Financial inclusion programme requires ownership in Assam

Banking facility being rolled out in rural areas of Assam by two national banks is a dream come true for many. However, slower implementation emanating from lack of ownership and awareness about the system itself is a spoiler


Samir Sachdeva | March 16, 2012

Even as the banking extension services under the financial inclusion (FI) programme provided by the state bank of India (SBI) and central bank of India (CBI) in Assam have witnessed a high uptake among the rural residents, its implementation lacks uniformity.

Under the FI programme, the banks with the help of technology service providers appointed business correspondents (BCs) in the unbanked rural areas and provided them the technology support to carry out banking transactions. In Assam, common service centres (CSCs) operators, referred to as village-level entrepreneurs (VLEs) under the national e-governance plan, have also been appointed as BCs.

The extended banking through these CSCs in rural areas of Assam has resulted in opening of 3,800 bank accounts in 18 districts but most of these enrolled bank accounts are not operational. While the BCs enrolled by the SBI are doing quite well in terms of timely enrolment of accounts and transactions, those of CBI are grossly underperforming. Zoom Connect is the technology service provider to SBI and SREI Sahaj is partner to the CBI. Both the private agencies are state centre agency (SCA) implementing the CSC scheme of the department of information technology, government of India in the state of Assam.

According to the data provided by the Assam electronics development corporation (Amtron), so far 22 CSCs, under SBI and Zoom Connect, have registered transactions to the tune of '7 lakh in assigned seven districts for 309 accounts. In contrast the 45 CSCs, under CBI and SREI, have recorded a mere transaction of '20,800. Interestingly, in case of CBI the transaction has happened in just one CSC located in Udalgiri district, out of the total assigned 12 districts, while rest of the 44 centres are yet to facilitate transactions for over 9,000 account holders.

Quite apparently, the ecosystem being created by the union ministry of finance and the Reserve Bank of India (RBI) to include the large unbanked section of the population is not working uniformly in the state. One of the key challenges in the implementation is lack of a single authority which can take the ownership of the financial inclusion drive.

For the banks, according to a senior official with CBI, pushing forward financial inclusion is an investment with little business proposition. Although he agrees this could change in future. For the state department of information technology and Amtron, financial inclusion is not even a government to citizen (G2C) service, but rather a business to consumer (B2C) service, hence it doesn’t come under their purview. For the SCAs, Zoom Connect and SREI Sahaj, it is certainly a business proposition, but in case of non-functioning of the system they have zero accountability.

Raj Kiran Rai, zonal manager for northeast region, CBI says, “We were very much occupied with the appointment of BCs and the figures for enrolment in the initial phase. Somehow, we missed keeping track of the operation of these enrolled accounts.”  However, he promptly assures, the bank will focus on the operational part from now on.

Syed Murtaza Adil, sales manager, SREI Sahaj passes the buck on the complexity involved in issuing of smart cards to CSC operators and customers by the bank (the CBI). According to Adil, “The VLEs and the applicant for bank account have to be issued a smart card from the headquarters of CBI, located in Mumbai and the process involved takes a lot of time. So far the bank has issued just four operator smart cards.”

However, in reality, the cards are issued by the technical service provider, itself. On bank’s role in the whole process, Rai clarifies, “We don’t issue any card. We just authorise the opening of bank account. The bank doesn’t manage the individual data of the business correspondents; bank just keeps a consolidated data of the total credit and debit through the BCs. The card, in fact, is issued by the service provider (SREI).” 

He also dubs SREI Sahaj as “one of the worst service provider bank ever had”, citing the lack of interest on SREI Sahaj’s part in pushing forward the financial inclusion drive. Out of 45 BCs, informs Rai, operator cards have been issued for just six of them. And out of this only one has been activated. The demand for such services is so much that the day the operator card was given to the concerned BC, 67 transactions happened the same day.

The bank also provides monthly compensation to its BCs. We are providing '5,000 per month to a BC. But the payment goes to the technical service provider and not directly to the BC, since the service provider looks after the appointment of BCs. The manager says that the bank has also partially, for almost half of the year since the transactions have started, released the monthly compensation. Here again SREI Sahaj state team denies receiving any such payment.

Between February 2011 and August 2011, Vipul Sarma, a CSC operator associated with the CBI in Darrang, enrolled 900 people for bank accounts, out of which just 83 smart cards have been issued, but even these cards are not operational. Not even a single transaction has happened so far.

Mahendra Kumar Yadav, managing director, Amtron attributes the wide difference in performance of CSCs associated with SBI and CBI’s to formers “focused” strategy for financial inclusion. “Also, a lot of payments under various social sector schemes are happening through SBI and so it has a natural edge over the CBI,” says Yadav.  However, Yadav is clueless over the complexity in the process of issuing operator’s card to the VLE and dearth of operational accounts with the CBI.

Besides, a few VLEs point at the stringent KYC (know your customer) norm followed by the local branches of CBI. “The SBI opens an account with a panchayat certificate and residential certificate or in case of its unavailability, a copy of voter list having name of the applicant. But the local CBI branch manager refuses to accept panchayat certificate as standard identification proof,” complains Vipul Sarma, another VLE associated with the CBI in Darrang.

In contrast, the accounts enrolled with SBI, doesn’t require a smart card. The bank just issues a paper ID card with a customer ID number, which is produced by the local bank branch. The enrolment process, too, is easy with SBI, since the bank has a more practical KYC norm. The CBI, on the other hand, asks for “standard” identification and residence proof.

In total, CBI has plans for appointing 150 BCs across the 150 unbanked village panchayats in rural Assam. While SREI Sahaj has been given task of creating and maintaining 45 BCs, the bank has also tied up with another service provider, Integra, which is looking after the appointment of rest of the 105 BCs. However, the BCs appointed by Integra are yet to be made operational.

The appointment for 105 BCs has been recently completed by Integra.  “Earlier, Integra was not showing much interest, but off late they have got active and after completing the appointment, it is in the process of distributing machines to all the BCs,” adds the manager.

Apparently, the availability of banking services in rural areas in Assam and in all other states is not encouraging. Access to banking is still an urban, middle class privilege, unavailable to a major section of the population. According to a Reserve Bank of India estimate (2009), only 5.2 percent of the villages have a bank branch. Most of the rural India relies on the informal financial services provided by the local moneylender or a contractor charging an extremely high interest rate.

Viewing the dissimilar pattern of implementation of financial inclusion programme across state, an agency to monitor and manage the overall implementation and operational matters and resolve stakeholder’s issues and concerns arising out of the routine business, seems an imperative.



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