Business Correspondence Model

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 slum-

dwellers 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 Hon’ble 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 31st 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 | 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 M o d e l

Objectives and Methodology

Chapter 2

2. 1 Objectives

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.

The research could be useful for following reasons

1. To measure the effectiveness of the existing model

3 | 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 m o d e l

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.

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 Stake holders Sample Size

1 Bank 1

2 BCs 10

3 Customers 10 per BC

4 Non-customers 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

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


Literature Review

Chapter 3

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

poverty with the help of loans offered by MFIs, micro-credit through Bank-

SHG 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

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 doesn’t

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,

“Branchless banking as a 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

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


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

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.


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.


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 bank’s 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


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 day’s or at least half a day’s

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.


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 block-

wise 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


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 Co-

operatives:

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


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 - Buldana District Details

Chapter 5

5.1 District Profile


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 State’s

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 State’s per capita income of Rs.

74027/- The district is industrially backward and placed in D+ index by the

State Government.


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

money transfer etc. While these systems meet the needs of modern


District - Division -

9661

5

13

1433

866

326 Total Male Female Rural Urban28 2588 1342 1246 NA NA

400 NA NA NA NA NA

11 NA NA NA NA NA

8 1858 1057 801 NA NA

172 NA NA NA NA NA

446 NA NA

358 NA 91547

186 451 NA

No. of Villages (Inhabited)Soil Type

1. PHYSICAL & ADMINISTRATIVE FEATURES 2. SOIL & CLIMATE

District Profile Appendix I

BULDANA State - MAHARASHTRA AMRAVATI

Total Geographical Area (Sq.km)Agro-climatic Zone Western Plateau and Hills Region-Plateau Zone North

No. of Sub Divisions

No. of Blocks Climate Hot and dry, Semi Arid (Wetter Half)

Deep Black, Medium Black, Medium Red and Black, Shallow RedNo. of Panchayats

Cultivators Category

6. WORKERS PROFILE [in '000] 7. DEMOGRAPHIC PROFILE [in '000]

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

Of the above, Small/ Marginal Farmers Population

Agricultural Labourers Scheduled Caste

Workers engaged in Household Industries Scheduled Tribe

Having radio/ tv sets

Workers engaged in Allied Agro-activities Literate

Other workers BPL

Total Households Having brick/ stone/ concrete houses Having electricity supply

Rural Households Having source of drinking water Having independent toilets

BPL Households Having access to banking services

Sources (if not mentioned against the respective item): Item Nos. 1, 3, 4,6- Census 2001; Item Nos. 2 - Dept. of Agr/ Dir. of Eco. & Stat.; Item No. 5 - BPL Survey 2002.

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 having

A/Cs with

Banks

No Frill

A/Cs

opened

Leftover

household

s as per

survey

1 SBI 171,788 109166 62075 547

2 CBI 95,549 88052 7497 0

3 BOM 63,504 43172 20007 325

4 BOB 2440 2378 22 0

5 SBH 7,398 6932 466 0

6 IDBI 9,171 9171 0 0

7 PNP 3,863 3819 44 0

8 VKGB 99000 48535 49756 709

Total 452673 311225 139867 1581

Table 5.1

(Source : Lead Bank)


District - State -

Total Rural Semi-urban Urban mFIs/ mFOs SHGs/ JLGs BCs/ BFs Villages Households

Commercial Banks 15 95 47 48 NA NA NA NA NA

Regional Rural Bank 1 24 12 12 NA NA NA NA NA

District Central Coop. Bank 1 106 93 13 NA NA NA NA NA

Coop. Agr. & Rural Dev. Bank NA NA NA NA NA NA NA NA NA

Primary Agr. Coop. Society 570 570 570 NA NA NA NA NA NA

Others NA NA NA NA NA NA NA NA NA

All Agencies 587 795 722 73 NA NA NA NA NA

31-Mar-08 31-Mar-09 31-Mar-10 Growth(%) Share(%) 31-Mar-09 31-Mar-10 31-Mar-11 Growth(%) Share(%)

Commercial Banks NA NA NA NA NA 11833700 13950718 17181590 23.16 62.95

Regional Rural Bank NA NA NA NA NA 1386400 1607890 1940696 20.70 7.11

Cooperative Banks NA NA NA NA NA 7293300 7845686 8173560 4.18 29.94

Others NA NA NA NA NA

All Agencies NA NA NA NA NA 20513400 23404294 27295846 16.63 100

31-Mar-09 31-Mar-10 31-Mar-11 Growth(%) Share(%) 31-Mar-09 31-Mar-10 31-Mar-11 Growth(%) Share(%)

Commercial Banks NA NA NA NA NA 8549700.00 10260474.00 12267768.00 19.56 67.57

Regional Rural Bank NA NA NA NA NA 924600.00 985381.00 1056665.00 7.23 5.82

Cooperative Banks NA NA NA NA NA 3790400.00 3696864.00 4832144.00 30.71 26.61

Others NA NA NA NA NA NA NA NA NA NA

All Agencies NA NA NA NA NA 13264700.00 14942719.00 18156577.00 21.51 100.00

31-Mar-09 31-Mar-10 31-Mar-11 Deposit Credit Deposit Credit

Commercial Banks 72.25 73.55 71.4NA NA NA NA

Regional Rural Bank 66.69 61.28 54.45NA NA NA NA

Cooperative Banks 51.97 47.12 59.12NA NA NA NA

Others NA NA NA NA NA

All Agencies 64.66 63.85 66.52NA NA NA NA

Commercial Banks 3735983 58 3147830 61 4218073 73 13230 100 1062687 80

Regional Rural Bank 553204 9 489320 10 139676 2 NA NA 78246 6

Cooperative Banks 2098383 33 1491588 29 1434455 25 NA NA 181945 14


All Agencies 6387570 100 5128738 100 5792204 100 13230 100 1322878 100

2008-09

Target [Rs.'000]

Ach'ment [Rs. '000]

Ach'ment [%]

Commercial Banks 2702000.00 1695500.00 62.74 3023643.00 3323886.00 109.93 4057604.00 3735983.00 92.07 88.25

Regional Rural Bank 533600.00 146300.00 27.41 579559.00 414606.00 71.54 517370.00 553204.00 106.93 68.62

Cooperative Banks 1554400.00 282600.00 18.18 15353.36 21210.72 138.15 2039045.00 2098383.00 102.91 86.41


All Agencies 4790000.00 2124400.00 44.35 5138528.00 5859574.00 114.03 6614019 6387570 96.58 84.99

2008-09

Target [Rs.'000]

Ach'ment [Rs. '000]

Ach'ment [%]

Crop Loan 3332851 1380500.00 41.42 3579242 4273823.00 119.41 4033734 4590037.00 113.79 91.54

Term Loan (Agr) 937219.00 377600.00 40.29 1010733.00 484298.00 47.92 1466181.00 538701.00 36.74 41.65

Total Agri. Credit 4270070.00 1758100.00 41.17 4589975.00 4758121.00 103.66 5499915 5128738 93.25 79.36

Non-Farm Sector 120024.00 97300.00 81.07 129252.00 272284.00 210.66 355087.00 463962.00 130.66 140.80

Other Priority Sector 399918 269000 67.26 419301.00 829169.00 197.75 759017.00 794870.00 104.72 123.24

Total Priority Sector 4790012.00 2124400.00 44.35 5138528.00 5859574.00 114.03 6614019 6387570 96.58 84.99

2008-09

Demand [Rs. '000]

Recovery [Rs. '000]

Recovery [%]

Commercial Banks NA NA NA NA NA NA NA NA NA NA

Regional Rural Bank 2445364 1075469 43.98 2412822 1943097 80.53 3277933 2299453 70.15 64.89

Cooperative Banks 1448409.00 1216686.00 84.00 5037429.00 3004771.00 59.65 4131226.00 2383535.00 57.70 67.12


All Agencies 3893773.00 2292155.00 58.87 7450251.00 4947868.00 66.41 7409159.00 4682988.00 63.21 62.83

Sources : Lead Bank & SLBC

1. NETWORK & OUTREACH (As on 31/03/2011)

Banking Profile Appendix II

BULDANA MAHARASHTRA Lead Bank - Central Bank of India

AgencyNo. of accounts Amount of Loan [Rs.'000]

AgencyNo. of

Banks/ Soc.

No. of Branches No. of non-formal agencies assoiated Per Branch Outreach

2. DEPOSITS OUTSTANDING

AgencyNo. of accounts Amount of Deposit [Rs.'000]

3. LOANS & ADVANCES OUTSTANDING

4. CD-RATIO 5. PERFORMANCE UNDER FINANCIAL INCLUSION (No. of A/cs)

AgencyCD Ratio

AgencyDuring 2010-11 Cumulative

% of Total Loans

Amount [Rs.'000]

% of Total Loans

Commercial Banks

Regional Rural Bank

Cooperative Banks

Others

All Agencies

6. PERFORMANCE TO FULFILL NATIONAL GOALS (As on 31/03/2011)Priority Sector Loans Loans to Agr. Sector Loans to Weaker Sections Loans under DRI Scheme Loans to Women

Amount [Rs.'000]

% of Total Loans

Amount [Rs.'000]

% of Total Loans

Amount [Rs.'000]

Amount [Rs.'000]

% of Total Loans

7. AGENCY-WISE PERFORMANCE UNDER ANNUAL CREDIT PLANS

Agency

2009-10 2010-11 Average Ach[%] in last 3 years

Target [Rs.'000]

Ach'ment [Rs. '000]

Agency

Ach'ment [%]Target

[Rs.'000]Ach'ment [Rs.

'000]Ach'ment

[%]

8. SECTOR-WISE PERFORMANCE UNDER ANNUAL CREDIT PLANS

Broad Sector

2009-10 2010-11 Average Ach[%] in last 3 yearsAch'ment [%]

Ach'ment [Rs. '000]

Average Rec. [%] in last 3

years

Target [Rs.'000]

Demand [Rs. '000]

Recovery [Rs. '000]

Ach'ment [Rs. '000]

Ach'ment [%]

Recovery [%]Demand [Rs.

'000]Recovery [Rs. '000]

Recovery [%]

Target [Rs.'000]

9. RECOVERY POSITION

Agency

2009-10 2010-11


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

1 VKGB 25

2 SBI 61

3 CBI 26

4 BOM 22

5 SBH 03

6 PNB 04

7 IDBI 04

8 BOB 02

9 Dena 01

Total 148

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.


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.


Functioning of BC Model, SBI

Chapter 6

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 PC’s 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 customer’s bank

account (known as “No Frills account”) and customer’s 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


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, BC’s laptop is directly linked to the bank’s 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 customer’s

account, BC gives the cash present with him to the customer. At the same

time, this cash gets transferred from customer’s account to BC’s

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 BC’s

transaction account gets transferred to the Customer’s account.

This helps the Bank to regulate flow of money and ensure that the BC

doesn’t 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 customer’s account. Overdraft is not

allowed on this account. When he balance is low, BC can go to the linked


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.


Data Analysis

Chapter 7

7.1 Sample Profile

Sr. No Stake holders Sample Size

1 Bank 1

2 BCs 10

3 Customers 10 per BC

4 Non-customers 5 per BC

Table 7.1

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 Name of Village Linked Branch

1 Shelud Chikhli

2 Peth Chikhli

3 Pimpalgaon Sarai Buldana

4 Mhasrur Dhad

5 Shirpur Kelwad

6 Dongar Shewali Buldana

7 Karvand Undri

8 Janori Shegaon

9 Pimparimali Mehkar

10 Shara Lonar

Table 7.2

7.4 Data Analysis for bank branches


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 BranchNo. of villages

allotedNo. of villages

coveredSBI Buldana 2 2SBI Chikhli 5 5SBI Dhad 5 2SBI Kelwad 1 1SBI Lonar 3 3SBI Mehkar 1 1SBI Shegaon 3 3SBI Undri 1 1Grand Total 21 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


Name of the Bank Deposit Micro Credit

Remittance Micro-insurance

Micro Pension

SBI Chikhli Yes No Yes No Yes

SBI Kelwad Yes No Yes No Yes

SBI Dhad Yes No Yes No Yes

SBI Buldana Yes SHG Yes No No

SBI Mehkar Yes No Yes No No

SBI Lonar Yes No Yes No Yes

SBI Shegaon Yes No Yes No Yes

SBI Undri Yes No Yes No 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


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


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 person’s

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 No. of BCs

Individually appointed CSP 9

Through BC 1

Table 7.5.1


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 CountMain 8Secondary 2

Table 7.5.2


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

No of Hours CSP is available in each village

6 Hours 28 Hours 39 Hours 1


12 Hours 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

No. of a/cs per village

Dongarshevli 600Janori 570

Karvand 433Mhasrur 1430

Peth 2000Pimpalgaon Sarai 789

Pimpremali 1150Shara 2561Shelud 3500


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

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

Count of Deposit accounts

Count of Loan accounts

Count of Pension

Count of Remittance

Dongarshevli 9 1 1 2Janori 10 Karwand 9 1 2Mhasrur 8 3 3Peth 10 2Pimpalgaon Sarai 7 6 2Pimpremali 10 6Shara 10 2 2


Shelud 9 2 3Shirpur 4 7 Grand Total 86 3 20 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 can’t afford frequent visits to branch. If the bank comes up with

a solution to the mentioned problem, customers can withdraw money as


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

Inoperative Operative

Dongarshevli 70% 30%Janori 20% 80%

Karwand 0% 100%Mhasrur 0% 100%

Peth 20% 80%Pimpalgaon Sarai 0% 100%

Pimpremali 0% 100%Shara 0% 100%Shelud 10% 90%Shirpur 0% 100%

Grand Total 12% 88%

Table 7.6.1


Fig. 7.6.1

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

Name of the village Average no of a/c per gousehold

Dongarshevli 1.4Janori 2.7Karwand 1.6Mhasrur 1.9Peth 1.9Pimpalgaon Sarai 1.6Pimpremali 3.1Shara 2.1Shelud 1.9Shirpur 1.1Total Average 1.93

Table 7.6.2


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

Total

Dongarshevli 9Janori 10Karwand 10Mhasrur 8Peth 10Pimpalgaon Sarai 9Pimpremali 10Shara 10Shelud 8Shirpur 4Grand Total 88

Table 7.6.3


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 customersDongarshevli 7

Janori 9Karwand 10Mhasrur 8

Peth 4Pimpalgaon Sarai 3

Pimpremali 10Shara 9Shelud 6Shirpur 6


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 villageCustomers availing Remittance services

Customers finding the service charges reasonable

Dongarshevli 2 Janori Karwand 2 Mhasrur 3 Peth 2 Pimpalgaon Sarai 2 Pimpremali 6 1Shara 2 1Shelud 3 1


Shirpur Grand Total 22 3

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)


7.7 Data Analysis for Non-Customers

7.7.1. Profile of non-customers

Occupation TotalAgri-labourer 4Alms 1Barber 1Driver 1Driver, travels 2Farming 37Service Engineer 1Shikshak Sevak 1Teacher 1Tiffins 1Grand Total 50

Table 7.7.1


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 Total1 272 53 1

No a/c 17Grand Total 50

Table 7.7.2


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. of respondents

No 44Yes 6Grand 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

Whether a member of any SHG/JLG

No YesGrand

Total

No.

of

accou

nts 1 25 2 27

2 5 5

3 1 1

No a/c 14 3 17


Grand Total 44 6 50

Chart 7.7.3a

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

accounts

Facilities No. of people availing facility

Deposit accounts 47

Loan accounts 29

Remittance 23

Micro Insurance 19

Pension 20

Table 7.7.4a

Fig. 7.7.4a


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 No of accountsInoperative 3operative 29

Not applicable (No account) 18Grand Total 50

Table 7.7.4b

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)

No of respondents

1 132 73 34 25 18 1

10 115 1

NA (No account) 200 1

Grand Total 50

Table 7.7.5


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)

Facility availed Yes No NATotal

respondentsDeposit Accounts 33 17 50

Loan Accounts 10 23 17 50Remittance 5 28 17 50

Micro-insurance 33 17 50Pension 2 31 17 50

Table 7.7.5a


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) Total

No 19

Yes 31

Grand Total 50

Table 7.7.6


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 No. of respondents

Not aware of the services offered 18

BC is not approachable/ doesn’t trust the concept (Acceptability) 2

Doesn’t find it convenient 6

Limit on Transactions 5

Already an account with another bank 19

Table 7.7.7


Fig. 7.7.7

The class “Doesn’t 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. of respondents

No 17Yes 33

Grand Total 50

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

SuggestionsMNAREGA payments can be done through kiosks 3Crop Loan/Gold Loan disbursement through BC 2

All govt payments to be done through kiosks 4Micro-insurance products to be made available 2

Farmers' clubs 1GCC/KCC facilities to be made available 2

Loan recovery cases can be handed over to BCs 2


Table 8.1.1

Fig 8.1.1

Findings

1. Currently MNAREGA payments are not done through kiosk accounts of

SBI. From Bank’s point of view, including MNAREGA payments will

increase business for the BCs, at the same time reducing the load on the

branch.

From customer’s point of view, it will save the customer’s time to go the

bank branch, thereby preventing the loss of his half a day’s 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 customer’s point

of view.


3. All Government payments are not done through the kiosk accounts due

to Tehsildar’s refusal to transfer payments to these accounts due to non-

provision 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 bank’s 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 bank’s 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 TotalPassbooks should be provided to customers, 5

Limit of 10,000 per a/c per day should be removed. 7

Branch a/c balance enquiry to be made possible at CSP

2

Provide monetary support for equipment and stationery

3

Better replacement for finger print detection 2

Low connectivity and electricity problem should be solved,

2

Loan disbursement to be done at CSP 2

Table 8.1.2


Fig. 8.1.2

Findings

1. Non provision of passbooks has led to several accounts turning

inoperative. The reason being that the Tehsildar doesn’t 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.


3. Customers who have accounts with the BC as well as with the bank,

cannot check their bank account’s 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 customer’s 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

SuggestionsCustomers

in %

Limit of 10000 per day is insufficient 13

A/c should be linked to base branch a/c

1

Passbooks should be provided 3

Overdraft should be allowed 1

Service charge for remittance is too high

4

Problem with fingerprint detection unit

1

Loan disbursement should be in kiosk a/c

3

Table. 8.1.3


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 –


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.


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 Nil

On withdrawal 0.5% (Min. Re. 1/- Max Rs. 12/-)

On remittance 2/5 : 3/5 ratio (Bank : B.C.)

On Account opening Rs. 20/- per account opened


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 /-.


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.


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.

BibliographyBansal & 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. Xavier’s 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/ 2008-2009 /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

“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 “Poverty’s 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/FID-9/2010 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


Annexure 1

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

Sr. No.

BankNo. of

Allotted Villages

1 Allahabad Bank 332 Andhra Bank 13 Bank of Baroda 1764 Bank of India 5065 Bank of Maharashtra 8536 Canara Bank 407 Central Bank 4368 Corporation Bank 39 Dena Bank 15810 HDFC Bank 111 ICICI Bank 7212 IDBI 8213 Indian Bank 1114 Indian Overseas Bank 2115 Karnataka Bank 116 Maharashtra Gramin Bank 35517 Oriental Bank of Commerce 618 Punjab National Bank 2619 Ratnakar Bank 2120 State Bank of Hyderabad 21521 State Bank of India 85522 Syndicate Bank 5023 Union Bank of India 189


24 UCO Bank 2325 Vijaya Bank 326 VKGB 6327 WKGB 92 Total 4292

Annexure 2


AURA

NGABA

D BEED

HINGO

LIJAL

NALAT

URNA

NDED

OSMA

NABAD

PARBH

ANI

THAN

EBU

LDHAN

AWA

SHIM

YAVATM

ALCH

ANDR

APUR

GADC

HIROL

IGO

NDIA

RATN

AGIRI

SINDH

UDUR

GSO

LAPUR

Allahabad Bank 1 1 3 2 4 3 4Andhra Bank 1

Bank of Baroda 2 3 1 1 2 6 2 5 2 1 10Bank of India 20 23 7 27 29 19 85

Bank of Maharashtra 40 12 3 27 18 6 29 4 66 22 7 8 15 7 21 14 9 35Canara Bank 1 2 2 7 1 1

Central Bank of India 9 1 2 8 2 20 25 12 16 2 9 7Corporation Bank

Dena Bank 1 1 2 24 25 1 12 3Indian Bank 2

Indian Overseas Bank 1Oriental Bank of Commerce 2

Punjab National Bank 1 1 5 4 3 1State Bank of Hyderabad 26 27 11 11 30 39 39 28 4

State Bank of India 13 34 20 9 29 27 28 19 26 59 23 21 14 12 21 19 10 49Syndicate Bank 2 15 1 1 2

Union Bank of India 2 4 1 9 7 2 8 1 12UCO Bank 2Vijaya Bank 1 1IDBI Bank 1 1 4 4 4 5 3

Total Public Sector Bank (A) 95 77 36 60 94 99 101 55 204 123 45 64 58 30 94 83 41 205MGB 32 52 16 32 60 107 31 20 5VKGB 25 9 29WKGB 8 14 2 13 6 49

Total Gramin Bank (B) 32 52 16 32 60 107 31 20 5 25 9 29 8 14 2 13 6 49HDFC BankICICI Bank 1 5 7

Ratnakar BankKarnataka Bank Ltd.

Total Private Sector Bank (C) 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 5 0 7Grand Total 127 129 52 92 154 206 132 76 209 148 54 93 66 44 96 101 47 261

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 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 Micro-

Finance (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.


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


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.


http://www.rbi.org.in/

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


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, inter-

alia, 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 Governor’s 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


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)


Encl: As above


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


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 draw your attention specifically to the

recommendations of the Committee relating to strengthening of

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 for consideration of the SLBC. The

composition of the sub-committee and subjects/ specific issues

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.


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:


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


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


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.


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 convenor’s 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/-


(Deepali Pant Joshi)


Encl: As above


Documents

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