Chakrabarty calls for routing state benefits through them

The banking correspondent model of extending services to the unbanked regions is still in an evolutionary phase, Dr K.C. Chakrabarty, Deputy Governor, Reserve Bank of India, said here on Thursday.

“We are yet to find an appropriate delivery model,” he told journalists on the sidelines of a function of Indian Overseas Bank here. The bank on Thursday opened a rural self-employment training institute and a financial literacy and credit counselling centre here.

The model was “defective to start with,” the Deputy Governor said. (When it began in 2007, only individuals could be appointed as banking correspondents and they were not supposed to work for profits.) “There are many problems: some where the handheld devices are not there, some where else the banks are not paying the BCs sufficiently,” Dr Chakrabarty said.

However, it would be wrong to denigrate the model, he said, pointing out that as of now there are 56,000 banking correspondents across the country. “True, only a part of them are functioning, but we need to find out why it works where it works and why it doesn't where it doesn't,” he said.

Correspondents must be able to generate adequate number of transactions. One way of doing this is to route all the state benefits through them, he said.

“How the BC model will evolve in future, I don't know,” Dr Chakrabarty said, adding that the eco-system of regulators, public administrators, civil society and the media must put their efforts together to achieve financial inclusion.

Mission not accomplished

Earlier, speaking at the function, Dr Chakrabarty said that opening branches in rural areas should not be taken as mission accomplished. The job is complete “only when credit is given,” he said. He wanted banks to properly document failures, so that useful lessons could be drawn from them. “In this country we are quick to celebrate success but we don't pay much attention to failures,” the Deputy Governor said.

Speaking on the occasion, Mr M. Narendra, Chairman and Managing Director, Indian Overseas, said that the institute would provide hands-on training to people. In the Nilgiris here, there is a great potential for employment in eco-tourism, he said.

Mr Narendra said that the institute would give training in areas like mobile-phone repairing. This area, in particular, has a great potential, he said, noting that all the people trained by their bank (in other districts) have been absorbed by companies like Nokia and Samsung.

Business linkage

Mr Sameer Kocchar, Chairman, Skoch Foundation, a think tank in the area of financial inclusion, told Business Line that the banking correspondent model has so far been “disastrous.” The problem fundamentally lay in that the correspondents do not have a revenue-generating business model, because they are unable to generate sufficient number of transactions. This, in turn, is not happening because there are not enough businesses for the rural poor to take up.

“Without the business linkage, the BC model would only fail,” he said. “You will only replace unskilled unemployed labour with skilled unemployed labour.”

mramesh@thehindu.co.in

(This article was published on March 2, 2012)
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