Redesigning financial inclusion: Feedback from earlier glitches key

ATM-enabled RuPay cards, which will come with newly opened accounts, will have an accident insurance benefit up to Rs 1 lakh

Ahead of the announcement of a financial inclusion (FI) programme from Prime Minister Narendra Modi on Independence Day, public sector bankers are working overtime to plug gaps that had hit previous such campaigns.

Preferring to call these “learning lessons”, bank executives said design for the new programme had been finalised after feedback from branch networks  and extensive consultations.

Earlier projects had problems in geographical coverage, poor remuneration to business correspondents (BCs) and in quality of coordination.

The earlier campaign had focused only on the supply side. It looked at providing a banking facility in villages of a population greater than 2,000 but the entire region was not targeted. The coverage now is to be comprehensive, with at least one account for each household not under the ambit of banking and financial services.

Also, earlier, there was lack of convergence between account opening, micro credit, insurance and pensions. This time, newly opened accounts come with an ATM-enabled RuPay card. The card will have an accident insurance benefit up to Rs 1 lakh. A Kisan Credit Card will also be provided.

Also, during previous campaigns, the remuneration to BCs was poor and also, often, delayed. (A BC is hired by a bank as its representative, usually equipped with a mobile device, who travels to where a client is to enable transactions with the device). The plan now is to pay each BC, termed “Bank Mitra”, at least Rs 5,000 a month. There will be an additional and variable component, based on transaction and activity.

Banks would also design a scheme for financing the BCs with loans to cover their working capital and transport needs, said a senior executive with a Mumbai-based state lender.

There had been challenges in making effective use of mobile BCs to reach unbanked households. A major difference with the earlier programme is in ensuring uniform coverage with fixed point Bank Mitras instead of mobile BCs covering only bigger villages. This is to help ensure most places will have access to banking services within a reasonable distance, say about five km, by August 2015. Areas facing telecom connectivity and infrastructure constraints will be covered by August 2016.

Some technology issues such as offline transactions and lock-in to a particular vendor had hampered further scalability of the campaign. Even in online accounts, the server was kept separately, preventing the account holder from operating the account from locations other than with a BC.

A senior PSB executive said the emphasis would now be on coordination to address glitches and connectivity issues in remote areas. There will be a panel of stakeholders to sort the technology issues.

In the previous avatar, the deposit accounts opened under the campaign had a very limited number of or no transactions. Financial literacy and credit counselling did not go hand in hand with the campaign. Now, it is proposed to provide basic financial literacy, including how to operate an ATM card and benefits of repayment of dues on time, during the camps to be conducted for account opening.

NEW AVATAR

• Earlier projects had problems in geographical coverage, poor remuneration to BCs and in quality of coordination
   
• There was lack of convergence between account opening, micro credit, insurance and pensions
   
• This time, newly opened accounts come with an ATM-enabled RuPay card
   
• A Kisan Credit Card will also be provided