Even before the government started assimilating those out of the banking fold, Bank of Baroda had taken a lead by entering the villages through ultra-smart branches, says Kishore Kharat, in conversation with Nayana Singh and Poulami Chakraborty
How do you perceive the Prime Minister’s Jan Dhan Yojana initiative?
This is one of the best steps ever taken by the government, because we started with financial inclusion way back in 2005, which was referred as ‘Bank-led’ and is today referred as ‘Bank-led Financial Programme’ as per the guidelines of Reserve Bank of India. Between 2005 and 2013, the RBI revised its programme twice, wherein the first guideline was to complete financial inclusion by 2012. But the bankers were not able to complete. The RBI has introduced a segregated financial inclusion plan for 2013 to 2016, wherein all the six lakh villages have been identified and allocated to the banks. There are around 40,000 bank branches in these villages to handle this odd issue. Also, these branches are in remote places. Thus, it was difficult for banks to address this, unless government authorities came forward for the cause.
The government authorities have the credibility to open branches from 40,000 to six lakhs – that is, one branch in every village, unlike the bankers, who have limited authority to address the issue. We as bankers, tried to introduce different models to find out whichever works best, of which, Business Correspondent (BC) model is one of the most popular. However, the problem with this model is acceptability by the villagers. Villagers could not trust on our credibility or trust people identifying them as bankers, because there have been numerous instances wherein people have lost huge money through chit-funds and so-called banks. Thus, developing that faith and credibility definitely takes time and more serious approach with government aid is sure to contribute to building faith and confidence of villagers and enrolling them in banking sectors.
For three years the banks were struggling with the economic viability issues of the model. But now, with the government coming forward with the PMJDY, this model in the banking sector will be given a boost. In 2012, the government again introduced DBT (Direct Benefit Transfer) and was expected to help banks in its implementation by identifying the beneficiaries and other aspects, which did not happen. At the ground level, the bankers faced a huge challenge of completing financial inclusion with limited resources to their aid. However with PMJDY, the government has taken the right step to rope in government machinery, for the benefit of the citizens of the country.
What initiatives has the Bank of Baroda taken towards financial inclusion?
There are several initiatives. Early in 2011, our bank was trailing behind other banks. It could have been referred as a nonstarter, even though we tried adopting several business models of proven success. Then, we tried identifying the problems that we are facing in adopting the several methodologies and the reason behind them. The foremost thing that we have done is to introduce the sense of ownership within our organisation, which has helped us in building and boosting confidence within the organisation. With that we were also able to create awareness amongst our branch managers that with the financial inclusion, there is a business for the banker, as all my branch managers were of the notion that the FI has similar procedure as business correspondent model. We had them convinced that corporate business correspondents are enablers of FI and it is basically our job through monthly meetings held in the town halls across the country.
The second initiative is BC remuneration, because if these business correspondents are not financially happy, then they will not work under this model. So, it was important for us to pay them competitively. However, there were limitations for us on this as well. So, we started to pay them directly from our organisation. With that we started to restructure BC remuneration by giving them added incentives on a stipulated amount of account openings.
The third best initiative that I would like to mention is opening of ultra-smart branches in remote villages, which is a step above the BC model. BCs are not credible among villagers as they might vanish after collecting their money.
Moreover, the villagers have very small amount of money to save as their source of income is also low. We started sending all our officers and link branch managers with BCs in villages once a week. So, when villagers find managers and officers from banks accompanying the BCs, they start believing these people and automatically the business increases. With backdrops and branding for the BC model in association with the bank, people started trusting their money with us, resulting in record number of bank accounts with us. The fourth important thing is that we ensure that our BCs visit the villages everyday to make banking easy and convenient.
Please elaborate how technology has been adopted by your institution for FI implementation. Also, what is the benchmark that the industry should set for evolving technologies in this sector in the years to come?
We Indians are very good at technology and its exploitation. There is a constant competition amongst firms for newer technologies. How ever, at this stage of technological advancement, we need it to provide seamless connection to internet connectivity and wherever there is internet, we have kiosks for reflection of transactions. But both of these have their limitations. We have more than 5,000 kiosks across the country, which is the highest number recorded yet. Another area of evolution that has picked up reasonably over the years is mobile banking, which enables customers to bank at the ease of their fingertips. But the problem lies in the fact that people in rural areas need awareness on this.
“We started sending all our officers and link branch managers with BCs in villages once in a week, compulsorily. So, when villagers find managers and officers from banks along with the BCs, they start believing these people and automatically the number of business increases, with people’s trust and credibility”
Access to ATMs and is a basic problem that people in rural parts have faced over the years. How can this be resolved?
The basic issue for all of us is that we are a cash oriented economy. There is too much cash transaction in the Indian economy. We have to push everything to cashless transactions somehow. The density of merchant point of sale (POS) machine needs to be increased substantially.Problems like low density of ATMs, not having enough cash or going out of service can be addressed only with cashless or bankless transactions. In my opinion, ATMs should be banned from use. On one hand, we are advocating a cashless economy, on the other hand, we are keeping ATM boxes across corners, making people withdraw more and more. It is high time, government needs to address these issues and take necessary action towards it.
Instead of increasing the density of ATMs across the country, it is important that we increase the density of the POS machines. Even in malls, these machines are not having wireless connectivity, which is one of the most state-of- the-art equipment used across the world. We need to improve on these aspects in first place to make it ready availability of money in cashless mode across the country.