Sampoorn Vittiya Samaveshan (SVS), the new financial inclusion plan to be announced by Prime Minister Narendra Modi on August 15, will have a special focus on banking correspondents (BCs) who are unable to make a living from banking transactions as most of the accounts opened in unbanked villages remain dormant, according to officials.
Over 220,000 BCs had been appointed by banks all over the country after the Reserve Bank of India (RBI) pushed this as a cost-effective way of extending banking services to the unbanked villages under the financial inclusion initiative.
"With no further income coming to them after being paid a one-time remuneration for opening individual accounts, at least 45,000 BCs completely went untraceable by the banks. Unless the job of the BCs are made somewhat viable, the whole plan of taking the banking services to the unbanked areas will not take off," a senior government official told Business Standard.
The banks are now told to engage the services of BCs in local branches so that they could earn from transactions like opening new accounts. This would also make the customers feel confident about dealing with the BCs independently after sometime.
The banks have opened 100 million no-frill rural household accounts on their own and another 80 million accounts through the banking correspondents, according to the available data. While BCs get remuneration on a per transaction basis, most of these accounts go dormant resulting in no-work-no-pay kind of a situation for them.
The banks will now have to activate the BCs by ensuring a minimum remuneration for them while pushing the rural households to do banking transactions. The opening of a second account in every rural household with an overdraft facility as proposed under the new financial inclusion plan is expected to help in this regard, according to bankers.