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 slumdwellers 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 31 st 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 |Financial Inclusion through Business Correspondence
Model

Objectives Chapter 2
2. 1 Objectives

and

Methodology

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.
3|Financial Inclusion through Business Correspondence model

The research could be useful for following reasons 1. To measure the effectiveness of the existing model 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.
4 |Financial Inclusion through Business Correspondence
Model

4. 2.e.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. 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. While 5|Financial Inclusion through Business Correspondence model . 2.3 Sample Size: Sr. main and secondary occupations. (See Annexure 2) Stage 2: Selection of 10 BCs of the selected bank – For variation purpose. No 1 2 3 4 Stake holders Bank BCs Customers Non-customers Sample Size 1 10 10 per BC 5 per BC 2.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. SBI. residing village etc. Based on the information. The BCs were directly appointed by RO. BCs were selected from various blocks of Buldana district considering their profiles i. The data from SLBC was used to identify a district with high BC concentration for SBI.4 Data Collection The primary and secondary data were collected in the following manner. Buldana district was selected. Based on the data. Buldana and not through any commercial BC. one commercial bank – State bank of India was selected for the survey.

selecting the sample.2 Secondary Data Secondary data on the BC model was collected from the concerned RBI circulars.5 Data Analysis The data were tabulated and analysed by using standard tools like averages tabular analysis etc. Pune. 2. Pune and SLBC. care was taken to give fair representation to all strata of the stakeholders.6 Reference Year The reference year for the study was 2011-12 6 |Financial Inclusion through Business Correspondence Model . The information available through various research papers written on the topic of Financial Inclusion was also referred to draw various conclusions. in Microsoft Excel. of NABARD RO. 2. Financial Inclusion Dept. 2. Bank of Maharashtra.4.

One of the prime objectives of bank nationalization (1969 and 1980) was to inflate the flow of credit to agriculture and small industries. in her speech. 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. The State as well as commercial banks in India were still not well positioned to meet the demands of these emerging markets. 2002 and 2005).” Usha Thorat.. The report of the committee on Financial Inclusion in India (Chairman C. 2007 expressed Financial Inclusion as “by financial inclusion we mean the provision of affordable financial services. 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. RBI. this direction of lending was termed as ‘priority sector’ lending (Ramachandran and Swaminathan.Literature Chapter 3 Review In India. in 2008.” World Bank. Deputy Governor. the nationalization of banks marked the beginning of financial inclusion. savings. (viz. defined Financial Inclusion as “Broad access to financial services with an absence of price and non-price barriers. access to payments and remittance facilities. Though there are many success stories of how people came out of 7|Financial Inclusion through Business Correspondence model . 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.

Also ‘The State of Sector Report’ authored by N. with NABARD playing a leadership role and micro-finance institutions. there are still unbanked households who require easy access to formal financial services. the proportion of non-poor clients were more than the poor. There are about 3. 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. Product Innovation 2. Srinivasan.” says the report.4 million SHGs in India serving 45 million poor. playing a catalytic as well as enabling role at the gross root level. Service innovation 8 |Financial Inclusion through Business Correspondence Model . For-profit MFIs like SKS or Spandana serve around 14 million poor. There are two ways in which financial inclusion can be worked on 1.“In five MFIs out of eight. and not just credit. micro-credit through BankSHG linkages. 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. 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. 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. mainly NGOs.poverty with the help of loans offered by MFIs. (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.

Chakraborty (RBI Monthly Bulletin. insurance and pension facilities. A Remittance Product for EBT and other remittances 4. 9|Financial Inclusion through Business Correspondence model . Other financial products can also be offered by the financial institutions along apart from the above mentioned products. This led to a concept of branchless banking which meant taking bank to the customers instead of bringing customers to the bank. 3. The CGAP definition of branchless banking goes as follows. Entrepreneurial Credit such as GCC. A Pure Savings Product.3. July 2010) proposed following four basic banking products to be provided by each bank to the poor. financial innovation doesn’t only mean innovating techniques of lending money to the poor for starting own business.2 Service Innovation Service innovation means designing an innovative channel.C. Also. 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. thus making it easier for the poor to be a part of formal banking. A Savings cum overdraft account 2. they should also be able to avail savings. 1.1 Product innovation There is a need to keep the financial products simple so that they are understood by the uneducated poor. ideally a recurring or variable recurring deposit 3. K.

Various techniques are being used in many developing countries for branchless banking in order to achieve financial inclusion.2. 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. 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.1 Intermediaries Physical access seems to be a very big hurdle in providing financial services to the poor. consequent of which a commission headed by the eminent economist Dr. C. for example. (Kloeppinger-Tod & Sharma 2010) - Use of Intermediaries (agents) appointed by financial institutions where opening a bank branch is not viable. Rangarajan was formed and it came with its report on financial 10 | 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 Model . over card-based networks or with mobile phones”. South Africa and Mexico have implemented the bank led model of branchless banking involving intermediaries.“Branchless banking as a delivery of financial services outside conventional bank branches using information and communication technologies and non bank retail agents. Also the costs of hiring and training a huge workforce for working in these areas will be huge. In 2006. insurance companies can carry various transactions through these agents who work according to pre-decided norms and conditions. This problem can be solved by allowing agents to work in the inaccessible areas. Banks. Countries like Brazil. It is nearly impossible to establish banks in remote areas where lack of water and electricity are still major issues. unbanked and underbanked in India. 3.

JLGs. 2009 11 | 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 model . NBFCs and other financial intermediaries like BC and BF . Banks. Chart 3.1 Source : The World Bank. SHGs. Regional Rural Banks.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. Report of Financial Access.

along with the new guidelines has led to a number of efforts in India to experiment with the BC/BF model. 2006 issued guidelines (See Annexure 3) to the banks allowing two categories of intermediaries. pursue the clients’ proposal and facilitate the bank to carry out its transactions. There is some sense that the existing regulations do not allow 12 | 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 Model . New organizations are being formed to offer BC services. According to the guidelines. the experiences are still mixed and there is a general consensus that the scheme has not taken off in the way it was envisioned. The other technological applications can be found out in the effective use of POS Devices and Mobile Phones – to secure and process transactions. 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. While all this holds potential. 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. but cannot transact on behalf of the bank. Business correspondents and Business Facilitators to provide financial services to areas where bank branches are not viable. Pensions and other social payments. the BFs can refer clients. while the BCs are permitted to carry out transactions on behalf of the bank as agents. The possible application of such new technologies such as the CBS (Core Banking Solution).The Business Correspondence (BC) Model Chapter 4 RBI on January 25.

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. different models. 13 | 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 model . the following survey has been done. that the existing guidelines do allow just enough space where viable models could still emerge. 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. However. business correspondent/facilitators have contributed to the survey. offer financial services through a number of different channels as againgt the only brick and mortar model available few years ago. Several banks. some hope prevails. The experiments underway offer an opportunity to examine the different experiences. Now. 4. the branches. 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. choices of technology and the viability. the principal banks are responsible for the acts of their correspondents. ATMs and the internet have become traditional banking channels. (See Annexure 3) While RBI has oversight and regulatory responsibility for the BC banking channel as part of its regulatory regime.1 The Basics of the BC Banking Channel Banks.sufficient flexibility for the BC arrangement to be viable. these days. The survey is sponsored and supported by NABARD.

2. conduct KYC. Technology Vendors who provide a range of hardware and processing capacity and connectivity which can link clients to BCs and BCs to the bank. extend credit. 2.Fig 4. cash out withdrawals. receive payments and in some cases. Customer Service Points are individuals. Business Correspondents which are organizations or individuals that organize and offer one or more points of transaction outside of bank branches. shops or other outlet points which are responsible for the direct contact with the clients. 14 | 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 Model . These partners mainly include: 1. CSPs open bank accounts. The BCs organize and manage a network of such transaction points in partnership with a bank.1 (Source : CAB 2009) Bank can collaborate with private partners/ individuals and also the technology service providers in order to implement this new channel.

credit and payments. (CAB 2009) 4.2 (Source : CAB 2009) For the channel to become financially viable.Fig 4. The bank’s revenue may come from the extension of services: accounts. regulations require that all revenue from the services be collected by the bank.Normally a rural bank branch can serve 3. The Tech Vendors.000 families in 12 to 15 villages within a radius of 15kms. savings. The Bank under contractual relationships then makes payment of service charges to the BCs and Technology Vendors.2 Advantages of using BCs 1. BCs and CSPs are not permitted to charge fees to clients for the services. A Public Sector Bank branch may require more than 5 15 | 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 model .000 to 4. A better alternative than bank branches .

16 | 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 Model . Several other banks such as Indian Bank. Reaching the unreached . Among private banks. In order for the BC Channel to work. 3. 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. there is no single successful approach. SBI among the public sector banks has been trying to recruit as many BCs as possible (and some BFs too). Punjab National Bank. while a private sector & foreign bank with IT connectivity may require about 5 times more. Oriental Bank of Commerce. Approximately 27 banks have piloted the BC model for expanding their operations. ICICI Bank and HDFC have taken the lead in making use of the scheme.years to breakeven in unbanked areas in India.(CAB 2009) Thus BC option facilitates easier outreach for banks at relatively low costs. 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. It is well understood that all the constituent pieces of the channel will have to work in tandem.For a poor farmer. 2. While there are many arrangements which are currently being tested. Further.The model is useful in bringing the financially excluded population in remote areas under the shelter of formal banking. Doorstep banking . the bank must work in collaboration with some or all of the different component partners who make up the BC Banking channel. Union Bank of India. Corporation Bank. Axis Bank have also tested the model. Canara Bank. be motivated to participate and receive appropriate revenues in order for the channel to grow and prosper. obtaining permission to open a branch is a long and protracted process. Andhra Bank.

RRBs. In a few cases. plan for financial literacy. Pensions and other social payments. even individuals such as village grocers. commercial banks.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. among other.e. 4. versus those that focus on delivering credit services. opening of outlets including BC 17 | 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 model . The big difference in performance and partnerships appears to be between those BC efforts that are account and savings focused. costs incurred and revenues earned under these different models can be quite different.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.11. Such plans by all banks operating in the block. In some cases. The partners chosen. 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. i.Banks have taken on NGOs and MFIs as BCs. NABARD (FID) had issued a circular dated 25 March 2010 to RRBs and to SCBs dated 01 April 2010 in this regard. In some cases this has also been combined with channeling government payments (G2P) such as NREGS. products offered. co-operative banks should include. dealers in agricultural inputs and retired bank officials have been engaged as BCs. in the circular dated 06 September 2010 NABARD (FID) had indicated that district-wise roadmap for FI has to be prepared by consolidation of blockwise financial inclusion plan. the focus has been on extending credit either in partnership with an MFI or through a relationship with a SHG Federation or network.02. 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.2009 and 26. Further.

viz.5 ICT Intervention for Financial Inclusion in RRBs and Cooperatives: Based on the recommendations of the interim report of the committee on Financial Inclusion. Washim. GOI has decided to create two funds.2010. Buldana. Nanded. Aurangabad. RBI and NABARD in the ratio of 40:40:20.01. The support would cover 100% of these expenses in the Ner and 60% in 266 excluded and disturbed districts. The pilot project is under implementation in Varna village in Khamgaon block. The support from FITF would cover the cost of smart cards and POS devices. Gadchiroli. Nasik. 4. 4.2011 . Latur. whereas FITF is meant to meet the cost of technology innovation and adoption. Kolhapur. Yavatmal. identification of BCs/BFs etc 4. Jalgaon. Nagpur. Osmanabad. Support in these areas would be available irrespective of viability analysis.. Nandurbar. Beed. Gondia. including their personalization. Hingoli. the Advisory Board of FIF and FITF has decided to provide support to Financial Inclusion Plans of Commercial Banks approved by RBI. FIF is meant for meeting the cost of developmental and promotional interventions. These funds will have a corpus of Rs. Jalna. The identified districts in Maharashtra are: Ahmednagar. Financial Inclusion Fund and Financial Inclusion Technology Fund in NABARD. incurred from 1.6 Support to Commercial Banks under FITF For ICT solution for Financial inclusion : In terms of FID Circular dated 11.12. Dhule.7 Support to Lead Banks from FIF for setting up of Financial Literacy and Credit Counseling Centres (FLCCs) :As advised in 18 | 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 Model . 500 crore each with contribution from GOI. issue of KCC/GCC/SCC to all eligible borrowers. In all other areas support based on viability gap would continue as hitherto.outlets. Parabhani.

Survey Chapter 5 - Buldana District Details 5.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. 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.1 District Profile 19 | 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 model . If a pool of competent.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. 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. financial planning etc. it would fasten the process of FI. Accordingly. 4. 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. The broad features of the FLCC are as under a) To provide financial counseling service through face to face interaction and other available media.

The total geographical area of buldana district is 9661 sq. km. 40. About 79% of the population of the district resides in the rural areas. There are 1433 villages and 13 semi-urban centres and one municipal council situated at Buldana. per capita net income of the district was at Rs. Forest based units. Other crops cultivated include Cotton. Sugarcane and Banana as well as short duration crops like Groundnut. Vainganga. as against State’s position of 365 per sq. About 82.The district is industrially backward and placed in D+ index by the State Government. 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.527/. The SC and SC population contributes 10. The population of the district is around 25.09% of the population is literate.2 District Economy Agriculture is the prime activity of the district with Bajra. The coverage of horticultural crops is limited and is expected to pick up as the programme is under auspices of National Horticultural mission.84% and 5. Jowar. There is scope for development of Agro based activities. Khadakpurna and Painganga are the major rivers flowing in the district. Purna. km. km which is 3. Soyabean. 20 | 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 Model . 5. 74027/.88 lakh as per 2011 census.15% respectively of the total population of the district. The average density of population is 268 per sq. The district has black soil which is highly fertile. Sunflower and Vegetables.14% of the total geographical area of the Maharashtra state. During 2009-10. Maize. Artisan units in the district.. Wheat and Pulses as major food crops.as against State’s per capita income of Rs. The rainfall ranged between 626 and 890 mm during last three years and 95% of it occurs during June – October period.

Internet Banking. Credit Deposit Ratio of all the Credit Agencies functioning was 66.3 Banking Sector The District has a well spread banking network with 15 commercial banks.District Profile District BULDANA Appendix I State - MAHARASHTRA Division . 1.km) No. Small/ Marginal Farmers Agricultural Labourers Workers engaged in Household Industries Workers engaged in Allied Agro-activities Other workers 326 28 400 11 8 172 Category Population Scheduled Caste Scheduled Tribe Literate BPL 7. 1 regional rural bank. Overall 73% of farmer households have no access to formal sources of credit. viz Vidarbha Kshetriya Gramin Bank and one District Central Co-operative Bank operating with total 225 branches. of A gr/ Dir.Dept.. Semi Arid (Wetter Half) Deep Black. WORKERS PROFILE [in '000] Cultivators Of the above. 5 . 51. HOUSEHOLD AMENITIES [Nos. of Panchayats 9661 5 13 1433 866 Agro-climatic Zone Climate Soil Type Western Plateau and Hills Region-Plateau Zone North Hot and dry. Item Nos. Credit/ Debit Cards. Banks lending to priority sector have shown an increasing trend. achievements under the Annual Credit Plan is uneven. DEMOGRAPHIC PROFILE [in '000] Total 2588 NA NA NA NA Male 1342 NA NA Female 1246 NA NA NA Rural NA NA NA NA NA Urban 1858 NA NA 1057 NA 801 NA NA 8. of Eco. Shallow Red 6. 3. of Blocks No. Of the total formal households. PHYSICAL & ADMINISTRATIVE FEATURES Total Geographical Area (Sq. & Stat. re ctiveite spe m): 5. however.4% of farmer households are financially excluded from both. formal and informal sources. 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. There are 570 primary agricultural co-operative societies (PACs).2011.AMRAVATI 2. SOIL & CLIMATE 1. only 27% have access to formal sources of credit. of Sub Divisions No. Medium Black.3. Medium Red and Black. 4.6. 2 .BPL Survey 2002. in '000 Households] Having brick/ stone/ concrete houses Having source of drinking water Having access to banking services NA NA Having electricity supply Having independent toilets 451 Having radio/ tv sets NA 91547 NA Source (if not me s ntione against the d Item Nos. Item No. Online 21 | 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 model . HOUSEHOLDS [in '000] Total Households Rural Households BPL Households 446 358 186 9.52% as on 31. 5. of Villages (Inhabited) No.4 Financial Inclusion in Buldana As per Rangarajan Committee on Financial Inclusion. one-third of this group also borrows from non-formal sources.Census 2001.

they leave the financially excluded sector of population untouched. This call for a conscious attempt to build simple.863 99000 452673 with 62075 7497 20007 22 466 0 44 49756 139867 No A/Cs Frill Leftover household s as per survey 547 0 325 0 0 0 0 709 1581 Table 5.398 9. 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. While these systems meet the needs of modern economy. These systems pose a high entry barrier for the financially excluded section.549 63.money transfer etc. Bank Total Household s Total Household s A/Cs 1 2 3 4 5 6 7 8 SBI CBI BOM BOB SBH IDBI PNP VKGB Total 171. user friendly and cost effective products and services that cater to the needs of the poor and excluded sectors of the society.171 3.1 having opened Banks 109166 88052 43172 2378 6932 9171 3819 48535 311225 (Source : Lead Bank) 22 | 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 Model .504 2440 7.788 95.

of Branches Total 95 24 106 NA No.00 3696864.25 68.00 272284.00 NA A ch'ment [%] 92.26 44.71 NA Share(%) 67.00 18156577.00 58.28 47. '000] NA Recovery [%] Demand [Rs.00 NA 31-Mar-10 10260474.57 5. of A/cs) 31-Mar-10 73.00 6614019 9.51 Cumulative Deposit NA NA NA NA NA 100.00 NA 31-Mar-11 12267768.21 64. [%] in last 3 Demand [Rs.36 140.24 84.25 66.00 1758100.'000] Loans 3735983 553204 2098383 NA NA Loans under DRI Scheme Amount % of Total [Rs.00 1554400. '000] 1695500. 15 1 1 NA No. Agr.25 130.89 67.00 377600.00 14942719.00 6387570 A ch'ment [%] 113.35 5138528.00 517370. '000] 4273823.53 59.00 985381.62 86.66 104. LOANS & ADVANCES OUTSTANDING Agency Commercial Banks Regional Rural Bank Cooperative Banks Others All Agencies No. PERFORMANCE UNDER FINANCIAL INCLUSION (No.15 57. '000] 3735983.00 579559.00 2039045. Bank Primary Agr.00 5859574.00 5128738 463962.92 103.00 414606. Recovery [%] Recovery [%] years '000] '000] NA NA NA NA NA 2445364 1448409.00 NA 2412822 5037429. & Rural Dev.00 4758121.00 2292155.Banking Profile District BULDANA Appendix II State - MAHARASHTRA Lead Bank - Central Bank of India 1.'000] 4057604.00 538701.12 NA 3893773.00 829169.00 NA 2299453 2383535. of accounts 31-Mar-09 NA NA NA NA NA Amount of Loan [Rs.07 106.79 36.15 NA Target [Rs. '000] NA 2010-11 Average Rec.00 924600.00 NA NA 80.'000] Loans 13230 NA NA NA Loans to Women Amount % of Total [Rs.93 71.00 4270070.97 NA 5. '000] NA NA Recovery [Rs.00 120024.07 67.00 146300. SECTOR-WISE PERFORMANCE UNDER ANNUAL CREDIT PLANS Broad Sector Crop Loan Term Loan (Agr) Total Agri.99 8.72 NA Ach'ment [%] 109.87 7450251.03 Target [Rs.00 2008-09 Target [Rs.61 NA 13264700.55 61. Sector A mount % of Total [Rs.16 20. '000] 4590037. Coop.00 2008-09 Demand [Rs.69 51.00 3790400.00 Ach'ment [Rs.00 62.00 399918 4790012.91 NA 4790000.58 84.74 93.56 7.41 NA 6387570 2008-09 Target [Rs.00 533600.'000] 3579242 1010733.66 197.65 79.00 2098383.85 31-Mar-11 71. Agency Commercial Banks Regional Rural Bank Cooperative Banks Others All Agencies A mount of Deposit [Rs.80 123.12 63.36 NA Ach'ment [Rs.00 97300.75 114.00 269000 2124400.00 1056665.00 759017.63 Share(%) 62.00 44.54 138. '000] 3323886.72 96.18 16.00 Ach'ment [Rs.65 66.00 4832144.94 100 3. '000] NA 2124400.00 4682988.11 29.12 66.42 40.83 Sources : Lead Bank & SLBC 23 | 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 model .17 81.00 2009-10 114.41 18.66 210.99 Average A ch[%] in last 3 years 91.52 Loans to A gr.'000] 4033734 1466181.00 484298. '000] 1380500.00 4947868.29 41. of non-formal agencies assoiated Urban mFIs/ mFOs NA NA NA NA NA NA NA Per Branch Outreach Villages NA NA NA NA NA NA NA Rural 47 12 93 NA Semi-urban 48 12 13 NA SHGs/ JLGs NA NA NA NA NA NA NA BCs/ BFs NA NA NA NA NA NA NA Households NA NA NA NA NA NA NA 570 NA 570 NA 570 NA NA NA 587 795 722 No.00 Ach'ment [%] 41.00 NA Ach'ment [Rs.00 21.'000] Growth(%) NA NA NA NA NA 31-Mar-10 NA NA NA NA NA 31-Mar-11 NA NA NA NA NA Share(%) NA NA NA NA NA 31-Mar-09 8549700.95 7. Credit Non-Farm Sector Other Priority Sector Total Priority Sector A ch'ment [Rs.54 41. NETWORK & OUTREACH (As on 3 1/03/20 11) Agency Commercial Banks Regional Rural Bank District Central Coop.00 282600.'000] 2702000.00 NA 1943097 3004771. of accounts 73 2 DEPOSITS OUTSTANDING .00 7409159.00 129252.'000] Loans 3147830 489320 1491588 NA NA A gency Commercial Banks Regional Rural Bank Cooperative Banks Others A ll A gencies Loans to Weaker Sections Amount % of Total [Rs.66 6.00 21210. Bank Coop.23 30.03 6614019 6387570 2010-11 96.00 NA NA 70. of Banks/ Soc. CD-RATIO Agency Commercial Banks Regional Rural Bank Cooperative Banks Others All Agencies CD Ratio 31-Mar-09 72.'000] 3023643.00 419301.58 5138528.00 NA Growth(%) 19.93 102.00 15353.35 Target [Rs.18 NA Target [Rs. Society Others All Agencies No.00 553204.70 4.00 NA 43.'000] 3332851 937219.4 54.41 3277933 4131226. AGENCY-WISE PERFORMANCE UNDER ANNUAL CREDIT PLANS Agency Commercial Banks Regional Rural Bank Cooperative Banks Others All Agencies A ch'ment [Rs.00 4589975. PERFORMANCE TO FULFILL NATIONAL GOALS (As on 31 /2 1) /03 01 Agency Commercial Banks Regional Rural Bank Cooperative Banks Others All Agencies Priority Sector Loans Amount % of Total [Rs. Recovery [Rs. RECOVERY POSITION Agency Commercial Banks Regional Rural Bank Cooperative Banks Others All Agencies Recovery [Rs.00 NA 1075469 1216686.'000] Loans 4218073 139676 1434455 NA NA During 2010-11 Deposit NA NA NA NA NA Credit NA NA NA NA NA Credit NA NA NA NA NA 64.98 84.00 5499915 355087.45 59.'000] Loans 1062687 78246 181945 NA NA 58 9 33 100 61 10 29 100 73 2 25 100 100 NA NA NA 80 6 14 100 Average A ch[%] in last 3 years 88.74 27.00 5859574.00 4.00 NA Ach'ment [%] 62.00 NA 5128738 5792204 2009-10 13230 100 2010-11 1322878 7.00 794870.41 47.00 2009-10 Ach'ment [%] 119.82 26.70 63.'000] Growth(%) NA NA NA NA NA 31-Mar-08 NA NA NA NA NA 31-Mar-09 NA NA NA NA NA 31-Mar-10 NA NA NA NA NA Share(%) NA NA NA NA NA 31-Mar-09 11833700 1386400 7293300 20513400 31-Mar-10 13950718 1607890 7845686 23404294 31-Mar-11 17181590 1940696 8173560 27295846 Growth(%) 23.

There are 148 villages in the district having population over 2000. The remittance facility is also allowed through SB accounts.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. Per day cash withdrawals and cash deposits can be made up to the limit of Rs. 10000/-. Name of the bank Number of villages allocated to the banks 25 61 26 22 03 04 04 02 01 148 1 2 3 4 5 6 7 8 9 VKGB SBI CBI BOM SBH PNB IDBI BOB Dena Total Table 5. The accounts are operated through identification of finger impressions. These customer Care Centres are providing banking services to the clients. These villages have been allocated block-wise to the banks as detailed below: Sr No. 24 | 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 Model . State Bank of India has opened 61 customer care centres which are operated by Business Correspondents.

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. 25 | 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 model .

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. • No ATM card. authentication and authorization of banking transactions. Withdraw cash Get loans Transfer money to another account 26 | 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 Model .Functioning Chapter 6 of BC Model. • • • • • Customers/ BC Account Holders can Deposit cash. and it is hassle free. • The PC’s machine-I. Kiosk Banking BC model is the closest it can get to real time user friendly banking services at your neighbourhood locations.D is then pre-registered and authorized by a bank to make transaction completely secure. webcam and printer. SBI SBI uses the kiosk banking model for business correspondence instead of using the portable Point of Sale (PoS) devices. swipe card or any other password is required by customer to carry out transactions. • 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. • 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.

Personal Account The BC is required to maintain certain balance in the transactional account. Thus BC can accept deposits only till he has balance in his transaction account which can be transferred to customer’s account. A/C statement etc. equivalent amount from the BC’s transaction account gets transferred to the Customer’s account. inverter. viz 1. This helps the Bank to regulate flow of money and ensure that the BC doesn’t misuse the surplus available with him. The BC has two accounts with the Bank. finger print reader. BC can go to the linked 27 | 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 model . BC’s laptop is directly linked to the bank’s CBS and all the transactional entries made are immediately updated on the server. At the same time. While performing a deposit transaction for any customer. BC gets cash in hand. Transactional Account 2. When the BC performs any withdrawal transaction for the customer’s account.• Get transaction Information like A/C balance. The limit on daily deposit transactions allowed for the BC is equal to the balance in his account on that particular day. Overdraft is not allowed on this account. When he balance is low. instantly. As soon as the entry is made. Exactly opposite process takes place in case of deposit transactions. this cash gets transferred from customer’s account to BC’s transaction account in the bank. BC gives the cash present with him to the customer. Once the kiosk is set up. SBI provides financial support to the BCs in form of loans upto 50000 in order to purchase equipments like laptop.

branch and deposit the cash present with him into the transaction account and the cycle goes on. A separate account has to be opened with the BC if such customers are willing to avail services of the BC. Customers who already had accounts with the bank branches cannot operate those accounts from the kiosk. 28 | 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 Model .

1 Sample Profile Sr. District buldana.3 List of Selected Business Correspondents and their respective linked bank branches Sr.State Bank of India. Maharashtra 7. No 1 2 3 4 5 6 7 8 9 10 Name of Village Shelud Peth Pimpalgaon Sarai Mhasrur Shirpur Dongar Shewali Karvand Janori Pimparimali Shara Linked Branch Chikhli Chikhli Buldana Dhad Kelwad Buldana Undri Shegaon Mehkar Lonar Table 7.4 Data Analysis for bank branches 29 | 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 model .1 Sample Size 1 10 10 per BC 5 per BC Analysis 7. No 1 2 3 4 Stake holders Bank BCs Customers Non-customers Table 7.Data Chapter 7 7.2 7.2 Selected Bank .

4. of villages covered 2 5 2 1 3 1 3 1 18 Chart 7. Number of villages allotted under financial inclusion drive as against the number of villages actually covered by the respective bank branches Bank Branch SBI Buldana SBI Chikhli SBI Dhad SBI Kelwad SBI Lonar SBI Mehkar SBI Shegaon SBI Undri Grand Total No. Financial Products offered through the BCs 30 | 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 Model .7.4.2. we see that 90% of the branches have achieved the targets with respect to the villages allotted to them. 7. hence no BCs have been appointed.4.4.1 From the figure 7. of villages alloted 2 5 5 1 3 1 3 1 21 No. The villages left out under Dhad branch will have separate bank branches within one year.1.1 Fig. 7.1.4.

However availability of these accounts also depends upon certain external factors which will be discussed later in this chapter.4.20 per new a/c. Micro-credit and Micro-insurance are the two services not offered through the SBI kiosks. The pay structure is as mentioned below.2 From the table 7.5% per withdrawal and remittance transaction No commission paid for deposit transactions 31 | 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 model . 0.2. it was found out that the BCs do not have any idea regarding these products. 7. On interacting with the BCs. RD and Fixed Deposits) as well as remittance facilities are available through the kiosk accounts. 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.4. Rs. we observe that Deposit accounts (Savings.3 Compensation Paid to the BCs Compensation paid to the BCs is strictly transaction based.4.Name of the Bank SBI Chikhli SBI Kelwad SBI Dhad SBI Buldana SBI Mehkar SBI Lonar SBI Shegaon SBI Undri Deposit Micro Remittance MicroMicro Credit insurance Pension Yes Yes Yes Yes Yes Yes Yes Yes No No No SHG No No No No Yes Yes Yes Yes Yes Yes Yes Yes No No No No No No No No Yes Yes Yes No No Yes Yes Yes Table 7.

Customers believe that the BC model is a temporary arrangement by the Bank and it might be shunned any time. Lukewarm response from customers To gain the trust of the customers.4. Technical problems in payments 32 | 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 Model .5 Problems faced by bank branches in Implementation of the BC model 1. Also non-availability of passbooks for the accounts opened at kiosk adds upto the problem. Non-availability of passbooks create a little mistrust in their minds and they prefer going to the bank branch for carrying out transactions. Villagers insist for passbook entries after every deposit or withdrawal even at the bank branch. 2. the number of transactions taking place at the kiosk per day. Some branches also accept residential proofs certified by BCs. in spite of the existing account at the bank branch. 7. SBI has appointed local youth as BCs.This amount sums up to be quite low taking into account. This leads into a general reluctance to open new accounts at the Kiosk.4. All the Branches accept proof of Residence certified by Block/ Village Panchayat. The roots of this problem lie in the fact that the customers are asked to open a new account at the 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.4 KYC norms adopted by the Bank Apart from the Photo Identity proof. 7. these BCs use several marketing strategies to make people aware of the facilities that can be availed through the SBI kiosk.

of BCs 9 1 . As a result.Fingerprints of farmers fade over a period of time due to excessive contact with soil and rough and heavy farm instruments. The customers then have to come to the Bank Branch for carrying out transactions. the fingerprint detection technique used at the kiosk to verify the person’s identity fails at times. 7.1 33 | 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 model No.5.5.1 BC Selection process BC Selection Process Individually appointed CSP Through BC Table 7.5 Data Analysis – Business Correspondents 7.

5.2. In a few cases.Fig. Though the BCs are linked to the respective SBI branches and report to the respective branches.1 From the figure 7. the Manager.5. There is a separate officer with designation of Manager. BC designation is given to an organization/NGO etc who in turn appoint CSPs. Pragati Adivasi Gramin Vikas Sanstha. BC as occupation BC as Occupation Main Secondary Count 8 2 Table 7. Alternative channel regulates and manages the BCs. 7.5. 7. Shegaon is one such example.2 34 | 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 Model .1. Alternate Channel at the Regional Office.5. we understand that majority of the BCs are directly appointed through personal interviews by SBI through SBI Regional office located at the district place.

This dedication enables them to encourage people to open accounts at the kiosk.2. Number of hours per day for which the BC is available No of a/c served by the CSP 6 Hours 8 Hours No of Hours CSP is available in each village 2 3 35 | 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 model . This situation has also enabled SBI to do the NPA Recovery in the particular village through BCs thus benefitting the business. 7.Fig 7.5% per transaction (withdrawal and remittance.5. with a ceiling of Rs 12) Rs.5.5.3. 20 foe every new account opened. local youth appointed by SBI undertake BC as their sole occupation.2 From the Figure 7. The commission offered by SBI to BCs is as under : 0. we observe that in most of the villages. However this also creates a need to rethink the commission offered by SBI to these BCs as it seems less.

of a/cs per village 600 570 433 1430 2000 789 36 | 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 .9 Hours 12 Hours 1 4 Table 7. since for most BCs main occupation is BC.5. making additional investment is not financially possible. BCs have to invest in the infrastructure on their own and as shown above.3 From the figure.5.4. The only problem sometimes obstructing the BC service timings is non-availability of electricity and absence of inverter. 7. This is possible because most of the CSPs reside in the same village which they serve.3 Fig 7. Number of accounts served by CSPs as on the date of survey Name of the village served by the CSP Dongarshevli Janori Karvand Mhasrur Peth Pimpalgaon Sarai Model No. we observe that majority of the CSPs are available for 8 to 12 hours per day.5. SBI might consider taking care of this problem in order to increase the business.

Pimpremali Shara Shelud Shirpur Grand Total

1150 2561 3500 1500 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 SBI Buldana SBI Chikhli SBI Dhad SBI Kelwad SBI Lonar SBI Mehkar SBI Shegaon SBI Undri Grand Total Total 0 500 750 335 420 680 450 150 3285

37 | 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 model

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 Dongarshevli Janori Karwand Mhasrur Peth Model Count of Deposit accounts 9 10 9 8 10 Count of Loan accounts 1 Count of Pension 1 1 3 Count of Remittance 2 2 3 2

38 | 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

Pimpalgaon Sarai Pimpremali Shara Shelud Shirpur Grand Total

7 10 10 9 4 86

6 2 2 3 7 20

2 6 2 3 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
39 | 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 model

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 Dongarshevli Janori Karwand Mhasrur Peth Pimpalgaon Sarai Pimpremali Shara Shelud Shirpur Grand Total Inoperative 70% 20% 0% 0% 20% 0% 0% 0% 10% 0% 12% Operative 30% 80% 100% 100% 80% 100% 100% 100% 90% 100% 88%

Table 7.6.1

40 | 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
Model

2.1 7.1 1.2 41 | 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 model .6.9 1.6.6 1.6.6 3.9 1. Average no.9 1.1 2. 7.1 1.4 2. of accounts per household in a village Name of the village Dongarshevli Janori Karwand Mhasrur Peth Pimpalgaon Sarai Pimpremali Shara Shelud Shirpur Total Average Average no of a/c per gousehold 1.Fig.7 1.93 Table 7.

7.6.6. 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. 7. 7.6. Students who receive scholarships also avail the BC facilities through their personal savings accounts. we observe that many households have 2 accounts with the kiosk.Fig.3.2. Number of customers who came to know about the kiosk banking through BCs Name of the village Dongarshevli Janori Karwand Mhasrur Peth Pimpalgaon Sarai Pimpremali Shara Shelud Shirpur Grand Total Total 9 10 10 8 10 9 10 10 8 4 88 Table 7.3 42 | 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 Model .2 From Fig.6.

BCs also announce about the services over the loudspeaker through a rickshaw (‘Dawandi’ in Marathi).3 The shaded area in Fig. People satisfied with the door-step deposit services Name of the village No. indicates the number of customers who became aware of the kiosk banking through BCs.Fig. 7. of customers Dongarshevli 7 Janori 9 Karwand 10 Mhasrur 8 Peth 4 Pimpalgaon Sarai 3 Pimpremali 10 Shara 9 Shelud 6 Shirpur 6 43 | 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 model . 7. It is evident that majority of the customers received information about the model through the BC.6. Hiring local youth as BCs has its own advantages since people can walk into the kiosk and enquire about the services without any apprehensions. it was observed that the BC travels from house to house educating people about the Facilities available at the kiosk.6. 7.4.6.3. At some villages.

4 Fig.6.6. 7.6. Customers satisfied with the charges Name of the village Dongarshevli Janori Karwand Mhasrur Peth Pimpalgaon Sarai Pimpremali Shara Shelud Model Customers availing Remittance services 2 2 3 2 2 6 2 3 Customers finding the service charges reasonable 1 1 1 44 | 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 . 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.4.6.5.Grand Total 72 Table 7. we observe that majority of customers who availed the kiosk banking facilities were satisfied with the door-step deposit services. Customers availing remittance services Vs. 7.4 From the fig. 7.

7.Shirpur Grand Total 22 3 Table 7. The bank charges - Rs 25 as fee for transaction of Rs 100 (Minimum) Rs 100 for transaction of Rs 10000 (Maximum) - 45 | 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 model .6. 7. 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.5.5 In Fig.6.5 Fig.6.

Profile of non-customers Occupation Agri-labourer Alms Barber Driver Driver.1.7.7 Data Analysis for Non-Customers 7.7. travels Farming Service Engineer Shikshak Sevak Teacher Tiffins Grand Total Total 4 1 1 1 2 37 1 1 1 1 50 Table 7.7.1 46 | 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 Model .

Some owned shops e.Fig.7.2.7.g.7. grocer.2 47 | 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 model .1 Majority of respondents had agriculture as their occupation. service engineers etc. of accounts per family 1 2 3 No a/c Grand Total Total 27 5 1 17 50 Table 7. Other 9 % included people working as drivers. 7. barber. Number of accounts per family No. 7. teachers.

daily wage earners or small scale farmers who seldom do any savings. However as indicated by the chart below. This group first needs inculcation of saving habit through SHGs before persuading them to open individual accounts with banks. Buldana District Central Co-operative bank had most of these accounts followed by SBI bank branches at nearby villages. never introduced to formal banking. Another major chunk of non-customers consists of the financially excluded population.7.Fig. of responde nts 44 6 48 | 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 .2 Majority of the non-customers of SBI already had accounts with other banks or co-operative societies. 7. many customers of SBI bank branch refused to open kiosk accounts.3 Whether members of SHGs whether a member of any SHG/JLG No Yes Model No.7. People in this group are mostly agri-labourers. 7. very few people are part of the SHG groups. Due to the duality of accounts. (separate account at the bank and the kiosk).

28% of the sample falls into this category.Grand Total 50 Table 7. Following table gives us a comprehensive view of the situation. of accounts 1 2 3 No a/c Grand Total Whether a member of any SHG/JLG No 25 5 1 14 44 3 6 Yes 2 Grand Total 27 5 1 17 50 49 | 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 model . 14/50 (28%) are financially excluded No.7.3 Fig. 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.7.

4a 50 | 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 Model . Facilities availed by non-customers of SBI on other bank accounts Facilities Deposit accounts Loan accounts Remittance Micro Insurance Pension No.3a 7.4a Fig. 7. of people availing facility 47 29 23 19 20 Table 7.7.4.7.Chart 7.7.7.

4b 51 | 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 model . pension services are not offered through the kiosk accounts in all villages due to lack of passbooks. however per month transactions are rare on these accounts.7. 7. Else people open accounts with SBI branches in nearby Town. people need to use the SBI Bank Branch account for such transactions. Loan accounts are also comparatively high in number.From Fig. As mentioned earlier. Account Status Inoperative operative Not applicable (No account) Grand Total No of accounts 3 29 18 50 Table 7. Majority of people open savings accounts but seldom operate the 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.4a it is evident that about 65% of the non-customers of SBI have accounts with other banks. As a result. Some villages have branches of Buldana Urban Bank or BDCC.7.

Fig.) from other banks usually operate the accounts. A part of this can be accounted to the long presence of the respective bank branches or co-operative societies in the particular village.4b.7. 7.7. we observe that customers availing various facilities (such as loan accounts.4b From Fig. 7. The limit of 10000 on withdrawal and remittance and the duality of accounts prevents them from approaching the kiosks. of times the respondent visits the bank every month Number of times the respondent visits the bank (say in a month) 1 2 3 4 5 8 10 15 NA (No account) 0 Grand Total No of respond ents 13 7 3 2 1 1 1 1 20 1 50 Table 7. These are usually the customers who were aware of the banking facilities since long and transacted through bank branches at nearby towns. remittance etc.5 52 | 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 Model .7.7.5 No. 7.

go to the bank once or twice a month.Fig.5a 53 | 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 model .5 gives us the better perspective on the operative bank accounts with other branches.7.7. The following chart 7. Majority of customers. who have bank accounts.7. 7.5 Fig. 7.5a indicates that most customers have deposit accounts followed by loan accounts and inward and outward remittances.5a Facilities availed by respondents (non-customers) Total responde nts 50 50 50 50 50 Facility availed Deposit Accounts Loan Accounts Remittance Microinsurance Pension Yes 33 10 5 No NA 17 17 17 17 17 23 28 33 31 2 Table 7. 7.7.7.

5a 7.7.7.6 Whether or not respondent is aware about the services offered by the BC Whether aware about the services provided by BC/CSP (Yes/No) No Yes Grand Total Total 19 31 50 Table 7.7.Fig.6 54 | 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 Model . 7.

7. The following chart elucidates the reason for their availing the services in spite of their awareness.7. 7.7.7.6 From Fig.6 we observe that majority of the non-customers are aware of the services offered through the kiosk.7 Reasons for not availing the services of BC/CSP Reasons for not availing the services of BC/CSP Not aware of the services offered BC is not approachable/ doesn’t trust the concept (Acceptability) Doesn’t find it convenient Limit on Transactions Already an account with another bank No.Fig. of respondents 18 2 6 5 19 Table 7. 7.7 55 | 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 model .7.

Fig.7. 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 The class “Doesn’t find it convenient” includes the non-provision of passbooks. 7. Their accounts with other bank branches served their remittance requirements. of respondents 17 33 50 56 | 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 Model . lack of overdraft facility and duality of accounts.8 Whether the respondents are interested in availing the services of the BC If interested in availing the services of the BC/CSP No Yes Grand Total No. 7.7. A few people refused to open accounts with BCs citing the limit of 10000.

Table 7. 8.1. increased transaction limits and less remittance charges. 7. Branch Managers.7. majority of people said “yes”. Findings and Conclusions Chapter 8 8.7.8 Fig.1 Suggestions by the Branch managers Suggestions MNAREGA payments can be done through kiosks Crop Loan/Gold Loan disbursement through BC All govt payments to be done through kiosks Micro-insurance products to be made available Farmers' clubs 3 2 4 2 1 57 | 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 model . Business Correspondents and Account Holders. viz.1 Findings The findings consist of the suggestions of various stakeholders.8 When asked whether people are interested in availing the services of the BC. However. the ‘ifs’ attached with the answers mostly echoed the need for passbooks. Conclusions drawn from the suggestions and on-field observations follow the findings.

From customer’s point of view. at the same time reducing the load on the branch.1.1 Fig 8. 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.1. it will save the customer’s time to go the bank branch. 58 | 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 Model . including MNAREGA payments will increase business for the BCs.1 Findings 1. Crop loan disbursement is the busiest time of the year for the bank branches as farmers come in huge numbers for crop loans. Currently MNAREGA payments are not done through kiosk accounts of SBI.GCC/KCC facilities to be made available Loan recovery cases can be handed over to BCs 2 2 Table 8. thereby preventing the loss of his half a day’s wages. 2. From Bank’s point of view.

2 59 | 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 model . 6. Provision of the facility on kiosk account will save customers from increased trips to bank branch. Limit of 10. This results in customer travelling to the branch in spite of availability of kiosk in his/her village. 5. 68 out of 70 cases were converted by the BC. 8. All Government payments are not done through the kiosk accounts due to Tehsildar’s refusal to transfer payments to these accounts due to nonprovision of passbooks. GCC/KCC are not provided on the kiosk accounts. 4. Availability of these products through the kiosk will benefit the customers as well as enhance bank’s business. Customers as well as the BCs in the district lack awareness about the micro-insurance products.1. Branch a/c balance enquiry to be made possible at CSP Provide monetary support for equipment and stationery Better replacement for finger print detection Low connectivity and electricity problem should be solved.1. This enables the customers to avail further loans and improves bank’s NPA recovery percentage. A unique practice of handing over NPA recovery cases to the BCs was observed at couple of branches. At one branch.3.2 Suggestions by BCs Data Passbooks should be provided to customers.000 per a/c per day should be removed. Loan disbursement to be done at CSP Total 5 7 2 3 2 2 2 Table 8.

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. Non provision of passbooks has led to several accounts turning inoperative. Increasing the limit would increase business for the BCs. 60 | 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 Model . 8. BCs do not have any objections to depositing the additional money in their transaction accounts as would be required by bank.2 Findings 1.Fig. 2.1. Several customers have are forced to go to the bank branches for withdrawals and money transfers above Rs. 10000.

he/she can withdraw the money as and when required instead of travelling to the bank branch every time.3. Customers who have accounts with the BC as well as with the bank.3 61 | 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 model . the finger print detector fails to detect the finger prints of customers.1. This also emphasizes the need for inverters. 7. This leads to slow carrying out of transactions ar inability to connect to the server. Connectivity is always a big issue in remote areas and so is the absence of electricity for major part of the day. In such cases. If loan amount is transferred to customer’s kiosk account. 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.3 Suggestions of account holders Suggestions Limit of 10000 per day is insufficient A/c should be linked to base branch a/c Passbooks should be provided Overdraft should be allowed Service charge for remittance is too high Problem with fingerprint detection unit Loan disbursement should be in kiosk a/c Customers in % 13 1 3 1 4 1 3 Table. 6. High speed internet service providers are costly and BCs cannot afford them without financial support from banks. 8. At times. customers have to travel to bank branch for carrying out the transactions. 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. BCs also expect financial support for the purchase of equipments like inverter which will help increase their business. 8.1. cannot check their bank account’s balance at the kiosk. 4. 5.

Fig 8.3 Findings Customers echo the BCs’ demands of 1.1. Loan disbursement through kiosk account Apart from these. Linking accounts to base branch 4. Reduction of service charge for remittance – 62 | 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 Model . Provision of passbooks 3. customers suggest that 6. Increase in limit of 10000 on withdrawal and remittance 2. Resolving problem with finger print detection system 5.

7. especially for low value transactions by the villagers.2 Conclusions Mentioned hereunder. 2. are the conclusions drawn regarding the BC Model of SBI in a summarized form. Provision of overdraft on the kiosk account 8. 100 (Minimum) - Rs 100 as charge for remittance transaction of Rs 10000 (Maximum) These charges are too high. 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. Bank charges - Rs 25 as charge for remittance transaction of Rs.As previously mentioned. On a positive note. These conclusions are drawn from the information collected through extensive questionnaire and on-field observations of the surveyor. Bank might consider reducing the charges. 63 | 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 model . 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. 1.

3.5% (Min. and also the NPA cases. 6. Alternate Channel. The presence of Manager. Following are a few points which SBI can consider for further improvements thus making the channel more financially viable and beneficial for all stakeholders.C. there are certain difficulties (as mentioned in ‘Findings’) faced by the Bank Branch Managers. 12/-) 2/5 : 3/5 ratio (Bank : B. The structure of commission is as follows On deposits On withdrawal On remittance On Account opening Nil 0. 4.Max Rs. BCs are assisting the recovery of loans outstanding of the Bank. 5. The BCs can directly report to the RBO in case of any difficulty thus making the channel more consistent.) Rs. 1. at the Regional bank Office (RBO) facilitates in the monitoring and regulation of the BC channel efficiently. 1/. However. the Business Correspondents and the customers. 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. 20/. Majority of customers availing the BC services are satisfied with the Door-step Banking Services made possible by this model.per account opened 64 | 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 Model . The commission is on very low side The commission provided to the BCs is strictly per transaction. Re.

internet bill. 3.On loans 0. Fee charged on Remittance is irrational The remittances are charged at the rate of Rs 2. Mininum Rs. The current financial aid provided by Bank is a personal loan of Rs 50000/.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. kiosk rent (if not in his own house). 100 /-.e. Rs. the repayment period of which is 4 years.5%. There are also certain recurring costs such as rent and stationery cost. After subtracting these.00 /. Provision of Financial Support for the BCs Apart from buying a laptop and finger print detector.to each BC. BC has to incur many additional expenses such as purchasing the inverter. Bank might consider restructuring the provision of financial support to the BCs to help cover all these expenses. given the number of accounts each BC caters to. This fee is too high in comparison to what the regular Bank Branches charge i. 2. 65 | 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 model . better connectivity internet modem etc. with an annual interest of 13.per 100. 2 per 1000 /-. the BC is left with too less an amount to use. However the BC has to take care of several recurring expenses such as stationery. SBI may consider certain fixed salary for the BCs apart from the transaction based commission. 25 and Maximum Rs.

4. 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. Provision of Passbook is unavailable Only Identity Cards are provided to the customers and not pass books. net balance is not shown. Hence Bank might consider increasing the limit to upto Rs. Loan disbursement through kiosk accounts Bank might consider disbursement of loan amount upto a specified limit through kiosk accounts. Bank might consider provision of passbooks for the accounts opened at the kiosks. 10000 makes many customers travel to the bank branch for transactions above the specified amount. 6. 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. 25000 /. This will reduce the load at the bank branch and also will prove convenient for small farmers. Such a step will help in increasing customers’ belief in the stability of the BC model. in some villages. 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.Bank must consider that this charge becomes too high for the rural people.in near future. Also. in the print copy of transaction. Transaction Limit of 10000 is too low The per day limit of Rs. Moreover. 66 | 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 Model . 5.

Pathway to Financial Inclusion?” RBI/ 20082009 /141 DBOD. “Report of the Working Group to Review the Business correspondent model” RBI Aug 2009 “Business Correspondents and Facilitators . “Indian Council for Research on International Economic Relations”. “Speech on Financial Inclusion”. New Delhi Rangarajan (2011). pp 90-111 67 | 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 model . BL. No 4.01. Bibliography Bansal & 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. “index of Financial Inclusion”. “The mirage of marketing at the Bottom of the Pyramid: How private sector can alleviate poverty”. All other suggestions such as provision of overdraft.7. “Financial Liberalization and Rural Credit in India” Tulika Books. No. California Management Review. Vol 49. “St. 35 /22. all Government payments including MNAREGA and micro-insurance products can be considered over a period of time.009/2008-2009 Karnani 2007. GCC/ KCC. Dec 2007 Thorat Usha (2009).BC. Xavier’s College” 2011 Sarma (2007).) (2002).

MCID 217/FI-01/2008-09 dated 14 May 2008 Circular No 02/FID 02/2010 dated 4. “Financial Inclusion in the Middle East and North Africa” The World Bank Middle East and North Africa Region Financial and Private Sector Development Unit.01.NB.239/FID-19/2010 dated 09 December 2010 68 | 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 Model . 68/FID9/2010 dated 25 March 2010 Circular No. 1. April 2010 Pearce 2011.FID / 2495 / FI-01/2010-11 dated 21 January 2011 Circular No./ H-1878-1912 / BP-12 / 2010-2011 dated 06 September 2010 Circular No.2010 Circular No. No.72 / FID-10 /2010 dated 01 April 2010 Circular No.01. CPD. March 2011 Rajiv Rao “Poverty’s New Saviour” Business Today Dec 14.“Nabard Newslertter” Vol 21. 2008 Kloeppinger-Tod & Sharma 2010 “Innovations in Rural and Agriculture Finance” IFPRI Access to fin world bank Circular No.2011 Circular No. DO. NB. No.07/FID/2011 dated 18. NB.FID/2326/FI-01/2010-11 Circular No. BPD.

of Allotted Villages 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank Corporation Bank Dena Bank HDFC Bank ICICI Bank IDBI Indian Bank Indian Overseas Bank Karnataka Bank Maharashtra Gramin Bank Oriental Bank of Commerce Punjab National Bank Ratnakar Bank State Bank of Hyderabad State Bank of India 33 1 176 506 853 40 436 3 158 1 72 82 11 21 1 355 6 26 21 215 855 69 | 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 model . Bank No.Annexure 1 Bankwise summary of allotted villages (above population 2000) in Maharashtra Sr. No.

T o t a l P r i v a t e S 0 e c 0t o r 0 B a0 n k 0 ( C 0) 0 1 G r a n d T o t 1a 2l 71 2 9 5 2 9 2 1 5 42 0 61 3 2 7 6 70 | 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 Model AURANGABAD BEED HINGOLI JALNA LATUR NANDED OSMANABAD PARBHANI THANE BULDHANA WASHIM YAVATMAL CHANDRAPUR GADCHIROLI GONDIA RATNAGIRI SINDHUDURG SOLAPUR 3 4 1 29 19 14 9 1 9 10 85 35 1 7 3 6 2 5 2 20 23 7 27 66 22 7 8 15 7 21 7 20 25 12 16 2 25 1 2 1 2 5 4 3 4 26 59 23 21 14 15 9 7 2 1 1 4 4 2 0 41 2 3 4 5 6 4 5 8 5 25 9 29 8 5 25 9 29 8 12 1 12 21 19 10 49 1 1 2 2 8 1 12 1 4 5 3 30 94 83 41 205 14 2 13 6 49 14 2 13 6 49 5 7 0 0 0 0 0 0 0 5 0 7 2 0 91 4 8 5 4 9 3 6 6 4 4 9 6 1 0 1 4 7 2 6 1 Syndicate Bank Union Bank of India UCO Bank Vijaya Bank VKGB WKGB Total 50 189 23 3 63 92 4292 Annexure 2 .22 23 24 25 26 27 A l l a h a b a d B 1a n k 1 3 2 4 A n d h ra B a n k 1 B a n k o f B a r 2 d a3 1 1 2 o B a n k o f In d ia B a n k o f M a h 4 0 a 1s 2h t 3r a 2 7 1 8 6 2 9 4 ar C a n a ra B a n k 1 2 2 C e n t r a l B a n k 9 o f I n d 1i a 2 8 2 C o r p o r a t io n B a n k D e n a B a n k1 1 2 24 In d ia n B a n k In d ia n O v e r s e a s B a n k O r ie n ta l B a n k o f C o m m e r c e P u n j a b N a t i o n1 a l B a n k 1 S t a t e B a n k o f 2 H6 y 2d 7e r1 a 1 b 1a 1d 3 0 3 9 3 9 2 8 S t a t e B a n k o1 f 3 I n3 d4 i a2 0 9 2 9 2 7 2 8 1 9 S y n d ic a te B a n k 2 U n i o n B a n k o2 f I n d i a 4 1 U C O Bank V ija y a B a n k ID B I B a n k 1 T o t a l P u b l i c S 9e 5c t7 o7 r 3B 6 a 6n 0k 9 ( 4A )9 9 1 0 1 5 5 M G B 3 2 5 2 1 6 3 2 6 0 1 0 73 1 2 0 VKG B W KG B T o t a l G r a m i n3 2B 5 n k1 6( B3 )2 6 0 1 0 73 1 2 0 a2 H D FC Bank IC IC I B a n k 1 R a tn a k a r B a n k K a rn a ta k a B a n k L td .

Krishi Vigyan Kendras and KVIC/ KVIB 71 | 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 model . Business Facilitator Model: Eligible Entities and Scope of Activities 2.BC. 58/22.01. NGOs/Farmers' Clubs. well functioning Panchayats.Governmental Organisations/ Self Help Groups (NGOs/ SHGs). Post Offices. 2.Use of Business Facilitators and Correspondents With the objective of ensuring greater financial inclusion and increasing the outreach of the banking sector. insurance agents. such as.BL. it has been decided in public interest to enable banks to use the services of Non.No. community based organisations. Agri Clinics/ Agri Business Centers. 1927 (S) The Chairmen & CEOs (All Scheduled Commercial Banks including RRBs) Dear Sir.001/2005-2006 January 25. cooperatives. banks may use intermediaries. Village Knowledge Centres. 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. Financial Inclusion by Extension of Banking Services .1 Under the “Business Facilitator” model.Annexure 3 RBI/2005-06/288 DBOD. IT enabled rural outlets of corporate entities. 2006 Magha 5.

rbi.2 As these services are not intended to involve the conduct of banking business by Business Facilitators. (ii) collection and preliminary processing of loan applications including verification of primary information/data. (vi) post-sanction monitoring. (iii) creating awareness about savings and other products and education and advice on managing money and debt counselling. 72 | 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 Model . no approval is required from RBI for using the above intermediaries for facilitation of the services indicated above.org. 2.units. (vii) monitoring and handholding of Self Help Groups/ Joint Liability Groups/ Credit Groups/ others. section 25 companies. (v) promotion and nurturing Self Help Groups/ Joint Liability Groups. NGOs/ MFIs set up under Societies/ Trust Acts. for providing facilitation services. Business Correspondent Model: Eligible Entities and Scope of Activities 3. depending on the comfort level of the bank. enjoying good reputation and having the confidence of the local people. Banks may conduct thorough due diligence on such entities keeping in view the indicative parameters given in Annex 3. 3. Banks may give wide publicity in the locality about the intermediary engaged by them as Business Correspondent and take measures to avoid being misrepresented. Societies registered under Mutually Aided Cooperative Societies Acts or the Cooperative Societies Acts of States.2 of the Report of the Internal Group appointed by Reserve Bank of India (available on RBI website: www. registered NBFCs not accepting public deposits and Post Offices may act as Business Correspondents. banks should ensure that they are well established.in) to examine issues relating to Rural Credit and MicroFinance (July 2005). (iv) processing and submission of applications to banks. Such services may include (i) identification of borrowers and fitment of activities. and (viii) follow-up for recovery.1 Under the "Business Correspondent" Model. In engaging such intermediaries 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.1 above as Business Correspondents. 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.Dir. Other Terms and Conditions for Engagement of Business Facilitators and Correspondents 5.07.3. due consideration should be given by banks to those risks.1 As the engagement of intermediaries as Business Facilitators/ Correspondents involves significant reputational. 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. Accordingly.00/2005-06 dated July 1. Payment of commission/ fees for engagement of Business Facilitators/ Correspondents Banks may pay reasonable commission/ fee to the Business Facilitators/ Correspondents. in furtherance of the objective of increasing the outreach of the banks for micro-finance.2 In addition to activities listed under the Business Facilitator Model. the Reserve Bank hereby permits banks to formulate a scheme for using the entities indicated in paragraph 3. in public interest. but conducted through the entities indicated above at places other than the bank premises. 4. They should also endeavour to adopt technology-based solutions for managing 73 | 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 model . RBI Master Circular DBOD. legal and operational risks. 3. the rate and quantum of which may be reviewed periodically. 5.5/13. 2005 may be treated as modified to that extent.3 The activities to be undertaken by the Business Correspondents would be within the normal course of the bank's banking business.

rbi.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. 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. besides increasing the outreach in a cost effective manner. (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.in). (b) the requirement that the transactions are accounted for and reflected in the bank's books by end of day or next working day. The name and contact number of designated Grievance Redressal Officer of the bank should be made known and widely publicised. 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. The designated officer should ensure that genuine grievances of customers are redressed promptly. 2005 (available on RBI website: www. 5. 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.org. he will have the option to approach the Office of the Banking Ombudsman concerned for redressal of his grievance/s. In formulating their schemes. (c) If a complainant does not get satisfactory response from the bank within 60 days from the date of his lodging the compliant. 74 | 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 Model .the risk.

2004 and August 23. Yours faithfully. Block Development Officer (BDO). banks can also rely on certificates of identification issued by the intermediary being used as Banking Correspondent. banks may adopt a flexible approach within the parameters of guidelines issued on KYC from time to time. 2005 provide sufficient flexibility to banks. known to the bank. Compliance with Know Your Customer (KYC) Norms Compliance with KYC norms will continue to be the responsibility of banks. head of Village Panchayat. Vijaya Bhaskar) Chief General Manager 75 | 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 model . Since the objective is to extend savings and loan facilities to the underprivileged and unbanked population. The KYC guidelines issued vide our circulars dated November 29. In addition to introduction from any person on whom KYC has been done. ( P.7. Post Master of the post office concerned or any other public functionary.

Deputy Governor.CO. financial literacy and credit counselling.000. by March 2011.HLC.BC. recommended broadening of the scope of the Scheme to specifically cover financial inclusion. 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. 2009.org. 'credit plus' activities.No.10/2009-10 November 27.rbi. 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.19. The Committee.LBS. which is available on our website (www. Such banking services may not necessarily be 76 | 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 Model . 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. the High Level Committee on Lead Bank Scheme constituted by the Reserve Bank of India with Smt. 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.in). interalia. role of State Governments. Usha Thorat.Annexure 4 ________________RESERVE BANK OF INDIA______________ RBI/ 2009-10/233 RPCD.43 /02. as Chairperson has submitted its Report on August 20.

4. 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. Please acknowledge receipt.extended through a brick and mortar branch but can be provided through any of the various forms of ICT. Yours faithfully. 3. You may advise the DCCs/all member banks accordingly. including through BCs” 2.based models. 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. A monitoring review mechanism may be instituted by DCCs to periodically assess and evaluate the progress made in achieving the roadmap. 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. This may be taken up for review in each meeting of the DCC. (Deepali Pant Joshi) Chief General Manager Encl: As above 77 | 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 model .

Report of the High Level Committee to Review Lead Bank Scheme -Implementation of the recommendations Over a period of four decades. therefore.Annexure 5 _______________RESERVE BANK OF INDIA_____________ RBI/2009-10/329 RPCD.56 /02. A High Level Committee to review Lead Bank Scheme was.HLC. since the inception of the Lead Bank Scheme (LBS).10/2009-10 February 26. 2. The overarching objective of the Scheme is to enable banks and State Governments to work together for inclusive growth.No. constituted by Reserve Bank of India. 2010 CMDs of all SLBC Convenor Banks Dear Sir.BC.19. The Committee recommended that the LBS is useful and needs to continue. 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. You are advised to initiate actions for speedy implementation of the recommendations and also closely 78 | 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 Model .LBS.CO. 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.

Each SLBC may have its own website. may vary from State to State depending on the specific problems/issues faced by the States. therefore. 79 | 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 model . iii) The secretariat/offices of SLBC should be sufficiently strengthened to enable the SLBC convenor bank to effectively discharge its functions. We of draw the your attention relating specifically to to the of recommendations Committee strengthening implementation of the Lead Bank Scheme at state and district level. The SLBC plays a very important role in development at state level. 4. There is. 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. we advise that the various fora under the Lead Bank Scheme need to be strengthened. a full day sensitisation workshop may be convened by the SLBC convenor bank in April/May every year. ii) In view of the large membership of the SLBC. Illustrative guidelines on the conduct of State Level Bankers Committee (SLBC) meetings are detailed below: I.monitor the progress made by the lead banks / commercial banks in this regard. it would be desirable for the SLBC to constitute Sub-Committees for specific tasks. the SLBC meetings may be co-chaired by Additional Chief Secretary or Development Commissioner of the State concerned. In each State. a need for streamlining and strengthening of the same. The issues sub-committee subjects/ specific impeding/enabling financial inclusion to be deliberated upon. Additionally. The sub committees may examine the specific issues in-depth and devise solutions/recommendations composition of the for consideration and of the SLBC. With a view to improving the efficacy of the Lead Bank Scheme.

Several Corporate houses are also engaged in Corporate Social Responsibility activities for sustainable development. 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. Agenda Items While all SLBCs/Lead Banks are expected to address the problems particular to the concerned states. Success stories could be presented in SLBC/DCC meetings to serve as models that could be replicated. 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: 80 | 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 Model .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. that have implications for sustainable development in agriculture and MSME sector. 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. v) Several institutions and academicians are engaged in research and studies etc. vi) The activities of NGOs in facilitating and channeling credit to the low income households are expected to increase in the coming years. therefore. 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. Other 'special invitees' may be invited to attend SLBC meetings depending on the agenda items/issues to be discussed in the meetings. The SLBC/DCC may.

review of performance of banks under Annual Credit Plan (ACP) vii. progress under SHG . steps taken for improving land record and recovery mechanism xv. regional imbalances in deployment of credit to various sectors of the economy viii. grant of educational loans xii. the specific issues inhibiting and enabling IT enabled financial inclusion iv. identification of unbanked/under banked areas for providing banking services in a time bound manner with a view to achieve 100% financial inclusion iii. flow of credit to priority sector and weaker sections of the society x.Deposit Ratio of the State ix. assistance under Government sponsored schemes xi. SME financing & bottlenecks thereof. if any xiv.bank linkage xiii. 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.i. issues to facilitate 'enablers' and remove/minimise 'impeders' for banking development for inclusive growth v. Credit . timely submission of data by banks 81 | 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 model . 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.

The SLBC convenor banks may include any other agenda item considered necessary. GREATER ROLE FOR PRIVATE SECTOR BANKS 82 | 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 Model . conducive law and order situation. uninterrupted power supply and adequate security etc. However. 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. 2009. However. ICT connectivity should not be an issue of constraint for not pursuing financial inclusion by commercial banks/RRBs. including through BCs. review of relief measures (in case of natural calamities wherever applicable) and xvii.BC. we draw your attention the following major recommendations: 5 I. Further.43/ 02.No.19. 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.10/2009-10 dated November 27. ii) SLBC convenor banks may take up impeders with the State governments as issues of road/digital connectivity.LBS. 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. issues remaining unresolved at the DCC/DLRC meetings The above list is illustrative and not exhaustive.xvi. these should not inhibit the introduction of financial inclusion initiatives. 5.CO. for ensuring banking expansion at all centres where penetration by the formal banking system is required. In this connection you may be guided by our Circular RPCD. II.HLC.based models.

policies and regulations which impact the common person. QUARTERLY PUBLIC MEETING AND GRIEVANCE REDRESSAL The Lead District Manager may convene a quarterly public meeting at various locations in the district. on their part.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. should also ensure that private sector banks are more closely involved in the Lead Bank Scheme.6 ii) The Zonal/controlling offices of banks. in coordination with banks having a presence in the area and other stakeholders to generate awareness of the various banking facilities. both while drawing up and in implementing the ACP/DCP. 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). While preparing the PLP for districts. PREPARATION OF DISTRICT CREDIT PLAN/ANNUAL CREDIT PLAN i) NABARD prepares PLPs for all the districts of the country. 83 | 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 model . 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. IV. 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. 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. NABARD should take into account the firm commitments given by the State Government/ banks/other stakeholders for the year. It may be ensured that there is little or no divergence between the PLP and the DCP/ACP. III.

Further. as soon as they are posted in a district.V. 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. 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. 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. 7 6. with supportive role of the Regional/Zonal Office. etc. 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. VI. Such sensitisation should form part of the probationary training of such officers. at periodic intervals on an ongoing basis. Yours faithfully Sd/84 | 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 Model . 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. All other instructions issued prior to this circular will continue to remain operative /effective. There is need for staff sensitisation/ training/seminars. Please acknowledge receipt. 7. LIAISON WITH STATE GOVERNMENT As the effectiveness of the Lead Banks Scheme depends on the dynamism of the District Collector and the LDM.

(Deepali Pant Joshi) Chief General Manager Encl: As above 85 | 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 model .

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