IDFC Bank aims to tap govt's subsidy pipeline

Bharat Banking tying up with states for vaious schemes and to provide microfinancing

With a focus on mass rural market, IDFC Bank’s Bharat Banking division is eyeing government business such as disbursal of subsidy and scholarships in a big way. It has started tying up with state governments for various schemes and is also looking to provide microfinancing.

Ravi Shankar, head-Bharat Banking, told Business Standard that IDFC Bank has partnered with Andhra Pradesh government in the Krishna district for direct benefits transfer (DBT) through Aadhaar-enabled payment system (AEPS). Besides, the bank would look at microfinancing schemes for purchase of motorcycles, equipment and even low-cost housing.

Business in Andhra

The Andhra Pradesh government initiated DBT from May 1, starting with social security pension. It would be extended to other government entitlements and finally to the public distribution system (PDS), making PDS payments cashless Shankar said the bank uses interoperable micro ATMs that enhance last-mile financial access through digitisation. The micro ATM functions like a “bank-in-a-box”.

The first interoperable social security pension was drawn through an IDFC Bank AEPS micro ATM on May 1 at Ganapavaram, Mylavaram mandal, in the Krishna district.

Nearly 32,000 pensioners will be using the IDFC Bank micro ATM infrastructure to access their benefits in the coming days. The bank estimates over time, the concentrated coverage of banking services would touch the lives of 4.6 million citizens in Krishna district alone.

The bank’s micro ATM is owned and operated by women members of self-help groups approved for financial support by the government of Andhra Pradesh. This is helping promote entrepreneurship in the district, the bank said.

The micro ATM agent would cater to customers at panchayat offices (in the first few days of every month) and later from their respective residences/work areas. These micro ATMs offer all basic banking services to customers of any bank including deposits, withdrawals and transfers.

In the Krishna district, people can draw their entitlements in their neighbourhood itself, by transacting on any of the 500 micro ATMs deployed by IDFC Bank across villages.

The full package of fund disbursal under the government such as MGNREGA, pension, scholarships and cashless PDS would also be carried to other districts, Shankar said. He said IDFC Bank’s Bharat Banking branches would be set up in semi-urban and rural areas. “They have a catchment areas of 25-30 km. We have a vision of creating large low-cost banking infrastructure.”

He said their business model was different from banks. “It is an outreach model. Officers reach out to customers and offer services at doorsteps. We are closer to microfinance organisations. Besides, we also offer customised savings product to people. We layer it with new technology.” Some 35 such branches have already been set up in around nine districts of Madhya Pradesh. It has started building a network in Uttar Pradesh and Karnataka, where it has 10 branches.

Micro ATMs work like tablets which have applications developed internally and have biometrics and a printer attached to them. They are available at fixed outlets which could be kirana stores where the shop owner is the operator. The applications loaded on it allow deposit and withdrawal facility and service request. The retailer has a current account with the bank. He dispenses and accepts cash even as the customer does not need to have an account with IDFC Bank.

The micro ATMs also provide instant account opening and activation, working on multiple identifiers, including Aadhaar-based authentication, mobile numbers, debit cards and bank account numbers.