ICICI takes ultra-small route for big plans on inclusion

Move to enable bank to process transactions faster than under the BC model.

India’s largest private lender has decided to take the ultra-small route to achieve its financial inclusion ambitions. In a recent note to the finance ministry, ICICI Bank said it would set up branches with an area of 100-200 square feet in remote villages.

Two employees equipped with a laptop or a tablet computer are to run these branches for a couple of hours on specific weekdays. The working days and timings will depend on local requirements. The branches will be directly connected to the bank’s core banking solution platform, with the help of CDMA technology. That will enable the bank to process transactions faster than under the current business correspondent (BC) model.

Also, these branches will offer tailor-made financial services according to local needs apart from providing basic banking services such as cash deposits, withdrawals and fund transfers. While the technology has been tested, the bank is yet to roll out branches on a pilot basis. The bank will reduce dependence on BCs once the brick and mortar model firms up. According to sources, the bank took the step to reduce the operational and reputation risks in outsourcing banking activities. With the help of these branches, it will be able to monitor and control the activities of BCs and their agents at the ground level.

In the proposed brick and mortar model, the bank felt connectivity and currency management were major challenges. Bank sources said though the focus was on electronic transactions, there was a significant need for handling and storing physical cash at these branches. When contacted, the bank declined to comment on the development pertaining to the small branches.

The bank has a network of 2,552 branches and 7,440 ATMs. It has a stake in FINO (Financial Information Network and Operations Ltd), which provides BC services to a host of other banks, too.

So far, BCs have played a major role in extending banking services across the country. According to Reserve Bank of India data, close to 100,000 villages have access to banking services, with about 77,000 covered by 58,351 BCs employed by banks. Scheduled commercial banks aim to extend financial services to around 223,000 villages by the end of March 2012 and 350,000 by the end of March 2013.