The Hindu Business Line : Branchless banking – reaching out to remote villages

Drawing attention: Dr C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister, examining a mini-account statement printed by a small bank device during his recent visit to Surinje village in Dakshina Kannada district.

A.J. Vinayak

Mangalore, Sept. 8 As you pass through the narrow roads of Surinje village flanked by paddy fields and coconut plantations, you will come across Zulaikha and Shobha. Nothing unusual about these names — they could have as well come off a telephone directory.

But for a village, devoid of banking facilities in spite of having 400-odd houses, they are the real pillars of financial inclusion. They represent components of a branchless banking system that is emerging in rural India.

Zulaikha, a tailor in the village, says she never entered a bank in her life till now. The reason — the nearest bank branch was 8 km away from her village, and then there was the process of filling applications (challans) and waiting in queue to withdraw money.

“If I want to visit the nearest branch, I will have to spend a major portion of my day’s earning as bus charge to and fro(nearly Rs 10-12). With that, half of my day’s productivity will come down,” says Zulaikha, who also nurses her ailing mother at home.

Business correspondent

For Zulaikha, fellow villager Shobha is the banker. Shobha, a member of the local self-help group, is the Business Correspondent of Corporation Bank in Surinje village of Dakshina Kannada district. Her home serves as the extension counter of Tadambail branch, situated 8 km away from the village, providing basic banking facilities to the villagers.

The day this reporter visited the village, Zulaikha wanted to deposit a portion of her savings with the bank at Shobha’s house. After enquiring about the health of her mother, Shobha asked Zulaikha for her smart card, to be inserted in the small device kept at her house.

Unlike in the sophisticated systems, where one has to produce a PIN (personal identification number) and passwords, the customer is asked to place her left thumb at the place marked on the device. Voice guidance from the device confirms the authentication of the transaction to both the customer and the banking correspondent.

Zulaikha is happy because a portion of her savings, however small, is safe with the bank, and she can withdraw it any day at the same place.

This system is now proving to be a role model on how banking facilities can be taken to more un-banked areas in the country.

Citing his experience in the implementation of the financial inclusion programme, Mr B. Sambamurthy, Chairman and Managing Director of Corporation Bank, says that many of the no-frills accounts opened in the villages were not functioning.

The branches were situated away from the villages and most illiterate people did not want to visit the branch.

“First, you have to break the barrier of inaccessibility to banks. This (branchless banking model) is the bank by the villagers for the villagers. My bank wanted to give them trust and confidence. We did not give them passwords and ATM cards. We gave them a biometric system. Here we want to keep the cost low and break that access barrier. If those two things happen, we will have wonderful transactions,” he says.

Challenges

The challenge for the bank was to take the more sophisticated technology to unsophisticated areas, as most of the rural areas are short of power and telephone connectivity. Added to this, the rural populace is not familiar with complicated machine operations.

So banks took into consideration factors such as the simplicity and ruggedness of the device, ease of operation, and security.

“For six-seven months my team worked very hard. So many things did not succeed. Either the biometric or the computer did not work. It was all like Einstein’s machine. We don’t have a textbook to implement the programme. It is purely a trial and error experiment,” he says.

When Mr Sambamurthy’s attention was drawn towards this reporter’s experience at Surinje village, he said: “Probably the lady whom you met is undertaking the most sophisticated paperless banking, as even you and I don’t have smart cards.”

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