of the mobile banking services- M-Pesa
of Kenya, G-Cash of Phillipines, Wizzit of South Africa.
Roll-Out Strategy is done as a 3-step process:
First step involves providing a secure & easy to use remote payment
system for enabling payments over a distance (remittances). Then it will
be easy to offer saving products based on regular payments, as there is
no credit risk involved here. Later, the behaviour of the customers
savings and payments can be studied to determine his/her credit score
and can introduce lending products. Implementation of UID in India will
further ease the procedure for creation of accounts & disbursal of loans to
the recipients.

Basically, it should address the following key issues for the service to be
adoptable and sustainable:
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YES Bank-Business World Transformational Series 2.0

Eligibility-Stringent KYC norms of telecom companies can be leveraged to

sanction a new bank account easily.
Solution should authenticate every eligible customer before the
processing of a transaction through a secured payment gateway. Besides,
anti-theft and device recovery features via GPS have to be kept in place
MIS system Though it incurs high initial cost for setting up a reliable &
robust MIS system, it is highly required to make the solution scalable for
future increase in demand
Need of a Model driven cum Proportionate regulation-adhering to the
bank-based model norms of RBI and proportionality in regulation of
various banking services
The product should be marketed as the viable solution for easy sending
and secure saving of money. Places of marketing can include weekly
market areas (mandis), banners in all the rural govt. offices, jingles over
the radio, conducting community meetings with the help of local BCs.
Once a customer is encouraged to transfer money remotely through this
service, he/she will always motivate the receiver to use this service as
both sender and receiver needs to have this app. Installed on their mobile
phones. Once the service is established, word-of-the-mouth marketing will
take place automatically.
No. of Loan
Taking Earners
(MM)
Urba
Purpose of Loan
Financial Emergency
Medical Emergency
Business Needs
Others
Total

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Percent of Loan Taking Earners

Rural
n
Rural
Urban
20.2
4.7
26.3
12.5
1.8
16.3
7.1
2.1
9.3
36.8
6.5
47.1
76.6
15.1
100

31
11.7
14
43.3
100

YES Bank-Business World Transformational Series 2.0

From Non-institutional Sources

Financial
Emergency
Medical

15.4

3.4

29.4

34.3

Emergency
Business

10.5

1.5

20.1

14.8

3.9
22.6
52.4

1.2
3.8
9.9

7.5
43
100

12.3
38.6
100

Needs
Others
Total
From Institutional Sources
Financial Emergency
Medical Emergency
Business Needs
Others
Total

4.8
2
3.2
24.2
34.2

1.3
0.3
0.9
5.3
7.8

19.6
8.1
13
59.3
100

24.9
6
17.1
52
100

The above exhibits indicate that more no. of people are seeking loans for
financial and medical emergencies. This means there will be more
chances of people seeking our loans if the loan products are offered
around these needs.
This table also gives a framework approach for the banker to configure the
loan portfolio as per the needs & requirements of the rural users, so that
there are fewer defaulters & increases the trust of depositors in the
system, thereby containing the value of NPAs. As an example, had the
banker proposed to have Rs.10000 Crore allocated towards rural
financing, Rs. 2500 crore of it can be allocated to financial emergency
needs, Rs.1500 crore towards medical emergency needs and remaining
among other purposes mentioned above.

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