Sreelatha Menon: The colour of money

Financial inclusion in Madhya Pradesh helps the Centre's cash transfer projects

It may not take a century for villages in India to get banks, and villagers to own accounts.

Madhya Pradesh is paving the way for financial inclusion. The state is suddenly full of excitement about what it considers is a feat. Its rural development department has hired publicity agents to spread the word that every villager in the state would have an account by August 15. This is the result of a change in strategy, according to the officials of the state government.

Perhaps it is also due to the change in the purpose of bank accounts. For, accounts are turning into channels for transfer of social security benefits.

The change in strategy is from an approach based on population to one based on distance. Earlier, the target was to have a branch for every group of 2,000 people. Having failed in accomplishing that, the state government looked at the option of having a branch every five kms.

So, the state underwent an elaborate process of mapping its villages to find out those outside the reach of any bank or post office. The mapping was done for 7,200 post offices, 3,200 nationalised banks, as well as regional rural banks and cooperative banks. The shadow areas where none of these existed were mapped. About 14,766 villages of 53,121 villages were identified as shadow zones that needed immediate help.

Now 4,100 ultra small banks are in process of being opened by August 15.

The change in approach means there would be a service area branch where post offices and panchayats can have accounts. The service area branch would get funds from the district local banks through electronic clearing service or other mechanisms. That would reduce the delay in payments. Most interior villages would get what are called ultra small branches, which have only a business correspondent or a bank employee.

Aruna Sharma, rural development secretary, said post offices and banks were happy with the arrangement as funds for government schemes, such as the National Rural Employment Guarantee Act, make up almost 80 per cent of their funds.

Now, for the change of purpose: People in Jasalpur village in Hoshangabad district have been recent beneficiaries.

An ultra small branch of Central Bank of India is now running in Panchayat Bhawan. Account holders include farmer Gorishanker Katre, Aaaganwadi worker Sushma Singh who used to travel to Hoshangabad to get her monthly honorarium earlier, and Dhan Singh who comes for his disability pension. The bank is manned by a young girl named Sangeeta Chouhan.

Besides, Jasalpur is going to be a part of another paradigm shift. Hoshangabad and Khandwa are scheduled to be the site for piloting cash transfer in the public distribution system (PDS). But cash as a substitute for food faces a problem. While bank accounts would help individuals, food is meant for families.

How does money transferred under PDS to the head of the family ensure women as well as children or dependants are also benefited?

Sharma says that is a concern. And, maybe the answer could be in women as the head of the family under PDS. But, before these answers are found, the government is all set to make the most of its universal reach in financial inclusion.

In fact, the cash transfer planned under PDS is also a reversal of a decision earlier to link PDS to smart cards, food coupons and UID (unique identification). These have been shelved for now in favour of cash transfer.

“The demand for food is limited. People want more than food. So, perhaps cash will help,” adds Sharma.