Branchless banking

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As you leave the city and start travelling in the hinterland of the Indian countryside, you’ll realise one thing if you observe a little closely the habitations you pass through. It is the lack of banks; a large part of rural India remains unbanked. Now just think: you are a farmer and after you sell your produce, you have no option but to keep your money at home. The nearest bank is, say, 50 km away, and it makes no economic sense to deposit your money at a place you cannot access immediately in case of emergency. This thus means no interest on your earnings and further, faster depletion of funds.

It is to find a solution to this problem that banking sector is working towards today. Establishing banks at every village is not possible – it demands immense funds and huge workforce. The answer the Corporation Bank has found is to go in for ‘branchless banking’. It has used this model successfully in Chittoor district of Andhra Pradesh to bring more villages under financial inclusion in un-banked areas. The key to making this a success is linking banking with livelihood. As Corporation Bank Chairman and Managing Director B Sambamurthy said, “Financial inclusion is of no use if it fails to provide livelihood to the poor. With the help of technology, the poor need to be brought into the mainstream of growth.”

In a joint project with National Dairy Development Board (NDDB), it has launched Milk Mitra cards in Chittoor district. Under this, women milk producers are given loans to enter dairy farming, the milk is supplied to NDDB and all payments are made directly to the bank account of each woman. These accounts can be accessed at the village level itself through the business correspondent, also a member of the local community.

Sambamurthy describes this as “a classic case of business at the bottom of the pyramid - and where commercial and social responsibilities can converge.” His views are reflected on ground by the successful implementation of the Milk Mitra card. D Manamma of Gandhipuram village of Chittoor district is a shining example. In her own words, “I have taken a loan of Rs 50,000 for dairy farming. With this loan I have purchased two cows. Balaji Dairy (a local dairy) collects milk from my doorstep and credits my money to my account directly.” She is not the only one. The success story is repeated all through the district and there are many more Manamma’s who are earning through this scheme and improving the lot of their family. The milk card scheme has also been replicated with the help of Smart Card for other produce also, like vegetables and flowers.

In fact, in Chittoor district, the Corporation Bank has added yet another dimension to this model, keeping in view the mantra of linking banking with livelihoods. It has been seen over time that branchless banking and better livelihood opportunities have inculcated the habit of saving in the villages. It’s clearly a win-win situation for both the bank and the people!

Such schemes have yet another positive spin-off. The section of the rural population that has benefited the most from these schemes is the women. They have grabbed the opportunity to not only add to their family’s finances but also have invested in their self esteem. The money they earn goes directly to their account and they can thus use it judiciously. “It is clearly leading to women empowerment,” says Sambamurthy.

The challenge for the bank was to take the more sophisticated technology to unsophisticated areas, as most of the rural areas are short of power and telephone connectivity. Added to this, the rural populace is not familiar with complicated machine operations. 

Under the branchless banking model, basic banking services are provided without having to open an expensive branch. Each identified person is given a Smart Card which is akin to e-Purse. One of the villagers is appointed as “business correspondent” and he or she is given the branchless banking kit and cash to dispense basic banking services to the villagers. The kit is a handheld device with multiple connectivity options. The operations are carried out through radio frequency identification cards provided to business correspondents and the villagers. So, the model not only provides banking services to the villagers, it also opens an employment opportunity.

Says Mamatha, a business correspondent of Penumur village in Chittoor district, “The bank has provided me employment. Earlier, I used to be a housewife.” She also enumerates the advantages of branchless banking. “Our village has benefited from the introduction of Smart Card. Most of the banking transactions are now done at the village level itself,” she says.

This model has yet another benefit. As T Devi of Penumur village explains: “With this Smart Card, I can deposit or withdraw (money) at my own convenience. Additionally, there is no requirement to fill any forms or vouchers, which is quite useful for an illiterate like me.”

The services are made available close to their homes, obviating the need to spend time and money on transport to reach the branch. The roll out and maintenance costs of this model are only a fraction of running a conventional branch.

This system is now proving to be a role model. Indian Institute of Management, Ahmedabad has evinced keen interest in the "Branchless Banking" model evolved by the Bank, which takes technology to the remotest villages of the country for providing banking facility. 

On its part, the Corporation Bank plans to extend this model to all “six lakh villages,” as Sambamurthy points out. Already, the number of branchless banking units has crossed 105 at the end of June, up from 33 at the end of March

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