Banks contribution to Rural India

The Bank has now become partners with the Union Government in its new initiative to disburse payments under various social security schemes, including NREGS wages. The bank contributes to service in rural area, through a simple process that allows beneficiaries to open a zero-balance account, into which the bank credits money due to them, that it gets from the Union government. The money in the account is then handed over to them in the village, through bank-in-the-backyard functionaries.
Functionaries such as Rebka, who prefers to be identified by just one name, is an active member of the local self-help group Velugu Gramaikhya Sangham, or because she is a “motivator” for other members of the group. (The Telugu name of the group roughly translates as velugu village unity association, with velugu meaning light.)
Rebka is the new custodian of hope for the 2,000 people living in Kothlapur, a village in Medak district, 55km north-west of Hyderabad. The 32-year-old helps set up zero-balance accounts at State Bank of India (SBI) for Kothlapur villagers to receive pensions and payments under social security schemes such as the National Rural Employment Guarantee Scheme, or NREGS, which promises 100 days of work a year to at least one adult from each poor rural family.
After setting up the accounts, where customers are free from having to maintain a mandatory minimum balance, Rebka lets villagers withdraw money at any time of the day or night, unlike bank branches that follow strict business hours.
Rebka carries a rectangular black box only slightly larger than a cordless phone handset and a flip-open cell phone. The little black box that Rebka carries around is a biometric device that matches the fingerprints of customers and communicates wirelessly with her cellphone, which, in turn, is linked to the SBI servers that hold information about the account holder and the account. The money is then debited from the beneficiary’s account.The entire transaction takes just a few minutes in real time. The biometric device, which matches fingerprints with originals collected and stored in the SBI database at the time the account is opened, ensures that the payment is indeed going to the beneficiary for whom it is intended.
For her services, Rebka gets 0.5-1% of the money she disburses, same as Zero Mass Foundation, a non-governmental organization that is authorized by the Reserve Bank of India, or RBI, to deliver services on behalf of a bank. Zero Mass Foundation, in turn, ties up with local self-help groups, and their members such as Rebka, for last-mile reach.
In Kothlapur, Rebka disburses around Rs50,000 every month to pension beneficiaries and those employed under NREGS.
The initiative was started in November 2006, and SBI has so far opened 1.77 million such accounts across 1,183 villages in eight districts of Andhra Pradesh. In Medak district alone, the bank has opened at least 450,000 so-called SBI Tiny accounts.
India’s banks are trying to deliver banking services to low-income groups. Given that only 59% of Indian adults have bank accounts, the opportunities are enormous. In rural areas, just 39% of the adult population has bank accounts. Coverage is worse when it comes to accessing loans. The credit market is small, with the number of loan accounts constituting only 14% of the adult population. In rural areas, the coverage is 9.5%.
Profits, if any, are in the future, but the costs are now and real. For instance, the apparatus and the cellphone that Rebka carries cost Rs22,500, add to that the commission she and Zero Mass Foundation receive.
Asked when such initiatives would become profitable, Rama Chandra Reddy, deputy general manager (rural business unit) at SBI in Hyderabad, replies: “When at least 40-50% of these accounts become active and people actually start using them for depositing and withdrawing money.” He expects this to happen within a year. Post Comments
This in ‘Backyard banking’ has been quite successful in Kothlapur, Medak, Andhra Pradesh.
For SBI, the rural banking initiative is not taken just as a profitable venture, but aimed at making banking services available to sections of society that had been previously perceived as un bankable.