The govern­ment’s much-hyped Di­rect Ben­e­fit Trans­fer pro­gramme has hit a road­block. Banks have failed to meet the huge de­mand for open­ing ac­counts for wel­fare cash trans­fer. This threat­ens to de­rail the wel­fare de­liv­ery pro­gramme and the coun­try’s mega pla

Down to Earth - - CONTENTS -

In­dia wants ev­ery cit­i­zen to have a bank ac­count by 2016 so that they can di­rectly re­ceive wel­fare money. But banks are slow to reach out to the mil­lions still out­side the bank­ing sys­tem

Barkoti Kalan has still not re­cov­ered from the freak hail­storm that wiped out many hectares of stand­ing crop in north­ern and cen­tral In­dia in March. The vil­lage is some 55 kilo­me­tres from Sa­gar district in Mad­hya Pradesh, one of the worst-hit states. People here are wit­ness­ing a fi­nan­cial cri­sis like never be­fore. But in­stead of hur­ry­ing to pre­pare the next crop, farm­ers are rush­ing to open their first bank ac­count.

Soon af­ter the nat­u­ral calamity, the state govern­ment an­nounced com­pen­sa­tion to those who lost their crop. The amount can be eas­ily trans­ferred to the vic­tims’ bank ac­counts. The Cen­tre’s much- cel­e­brated Di­rect Ben­e­fit Trans­fer ( DBT) pro­gramme prom­ises to elec­tron­i­cally trans­fer wel­fare amounts, like old age pen­sion, stu­dents’ scholarships and even daily wages un­der the Ma­hatma Gandhi Na­tional Ru­ral Em­ploy­ment Guar­an­tee Scheme ( MGNREGS), in people’s bank ac­counts.

But trans­fer of ben­e­fits is eas­ier said than done. Most people in Barkoti Kalan, like in the rest of In­dia, do not have a bank ac­count. Many vil­lages across the coun­try do not even have a bank. Cen­sus 2011 recorded that nearly 500 mil­lion people in In­dia are not in­cluded in the for­mal bank­ing sys­tem. Of these, 370 mil­lion live in ru­ral In­dia. With­out bank ac­counts, the poor, old and the needy will lose the much-needed cash.

Way back in 2008, a high level com­mit­tee headed by C Ran­gara­jan, for­mer gover­nor of the Re­serve Bank of In­dia ( RIB), rec­om­mended a com­pre­hen­sive plan to in­clude each one in the coun­try in the for­mal bank­ing sys­tem. In 2010, the Cen­tre launched the Fi­nan­cial In­clu­sion Plan ( FIP) un­der RBI’s su­per­vi­sion. Its ob­jec­tive is to make core bank­ing ser­vices ac­ces­si­ble to the low in­come and dis­ad­van­taged ru­ral pop­u­la­tion. In the first phase, that ended in March 2013, it aimed at bring­ing all vil­lages with more than 2,000 people within the for­mal bank­ing sys­tem. In the sec­ond phase, that will end in March 2016, vil­lages with less than 2,000 people will be brought un­der FIP. To sim­plify the process of open­ing a bank ac­count, govern­ment banks clos­est to these vil­lages ei­ther open a branch, set up a bank­ing kiosk, or place a bank­ing cor­re­spon­dent there. People have the ad­van­tage of open­ing ac­counts with zero bal­ance. The ac­count makes avail­ing de­vel­op­ment ben­e­fits easy. The sud­den hail­storm made the need for banks just more ur­gent.

Barkoti Kalan, how­ever, has been strug­gling to im­ple­ment FIP for the past twoand- a- half years. Dhar­men­dra Ku­mar, bank­ing cor­re­spon­dent for Cen­tral Bank of In­dia, came as the mes­sen­ger of hope. His task is to open ac­counts of 10,000 people in five pan­chay­ats. This means, if he fails to do his job, each of these people may lose govern­ment ben­e­fits.

Dhar­men­dra has a one- room of­fice ad­join­ing a gro­cery shop, a bio­met­ric ma­chine to ac­cess thumb im­pres­sions and a lap­top, a cru­cial link be­tween people and the bank. Yet, open­ing an ac­count is a dis­tant dream. Chan­drab­hushan Dubey, 25, has been meet­ing Dhar­men­dra for the past three months to get an ac­count opened. “Ear­lier, he would com­plain of elec­tric­ity prob­lem and show the dis­charged lap­top. Since seven days, the In­ter­net con­nec­tion has been weak. The lap­top has an al­most per­pet­ual dis­play on its screen say­ing ‘Re­con­nect­ing...’,” says Dubey.

Tech­no­log­i­cal glitches have slowed

Bank staff did not en­ter­tain my

hus­band when he went to open an ac­count to

keep my earn­ings there SAND­HYA KORI



down Dhar­men­dra’s work pace sub­stan­tially. “In the past seven months, I have not been able to meet the needs of people in my own vil­lage. How will I go to the re­main­ing four pan­chay­ats un­der my ju­ris­dic­tion?” he says.

Barkoti Kalan is not alone in its strug­gle. Pu­rio pan­chayat in Ranchi’s Ratu block marked the be­gin­ning of FIP in Jhark­hand. What fol­lowed was sud­den, high- level bu­reau­cratic ac­tiv­i­ties in the pan­chayat. Bank and po­lit­i­cal stal­warts kept mak­ing rounds of the vil­lage to mon­i­tor the pro­gramme’s progress. “They said a bank ac­count will curb cor­rup­tion and en­sure that com­pen­sa­tion money reaches no one but us,” says Sati Devi, daily wage labourer un­der MGNREGS. But two years later, her pass­book is blank. “I went to the bank­ing cor­re­spon­dent to get my wages, but he said my fin­ger­prints did not match the records. He told me to con­tact the base branch of Bank of In­dia. I walked 12 km to reach the bank, but got no help from there ei­ther,” she says.

In Nars­ingh­pur district in Mad­hya Pradesh, 32-year-old Sand­hya Kori is not even aware of FIP. The Dalit woman is a tai­lor by pro­fes­sion and finds it un­safe to keep her earn­ings in her thatched house. “When my hus­band went to open a bank ac­count, they did not en­ter­tain him,” she says.

De­spite DBT, dearth of banks is a prob­lem across the coun­try. As a trend, the poorer the re­gion the more se­vere the short­age. The in­con­ve­nient co­in­ci­dence is that poor ar­eas are also the re­gions where max­i­mum ben­e­fi­cia­ries live, mak­ing a need for banks more acute.

The coun­try aims to give an ac­count to ev­ery In­dian by 2016. But in the past three years, only 100 mil­lion ac­counts were opened. The coun­try is still one of the least banked coun­tries in the world. In fact, bank­ing in­fra­struc­ture in In­dia is one of the worst in the world ( see ‘ Where In­dia stands’ on p27). Ac­cord­ing to the fi­nance min­istry, for ev­ery 12,500 people there is just one bank.

Cur­rently, there are 28 Cen­trally- funded schemes un­der DBT, which cov­ers 4 mil­lion people. The govern­ment is al­ready fal­ter­ing in man­ag­ing this. How will it man­age when its four ma­jor pro­grammes— Right To Ed­u­ca­tion, MGNREGS, LPG and Na­tional So­cial As­sis­tance Pro­gramme— are in­cluded which will cover 650 mil­lion people? (see ‘Chal­lenge for In­dia’).

Bur­den on banks

Most bankers ad­mit they are not ready for FIP. “In Nars­ingh­pur, UCO Bank, Pun­jab Na­tional Bank and Ca­nara Bank have not even started ap­point­ing bank­ing cor­re­spon­dents,” says Ashok Ku­mar Chakrabarty, lead district bank man­ager. Oth­ers, who eval­u­ate the per­for­mance of their banks on the ba­sis of profit and vol­ume of busi­ness, say open­ing zero-bal­ance ac­counts is not a prof­itable propo­si­tion. Main­tain­ing ac­count reg­is­ters, pay­ing bank­ing cor­re­spon­dents and In­ter­net sup­port com­pa­nies in­volves costs. A bank spends ` 50 for open­ing one ac­count. It spends an­other ` 40 per year for man­ag­ing ac­counts, says R L Naik, lead district man­ager in Sa­gar, Cen­tral Bank of In­dia. Banks do not see its re­cov­ery.

Fur­ther, with a pa­thetic in­fra­struc­ture, banks find the huge task of reach­ing bank­ing ser­vices to the last per­son in the coun­try nearly im­pos­si­ble. When Naik joined the district branch two years ago, it had a staff of only two. “Af­ter FIP, the num­ber of clients is grow­ing steadily but the vol­ume of busi­ness has not in­creased. We are un­able to man­age it with

the limited staff,” he says. FIP makes it manda­tory for base branch man­agers to visit vil­lages and mo­ti­vate people to open ac­counts. “With the limited staff, it is im­prac­ti­cal,” he says.

Jain Bhushan, gen­eral man­ager of state level banker’s com­mit­tee, Bank of In­dia, Jhark­hand, says the big­gest chal­lenge in FIP is main­tain­ing cor­rect data that tes­ti­fies the iden­tity of a ben­e­fi­ciary. Bank­ing cor­re­spon­dents sub­mit forms and other documents at the base branch. The bank sends data, such as ad­dresses, names, fin­ger­prints and bank ac­count num­bers, to the re­spec­tive district ad­min­is­tra­tions for ver­i­fi­ca­tion. But prob­lems like mis­match in names and ad­dresses are ram­pant. Nearly, 70 per cent of the data is wrong, says Bhushan.

The prob­lem is com­pounded be­cause of fi­nan­cial il­lit­er­acy among ben­e­fi­cia­ries and bank­ing cor­re­spon­dents. Saurav Jain, as­sis­tant man­ager at the ru­ral branch of Cen­tral Bank of In­dia in Sa­gar, says ev­ery day at least five people reach the bank for open­ing their ac­counts to get re­lief for crop loss. But most al­ready have their ac­counts so the bank server re­fuses to ac­cept their data. The ben­e­fi­cia­ries give a se­ries of ex­cuses like hav­ing lost their pre­vi­ous pass­book in nat­u­ral calami­ties.

Then there are those who are never sat­is­fied that they have re­ceived cash till they get it in their hand, says Jain. They would first get their pass­book up­dated. Then they would with­draw the amount. Happy with the money, they would de­posit it back in the bank for safety. It in­creases work load of banks staffs, he says.

“Fi­nan­cial il­lit­er­acy also leads to one-sided trans­ac­tions,” says Cha­ran Singh, Re­serve Bank of In­dia chair pro­fes­sor, IIM Ben­galuru. “People use their ac­counts only to with­draw sub­sidy. They are not mo­ti­vated enough to do trans­ac­tions,” he says.

Bank­ing cor­re­spon­dents also ac­cept too

People use ac­counts only to

with­draw sub­sidy. They

are not mo­ti­vated enough to do trans­ac­tions


much of un­nec­es­sary documents from people. “Clear­ing junk data con­sumes a lot of our time,” says Bhushan.

Naik com­plains that bank­ing cor­re­spon­dents keep mak­ing phone calls ask­ing if their ac­counts have opened or not. “There is al­ready too much work­load. How do we ask our po­ten­tial cus­tomers to wait so that we can an­swer the bank­ing cor­re­spon­dent?” he asks.

Un­sus­tain­able propo­si­tion

Twenty- one- year- old K Lavanya has been work­ing for the past four years as a bank­ing cor­re­spon­dent for Andhra Bank in Kanaka­mamidi vil­lage, about 30 km from Hy­der­abad. She deals with 450 ac­counts. She starts work at 8 am. Most of the days, her work stretches till 8 in the night.

Lavanya works from home with a handy elec­tronic ma­chine given by her em­ployer, Bartron­ics In­dia Limited, IT ser­vice provider. All the ac­count hold­ers have smart cards which are in­serted in the ma­chine to ac­cess ac­count de­tails and to do trans­ac­tions. People can credit and debit up to ` 5,000 with the help of this handy ma­chine. Lavanya also dis­burses loans up to ` 25,000 and col­lects their re­pay­ments. About 40 people have recurring de­posits in “Lavanya’s Bank”.

“I have a 24-hour job. All the cus­tomers live closeby. I can­not refuse any­one even if they come in the night,” she says. For her full-time job, Lavanya gets a pit­tance ` 500 as monthly salary and 0.5 per cent com­mis­sion on ev­ery trans­ac­tion. “I can earn only up to ` 1,500 a month,” she says.

Bank­ing cor­re­spon­dents, the back­bone of FIP, have got a raw deal in the pro­gramme. Durgesh Pharkade, bank­ing cor­re­spon­dent at Manikwada branch of Bank of In­dia in Ma­ha­rash­tra’s Wardha district, says he is paid 0.5 per cent com­mis­sion on ev­ery trans­ac­tion up to ` 10,000. “For higher amounts, ` 25 is all we get per trans­ac­tion,” he says.

A bank­ing cor­re­spon­dent’s in­come varies from bank to bank, says L M Desh­mukh, who works in Bank of Ma­ha­rash­tra and is mem­ber sec­re­tary of the state- level bankers’ com­mit­tee, the nodal body for the im­ple­men­ta­tion of FIP. “Com­mis­sions vary from 0.15 per cent to 1.80 per cent. Bank of Ma­ha­rash­tra pays fixed monthly re­mu­ner­a­tion of ` 2,500,” he says.

Dhar­men­dra of Barkoti Kalan, how­ever, has not re­ceived any­thing since he joined seven months back de­spite be­ing promised ` 12 for ev­ery ac­count he got opened, ` 15 for Aad­haar seeded ac­count and 2.5 per cent com­mis­sion for ev­ery trans­ac­tion. Dhar­men­dra was ap­pointed as a bank­ing cor­re­spon­dent by MPCON, IT ser­vice provider for Cen­tral Bank of In­dia.

Tulsi Kuriy, bank­ing cor­re­spon­dent at Pu­rio pan­chayat, says he was promised monthly salary of ` 2,100 and 0.3 per cent com­mis­sion per trans­ac­tion. “I have not re­ceived a sin­gle paisa for the last two years.”

“We are ex­pected to be in the field from 8 am till 2 pm. Af­ter that, bank of­fi­cials ask us to work at the branch of­fice to pre­pare loan pro­pos­als, and vouch­ers and to up­date files. We are not paid any­thing for this,” says a bank­ing cor­re­spon­dent who did not wish to be named.

Desh­mukh says that the aver­age com­mis­sion of 0.4 per cent is not a bad bet for the bank­ing cor­re­spon­dent. But he can earn about ` 10,000 for 25 days’ work in a month only if his trans­ac­tions are worth ` 1 lakh daily. To make this pos­si­ble, govern­ment must has­ten the process of trans­fer­ring re­mu­ner­a­tive sub­si­dies on fer­tilis­ers and kerosene through di­rect ben­e­fit trans­fer. “The bulk of trans­ac­tions has to go up suf­fi­ciently to make the model sus­tain­able, and soon, be­fore too many cor­re­spon­dents lose faith and quit,” he says.

Kheriveer vil­lage in Mad­hya Pradesh’s Sa­gar district has one bank, but people have to travel five kilo­me­tres to avail bank­ing ser­vices. Rea­son: the bank­ing cor­re­spon­dent now op­er­ates out of his sta­tionery shop in the mar­ket area

Hem Raj Prasad Mishra (left) runs a kinder­garten school in Barkoti Kalan in Mad­hya Pradesh. Each time he goes to the bank kiosk to open an ac­count, the bank­ing cor­re­spon­dent’s lap­top dis­plays noth­ing more than “Re­con­nect­ing...” on its screen


K Lavanya works as a bank­ing cor­re­spon­dent from her house in Kanaka­mamidi vil­lage in Andhra Pradesh. She gets only ` 500 as monthly salary

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