- What is financial inclusion?
- Why Business Correspondents system?
- Who/What is Business correspondent?
- Who can become Business correspondent for Banks?
- Functions of Banking Business Correspondents?
- Swabhimaan
- Reforms in BC model
- BCA for Direct Cash Transfer?
- Mock questions
What is financial inclusion?
Ans.
- Giving formal banking services to poor people in urban & rural areas.
- Promoting habit of money-savings, insurance, pension-investment among poor-people.
- Help them get loans at reasonable rates from normal banks. So they donât become victims in the hands of local moneylender cum thugs.
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Why Business Correspondents system?
- If Financial inclusion means âopen bank accounts for poor people.â Then whatâs the big deal, just open a damn account!
- Not so easy. India has around 6 lakh villages. Most of them donât have bank branches.
- Ok so Why canât banks open branches in every village?
No profit
- Because Administrative costs will be high= Building rent, telephone, electricity, staff salary, security guards.
- On the other hand volume of business is very âlowâ in village areas=amount of money deposited, loans taken.
- Means there is No profit. Actually itâll lead to heavy losses.
Reluctant staff
- In many villages, there is no electricity, no good schools/drinking water, naxalite problem= Bank staff doesnât want to serve there.
- Therefore banks donât like to open branches below district HQ or Tehsil level. Now comes the problem
Hardships faced by poors
- A poor man lives in remote village.
- This man has deposited some Rs.2000 in a bank @his tehsil.
- Now, He wants to take out some money from his bank account.
- So Heâll have to make a trip for 10-20 kms =travel =time and cost.
- He is illiterate so he doesnât know how to fillup bank slips, other paperwork. He needs to ask for help here and there in the bank office.
- And most banks/post-offices donât treat poor people with respect or priority like they do with regular customers.
- So, he may have to wait for many hours, move from this table to that table, before he gets his money.
- = he cannot return to his village and do his daily job/work.
- = his one dayâs income is lost.
- Same process repeats, when this man wants loan to buy a new cow, pumpset, seeds or fertilizers.
- One the other hand, local money lenders in his village, give money quickly, without asking many questions or requiring him to fillup two dozen application forms. (but then they extract 36% compound interest from this poor man, thus making his life a living hell.)
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We canât open branches @every village, because itâs not profitable. |
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We canât make trip to nearest town to access banking facilities, because it is inconvenient. |
So, whatâs the solution?
How about a âmiddleman / agentâ between banks and the poor people?
Who/What is Business correspondent?
- Business correspondents are bank representatives.
- They help villagers to open bank accounts.
- They help villagers in banking transactions. (deposit money, take money out of savings account, loans etc.)
- The Business Correspondent carries a mobile device.
- The villager gives his thumb impression or electronic signature, and get the money.
- Business Correspondents get commission from bank for every new account opened, every transection made via them, every loan-application processed etc.
Functions of Banking Business Correspondents?
- Create awareness about savings.
- Give advice to villagers, about how to save/invest money and how to arrange/manage loans.
- Help the villagers to open bank accounts.
- Collect loan applications, forward them to bank.
- Preliminary processing of loan applications for example: verification of personâs identity, home-address etc.
- Help the Self Help Groups (SHG), to get loans.
- Help the bank to collect EMIs and recover loan money.
Swabhimaan
- Initiative by the Finance Ministry + Indian Banksâ Association
- launched in 2011
- To bridge economic gap between rural and urban India.
Objectives of Swabhimaan
- Make banking facilities available to every habitat with a population >2000 (by March 2012.)
- Banks will provide basic services like deposits, withdrawal, Kisan Credit Card (KCCs) etc via Business Correspondents (BCs) also known as Bank Saathi.
- Banks will also working together with the Unique Identification Authority of India (UIDAI) for opening new bank accounts.
- Government will send subsidies and social security benefits (pension etc.) directly to beneficiaryâs account.
- Beneficiary can withdraw the money from the Business Correspondents (BCs) in their village itself.
- Government has provided 500 million rupees to banks for taking these ^initiatives.(e.g. paying Commissions to Bank Saathi, their training cost, doing paperwork with UID.)
Reforms in BC model
- Last year Finance ministry came up with this proposal:
- India be divided into 20 clusters.
- A common BC be appointed for all public sector banks operating in that geography.
- Such a move would improve the economics of the BC model. (otherwise so many BCs, fragmentation=nobody earning decent Commission=nobody improving the service delivery.)
- Reserve Bank of India (RBI) has permitted all business correspondents (BCs) working for one particular bank, to conduct business for other banks as well.
- FINO, India’s largest Business Correspondents company
- FINO=Financial Inclusion Network and Operations (FINO).
- It is promoted by various Public and Private sector banks and insurance companies like LIC.
- Last year, FINO become the common Business Correspondents company for all public sector banks operating in Jharkhand.
Kiosk Banking
- The D.I.Y. (Do it yourself) banking services e.g. ATM, internet kiosks = still expensive.
- There is also lack of education + awareness in rural areas about such things.
- So even if Government /bank installs such automatic ATM, internet kiosks=> most of the time they just gather dust.
- Therefore, technology-based âself-serviceâ model (e.g ATM, internet kiosks) is not useful at this stage.
- And hence we need Personnel (these Business Correspondents=middlemen). Because often villagers are illiterate, so they canât even fill up the forms for opening bank accounts or loan-application or filling the deposit slips etc. Business Correspondents are essential at this stage.
- But again problem: The cost per transaction remains high. (Because Bank has to pay commission to B.C.agent.)
- Therefore, Chindu has suggested following solution for long term:
- Migrate from banking correspondent model to Kiosk banking = mobile vans fitted with ATM machines+ biometric devices.
- They’ll provide banking services in remote areas.
BCA for Direct Cash Transfer?
- In November 2012, Mohan announced Direct Cash transfer scheme. (will be covered in detail, later)
- Anyways, under Direct Cash transfer scheme, Government will directly deposit payments, subsidies, scholarships, pensions etc into the beneficiaryâs bank account.
- Sounds well and good? Well, here is the big problem
- There are about six lakh villages in India.
- And despite all these financial inclusion initiatives (of FINMIN+RBI), still only ~75,000 villages have a bank branch or business correspondent agents (BCA). So for the poor people in remaining ~525000 villages still face the problems we saw` in MNREGA payment withdrawl.
- So Direct Cash Transfer will be #EPICFAIL unless each and every village is covered under banking services.
- Therefore, recently Chindu asked the banks to have at least one bank branch or business correspondent agents (BCA) for every village or group of villages with 1,000 to 1,500 households.
- In the villages without BCA, Department of Electronics and Information Technology will install Common Service Centre (CSC).
- This CSCs will serve as the BCA.
- Right now, CSC will used only for opening new accounts of beneficiaries under the scheme for direct cash transfer.
- Only after banks install the software and complete other technical requirements for cash transactions, the CSC will allow villagers to withdraw cash from their accounts.
Side note on CSC
- Common Services Centers scheme= started in 2006.
- Aim= set up of 100,000+ (one lakh) internet enabled centers in rural areas under the National e-Governance plan (NeGP)
Mock questions
Q1. Financial inclusion involves
- Covering rural poors in banking net.
- Covering urban poors in banking net.
- Providing jobs to poor people.
- Providing vocational training to poor people.
- Spreading banking awareness among poor people.
Ans.choices
- Only 1, 3 and 5
- Only 1,2 and 5
- Only 3 and 4.
- All of them
Q2. Find incorrect statements about âSwabhimaanâ scheme
- It was launched by the Ministry of Social justice in 2009.
- It aims to provide insurance coverage to laborers in unorganized sector.
- It aims to provide financial inclusion to people residing in remote areas of India.
Ans
- Only 3
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
Q3. Who among the following, is/are eligible to become Business correspondents for banks?
- Post office
- Panchayats
- NGO and Insurance Agents
- Self Help Groups (SHG)
Ans
- Only 1 and 2
- Only 2 and 4
- Only 2 and 3
- All of them.
Descriptive Questions
- Swabhimaan (5m)
- Swavalamban (5m)
- Common Services Centers scheme (5m)
- Write a note on National E-governance Plan (NeGP) (10m)
- Define Financial inclusion. Discuss the initiatives taken to achieve financial inclusion. (15m)
Interview
- Apart from what is already being done, what new initiatives should be taken to achieve 100% financial inclusion?
I open a CSP please help.
Sr.help me Punjab national bank BC point lena hae
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mai pnb ka csp Lena chahta hu. west champaran ka contact no. chahiye
Economic material in hindi
I am bc for odisha gramya bank. Bc salary minimum wages. Pay for month
sir i get IIBF business correspondent pass mark so please any one job for IIBF related .
Already worked in INDIAN GRAMEEN SERVICE (IGS) for 1 year.so i request please provide me IIBF related work
Dear sir, I want to open csp in khagaria bihar.. Pin 85/12/14.. My contact number – 8539071752, 9110994564
I want to open uco bank csp please help me
sir mujhe kiosk bank lena hai kya mujhe mil sakta hai jo ki mere gao se bank 9 km duri me
I want to be BCA of Central Bank of India
SIR MUJHE CENTRAL BANK OF INDIA YA BOI KA CSO LENA HAI
BOI ka CSP Madhya Pradesh ya Jharkhand mey lene ke liye consult karein.