Fo­cus on gov­er­nance

Small suc­cess mod­els show how good man­age­ment can make ru­ral bank­ing prof­itable

Down to Earth - - COVER STORY -

Fi­nan­cial in­clu­sion makes good busi­ness sense for banks which have ex­em­pli­fied good gov­er­nance. “As many as 146,000 no- frills, or zero- bal­ance, ac­counts were opened in the Wardha branch of Bank of In­dia in the past two years,” says Mo­han Mashankar, lead district man­ager. It earned them de­posits of ` 13 to ` 14 crore. The additional busi­ness has come as an un­ex­pected wind­fall. “Once people have ac­cess to a bank ac­count, it is a great in­cen­tive to save sur­plus money for fu­ture use,” he adds.

Banks have started show­ing in­ter­est in lend­ing cred­its to self- help groups ( SHGs). Andhra Pradesh has built a strong link be­tween banks and women’s SHGs. Of the 8 mil­lion ru­ral SHGs in In­dia, about 1 mil­lion are in Andhra Pradesh. Since 2000, banks have dis­bursed about ` 60,000 crore to SHGs as loans. In 2013- 14 alone, more than

Our mi­cro

fi­nanc­ing model shows

that ru­ral bank­ing can

also be a prof­itable




` 12,000 crore was given to SHGs. “Of the to­tal loans given by banks to SHGs in the coun­try, at least 50 per cent is in Andhra Pradesh,” says V V Rakhu­natha Reddy, di­rec­tor, So­ci­ety For Elim­i­na­tion of Ru­ral Poverty un­der the depart­ment of ru­ral de­vel­op­ment. “This was pos­si­ble be­cause of the strong rap­port be­tween govern­ment and banks,” says C Do­raswami, gen­eral man­ager and con­venor of state-level bankers’ com­mit­tee in Andhra Bank.

Basix, a Hy­der­abad- based non- profit en­gaged in mi­cro- fi­nanc­ing, lends cred­its to SHGs and other ru­ral en­trepreneurs. “We have nearly 99 per cent re­cov­ery rate,” says Anoop Kaul, who works in the non- profit, and is for­mer gen­eral man­ager, State Bank of In­dia. This shows that with proper man­age­ment, ru­ral bank­ing can be a prof­itable busi­ness, he says.

“Banks should now fo­cus on form­ing SHGs com­pris­ing low in­come dis­ad­van­taged groups so that they are able to take their ser­vices to the ru­ral masses,” says Gopal Naik, pro­fes­sor, IIM Ben­galuru.

R L Naik, who was then man­ager of Cen­tral Bank of In­dia’s Etawah branch in Ut­tar Pradesh, says the bank earned more than ` 15 crore un­der FIP. “It hap­pened be­cause of proper man­age­ment and close mon­i­tor­ing of bank­ing cor­re­spon­dents,” he adds.

Anil Ku­mar Kale, branch man­ager at Bank of In­dia’s branch at Bhidi vil­lage in Nag­pur district, amid ex­ces­sive work­load, bank­ing cor­re­spon­dents come as a help­ing hand. “A lot of the reg­u­lar work that was be­ing done at the branches is now be­ing han­dled by them through their hand­held bio­met­ric ma­chines. A large num­ber of ben­e­fi­cia­ries of old- age pen­sions are be­ing ser­viced ex­clu­sively by bank­ing cor­re­spon­dents,” he says.

B C Kulka­rni, man­ager of De­oli branch in Nag­pur which cov­ers nine vil­lages, says the branch has opened around 3,000 additional ac­counts. “Each of these ac­counts have at least one trans­ac­tion per month in govern­ment’s sub­si­dies,” he says. “How­ever, some of the agri­cul­tural loan work, dis­burse­ment as well as re­cov­ery, is now be­ing han­dled by bank­ing cor­re­spon­dents at the vil­lage- level it­self. The end re­sult is that our work­load at the branch level has not in­creased by more than 10-15 per cent,” he adds.

Road to suc­cess

To en­cour­age bank­ing cor­re­spon­dents to work sincerely and to curb their high at­tri­tion rate, it is es­sen­tial to give them good in­cen­tives, says B A Prab­hakar, for­mer chair­per­son and man­ag­ing di­rec­tor of Andhra Bank. “They should be given re­spon­si­bil­i­ties like re­cov­ery of bad loans and mo­ti­vat­ing people to do more bank­ing trans­ac­tions,” he says. “Be­sides, banks should open cen­tres and ap­point of­fi­cers who can co­or­di­nate with the cor­re­spon­dents and re­view their per­for­mance,” he adds.

“Since there is so much work pres­sure, ev­ery bank should have a ded­i­cated staff to im­ple­ment FIP in the right spirit,” says a man­ager with re­gional ru­ral bank in Sa­gar who did not wish to be named. This apart, there is an ur­gent need to coun­sel people in ru­ral ar­eas about the ben­e­fits of main­stream fi­nan­cial sys­tem, he adds.

K C Chakrabarty, deputy gover­nor, Re­serve Bank of In­dia, says gov­er­nance deficit is the prime rea­son for the slow progress of FIP. To make the mega pro­gramme work it is im­per­a­tive to im­prove man­age­ment and ac­count­abil­ity and make the sys­tem trans - par­ent, he says.


Govind Ke­vat runs a State Bank of In­dia kiosk at De­ori in Mad­hya Pradesh

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