Sitaram, a 72-year-old widower abandoned by his sons, lives alone and works as a daily wage labourer in a village in Gwalior district of Madhya Pradesh. He gets a pension of ₹150 a month, for which he used to travel 16 km to the nearest branch of an agricultural cooperative society.

Not any longer. Sitaram now walks just 16 yards and collects his pension from Central Bank of India’s ultra small branch, thanks to the Madhya Pradesh Government’s financial inclusion model, Samruddhi.

The scheme, which was hailed as an “excellent model of financial inclusion” by a recent evaluation report by United Nations Development Programme (UNDP), has been able to achieve a nearly 40 per cent rise in the number of bank accounts. In the past one-and-a half years since the scheme’s launch, 2,071 ultra small bank branches have been opened, with business transactions worth ₹800 crore.

The UNDP evaluation report, released on Friday by the Union Finance Secretary Sumit Bose, while appreciating the design of the model, calls for aggressive awareness campaigns to promote financial literacy as well as consumer protection.

Internet connectivity is one of the problem areas, the report pointed out. Also, the State needs to move beyond opening of bank accounts for inclusive growth, it added.

The task is challenging as the country’s second largest State has 54,903 villages, of which 50,396 were unbanked or under-banked till March 31, 2011, leading to vast economic disparities.

Samrudhhi was rolled out for transfer of direct benefits to the poor. The model stands on three pillars – a common database platform for integrating all benefit schemes, such as pensions, MGNREGA wages, scholarships etc; and electronic fund management system handled by banking correspondents and opening ultra small bank branches for last-mile connectivity. Public sector banks, post offices, regional rural banks and cooperatives are partners in the process.

Buoyed by the response and to further deepen financial inclusion, the MP government has decided to give rent-free space in each panchayat for ultra small bank branches, as also Internet connectivity, said Aruna Sharma, Additional Chief Secretary to the MP Government, adding that 3,000 ultra small banks will be opened in 14,667 unbanked villages.

However, some public sector banking partners wanted the RBI to relook at its recent direction to put in place a banking correspondent in every village. “This will be problem on the ground. We can arrange for this, but the person will soon run away,’ said a Central Bank of India official.

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