'Banking connectivity surges with BC mode'

Connectivity achieved through Business Correspondent and other alternate channels

Banking connectivity has jumped from about 67,000 villages in March 2010 to 211,000 villages in December 2012. The country has about 600,000 villages.

The rise was largely achieved through business correspondents (BCs) and other alternative channels, not so much through the branch model, Reserve Bank of India data showed.

The data was shared by Deepali Pant Joshi, executive director, RBI, in a presentation at the International Summit on Skill Development in New Delhi yesterday.   

RBI is expected to issue new banking licences this financial year. The primary reason for new licences is  more financial inclusion. The central bank’s condition is that the new bank should open 25 per cent of its branches in hitherto unbanked rural areas.

Banks opened only 4,323 branches in unbanked villages between April 2011 and December 2012.  They didn’t open a single branch in unbanked villages in 2010-11. However, they appointed 46,628 BCs that year. The number of Bcs increased nearly three- fold between March 2010 and December 2012, from about 34,500 to 152,000.

However, a senior banker says: “In the BC model, the bank faces high attrition, as they leave the job for better prospects.”    

The recent government decision of direct benefit transfer linked to Aadhaar cards is heavily dependent on accessibility of banking services to people, especially in rural areas.

Joshi’s presentation noted there were issues about how to provide banking services to villages with a low population, ensuring the viability. Therefore, there was a need to evolve an appropriate business model and efficient delivery mechanism in these villages.

Coordination on a national level is required between all stakeholders –- banks, governments, civil society and non-government bodies to achieve financial inclusion, Joshi said in her presentation.

In the first phase of financial inclusion, the thrust was on covering villages above a population of 2,000. This has shifted to villages having a population below 2,000.

RBI has also asked banks to finalise their financial inclusion plans for the years 2013-16 and said it should be integrated with the business plan of the bank.