The Reserve Bank of India (RBI’s) Governor Duvvuri Subbarao today said that there is a disappointingly large number of cases of bank branches with low customer footfalls. The Business Correspondent (BCs) will drift off after a few months and ‘no frills accounts’ which remain largely inoperative.
In his oration speech as part of Indian Overseas Bank’s Platinum Jubilee celebrations at Chennai on Wednesday Duvvuri Subbarao, Governor, Reserve Bank of India said that Banks should look upon Financial Inclusion not as an obligation but as an opportunity to build fortune at the bottom of the pyramid.
He added that one of the issues that comes up in financial inclusion is the deployment of BCs. Since the operation of a brick and mortar branch is expensive, banks have found the BC model to be a cost-effective way of expanding access to the formal financial sector.
“One of the challenges lies in moving beyond numbers and looking at how we actually make a difference. There is a disappointingly large number of cases of bank branches with low customer footfalls; BCs will drift off after a few months and ‘no frills accounts’ which remain largely inoperative”.
This is where issues of perception come in. Unless banks are convinced that reaching out to the common man is not just a forced regulatory imperative but a potential business opportunity, the numbers will remain without life. The Reserve Bank looks forward to competition among banks to develop business models for such small, low staff and low cost branches, said Subbarao.
Latest figures indicate that there are over 110,000 BCs deployed across the country as of now. Benefitting from accumulated experience, the Reserve Bank has liberalised the eligibility norms for appointment as BCs by including retired employees, kirana shops, NGOs, societies, post offices, Section 25 companies and also large corporates who have a marketing penetration.
“Recently, we have allowed interoperability of BCs to enable remittance and electronic benefit transfers. Even as the BC model has consolidated by now, two caveats are in order. First, banks should not neglect the importance of brick and mortar branches, and in their financial inclusion plans, should maintain a fair ratio between brick and mortar branches and BCs. Indeed, I think there is a strong case for a much larger effort on innovating a cost effective village branch model. Second, it is important that all BCs are trained in the use of technology, knowledge of bank products and processes, and importantly, in customer service," the Governor said.