The Hindu Business Line : Kodagu takes to `no frills' banking

Kodagu account
Financial Inclusion launched on August 14, 2006.
122 bank branches, belonging to 16 banks, covered in scheme.
Loans given to 1,174 people.

Mr Manohar and his wife Mrs Mamatha who openend bank account under financial inclusion in Madikeri.

Madikeri March 16. Financial inclusion scheme, in which banking services are delivered at an affordable cost to the vast sections of the disadvantaged and low-income groups, has turned out to be a resounding success in Kodagu district of Karnataka.

It was launched in Kodagu on August 14 last year. The scheme aims to bring the underprivileged, particularly in the rural segments, into the ambit of banking with the goal of helping them prosper by taking up various economic activities.

As per a survey conducted a couple of years ago by the National Sample Survey Organisation, as much as 51 per cent of the population had remained out of the ambit of banking services. The Government of India, in consultation with the Reserve Bank of India, decided on bringing all in the districts in each State under the gamut of banking services, authorising Lead Banks in each district.

Under this, activities such as opening of savings bank accounts, remittances, insurance and small credit disbursements were to be taken up. Financial inclusion is an effective tool to lift the economic conditions and standards of the poor and disadvantaged, says Mr Arun Kulkarni, Manager of the Lead bank for Kodagu, which is the Corporation Bank.

Mr Kulkarni said that in Kodagu financial inclusion should be counted as 100 per cent success. This was because, during a survey conducted by the self-help groups, the number of persons eligible for the "no frills" account in Kodagu were found to be 20,708. A "no frills" account is the one opened with a zero balance, to which credit facilities are extended without insistence on security and purpose.

But, as against the 20,708, as many as 23,407 accounts were opened in Kodagu, covering 295 villages and 71 municipal wards. The wards are spread in six urban centres, including Madikeri city. He said 122 bank branches in Kodagu, belonging to 16 different banks, had taken part in the project.

Getting loans

Loan disbursements, up to a maximum of Rs 25,000, were made to the members, amounting to a total of Rs 2.03 crore, as on February 28. Loans were given under the general credit card (GCC) scheme. As many as 3,043 persons were identified in the villages and municipal wards, of which 1,174 had availed themselves of loans. As far as the survey of households is concerned, a total of 97,829 houses were covered, Mr Kulkarni said.

The Chief Executive Officer of the Kodagu Zilla Panchayat, Mr K. Sundar Naik, agrees that financial inclusion had been a great hit in Kodagu. He had verified from his visits to remote areas such as Karike in Madikeri Taluk and Kutta in Virajpet Taluk that people had opened bank accounts.

The "no frills" account had enthused many. The loan amount, which now stood at a maximum of Rs 25,000 was alright, but for agriculture purposes, it might have to be raised later, unlike non-agriculture purposes, he said.

"The financial inclusion scheme has come as a boon to villagers in Kodagu,'' said Mr C.B. Belliappa, a farmer from Bettatur village in Madikeri Taluk. He said officers from Corporation Bank had visited his house, requesting him to open a bank account. He was told that he could avail a loan after opening the account. Mr Belliappa told Business Line that he had invested the Rs 15,000 borrowed from the bank in dairy activity. He said if the scheme was extended to all eligible villagers, they would benefit.

Mindset change

According to a survey conducted by the Indian Institute of Bank Management, a majority of the people had refrained from borrowing bank loans for several reasons. They felt that borrowing from the banks was cumbersome, or the branch is away from the village, or the rules and regulations were too complicated.

Some thought they were too poor or illiterate to be considered for bank financing. Many had felt that it was easy to secure loans from the moneylenders for they knew them well in the villages and the purpose of the loan was immaterial to the moneylender.

Financial Inclusion, reaching the financially excluded, is precisely aimed at ending this notion by bringing every eligible person into the mainstream of banking.

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