Pvt banks go offbeat to make inclusion effective

For instance, ICICI Bank is now using light commercial vehicles to serve many of its rural customers in Maharashtra

A decade ago, financial inclusion was merely a regulatory compulsion for most private banks in the country. But now many of them have stepped up efforts to improve the penetration of banking services, notwithstanding their disagreement over the Nachiket Mor committee’s recommendations on financial inclusion.

While private banks are expanding their reach in the hinterland, they are not solely relying on brick-and-mortar branches to serve the rural population.

India’s largest private lender, ICICI Bank, is now using light commercial vehicles to serve many of its rural customers in Maharashtra. The vehicles – equipped with a mini ATM, safe, laptops (connected to the bank’s core banking platform), and machines to count notes and detect forged cheques – cover three to four unbanked villages a day. The model, Branch on Wheels, allow the bank to serve a sizeable population in remote locations in a cost-effective manner.

“The most important aspect of financial inclusion is access. The Branch on Wheels model is in line with our idea of being closer to the customer. We plan to introduce it in Orissa and Chhattisgarh soon,” Rajiv Sabharwal, executive director of ICICI Bank, said.

Of course, the bank is also opening a large number of branches in unbanked regions. In the last 18 months, it has opened 430 branches in those geographies. Almost 75 per cent of the bank’s new branches are being opened in rural and semi-urban areas. The share of these branches in ICICI Bank’s network has improved to 51 per cent from 43 per cent in last four-and-a-half years.

Rivals HDFC Bank and Axis Bank are not far behind. HDFC Bank has opened more than 88 per cent of its new branches in 2012-13 in semi-urban and rural areas. These branches now account for 52 per cent of Axis Bank’s branch network compared to 33 per cent at the end of March, 2010.

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But even these banks are complementing their regular brick-and-mortar branches with unique facilities. HDFC Bank, for instance, is opening mini-branches (with two or three employees) that work closely with the nearest hub branch within a certain radius to ensure all its products and services are available to customers.

Technology has played a big role in allowing banks to introduce innovative offers. “We have been innovative in experimenting with different operating and technology models to assess what works and what does not. We were one of the first banks to sense the opportunity around mobile-based financial inclusion and tied-up with two of the top three telecom companies in the country,” Rajiv Anand, president of retail banking at Axis Bank, said.

While critics often say that lenders are satisfied just by opening basic savings accounts that remain mostly inoperative, bankers claim that they have now found ways to keep these accounts active. “It is true that these accounts take some time to become operative. To solve this, we have partnered state governments to open basic savings accounts. According to the agreement, all the benefits offered by the government get electronically transferred to these accounts. It has helped us in keeping these accounts active,” ICICI Bank’s Sabharwal said.

He added that the bank has seen significant improvement in account activity in the last two years. Bankers say that apart from savings accounts, a bouquet of products and services — micro insurance, cattle loans, loans to micro-enterprises — are now being offered through their rural branches.

So, what is causing this euphoria pertaining to financial inclusion? “Primarily the realisation that this business cannot scale-up in a meaningful manner under a regulatory diktat...The realisation of the sheer size of the rural business opportunity that lies untapped today (rural savings in India is 44 per cent of overall savings) is one of the main reasons for this transformation,” Axis Bank’s Anand said.

Bankers admit that to make inclusion effective financial literacy plays a key role. The out-of-the-box ideas are also being used to provide financial education in villages — comic books (in eight different languages) on good financial habits are now available at many of ICICI Bank’s rural branches.

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