Research paper
on
BRANCHLESS BANKING:
CORPORATION BANK’S ANSWER
FOR FINANCIAL INCLUSION
BY
NIDHI P R
RESEARCH FELLOW
MOTHER TERESA WOMEN’S UNIVERSITY
KODAIKANAL – 624 102
Submitted to
National seminar on
IT and Management interventions for sustainable development
At
MAR THOMA INSTITUTE OF
INFORMATION TECHNOLOGY
Financial Inclusion and the Role of IT
The Scenario –
Financial inclusion has been a focus of attention in recent times. The increase in
the number of branches has not answered the needs of the farmers and reaching the
unbanked population of the country to enable inclusive growth.
Almost 3 billion people around the world lack access to basic financial services
that have the potential to transform economies and boost livelihoods. A large part of rural
India remains unbanked.
There are more than 70% of the household who live in more than 6 lakh villages
who have no access to basic banking services and still remain unbanked or avail services
from the unorganized sector.
The concept of financial inclusion was best summed up by the Rangarajan
Committee in 2008 as “the process of ensuring access to financial services and timely and
adequate credit where needed by vulnerable groups such as weaker sections and low
income groups at an affordable cost.”
Financial inclusion is, there fore considered critical for achieving inclusive
growth. Financial inclusion addresses three major problems being faced by the rural
communities’ viz. access to
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Financial services,
Affordability of services and
The actual utilization of these services.
The Initiatives.
Corporation bank saw this as an opportunity to expand its rural outreach by
leveraging information technology for providing efficient service delivery points in a
secure and cost effective manner.
The Bank developed a totally indigenous device typically suited for the Indian
rural environment by introducing alternate communication channels and power sources to
tide over the lack of reliable infrastructure in the villages.
Technology:
The device being used is indigenously fabricated and manufactured and has four
lines of graphic display with a capacitive finger print scanner and uses RFID (Radio
Frequency Identification) Cards otherwise known as NFC (Near Field Communication)
Cards. It has a numeric keypad for the inputs and an impact printer for providing the
receipts. The Business Correspondent card stores the photograph and the other
characteristics of the Business Correspondent like name, Address etc. on the fascia of the
card and the transaction and balance details in the chip inside. The Customer Cards
contain the basic KYC (Know Your Customer) details of the customer namely name,
address and the photograph of the customer on the fascia and the chip inside contains the
account details of the customer along with the latest balance held and the fingerprints of
the customer.
The Smart Cards and the associated fingerprint of the customer provide unique,
foolproof identification of the customer without the requirement of a PIN/Password that
is required in the other customer delivery channels. The fingerprint identification ensures
non-repudiation and the solution deployed is off-line and requires only the devices for
carrying out the transactions.
There is a day begin to synchronize and download the balance on the card and the
day end would enable the settlement and creation of data files which would be used for
updating the balances in the account at the backend. The communication channel can be
either GPRS or Dial –up or CDMA depending upon the availability of the service and the
device has a lithium ion battery for backup during power outages. Corporation Bank was
the first Public Sector Bank to implement Core Banking Connecting all its business units
(Branches and Extension Counters). This enabled the Bank to post the transactions from a
single central location.
Cost :
The device is sources at Rs. 20,000/- per unit and the card costs depend upon the
capacity of the card. The Bank incurs Rs. 100/- per card including enrollment and the
Business correspondent is paid Rs. 1500/- per month towards remuneration. No service
charge is being levied from the customers for the transactions carried out by them from
the device.
Implementation:
The Bank conducts a survey of the villages by availing the services of NGOs,
Anganwadi Workers or students in a prescribed format and prepares a villagers credit
plan. The survey would provide inputs as to the number of villagers who do not have a
Bank account and ‘no-frill’ accounts are opened. The Bank has conducted and completed
the survey in 1380 village and has surveyed more than 4.20 lakh households. The Bank
does not stop with just opening of ‘no-frill’ savings Bank accounts but ensures operations
in these accounts through the use of Point of Transaction Devices.
Implementation of Branchless Banking which has been branded as “Corp
Grameen Vikas Kendra” has a two-fold advantage to the rural and semi-urban branches
because they are able to handle the increased volume of business with the existing staff,
Further, customers who were hesitant to save small sums such as Rs. 10/- ors Rs. 20/came forward to transact, as it was convenient for them to carry out these transaction
from the comfort of their villages without the rigidities of paperwork and the
compulsions of time. As the transactions are carried out using the device, there is greater
accuracy and increased security and reduced incidences of fraud
These transactions are typically low value and high volume transactions, which are
normally discouraged at the branches and in view of the literacy levels and the
infrastructure bottlenecks, it may not be viable to install ATM at these locations.
Products:
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The following services are being provided to the Smart Cardholders:
Deposits
Withdrawals
Balance Enquiry
Mini statement
Transfer of funds between Own Accounts
Loan Repayments Loan Withdrawals in Running Loan Accounts (GCC)
Recurring Deposits
Self Help Groups (Both SB and SHG Loan Accounts)
NREG Payments
SSP Payments
Conclusion:
Providing financial services to the rural people at their doorsteps provides
immense opportunities for business growth and cross selling of products and services
apart from fulfilling the national objective of Inclusive Growth.
During the financial year 2011- 12, the Bank has covered 890 villages through
Branchless Banking model to take the total number of units to 3,390 as at the end of March 2012.
The Bank has opened more than 1.65 lakh “no-frill” savings bank accounts during the year,
reaching a level of 14.26 lakh accounts with a balance of 67.49 Crore and sanctioned 23,970
General Credit Cards with an outstanding balance of 33.17 Crore. The Bank has implemented
Urban Financial Inclusion in 105 urban locations spread across 6 states and branded it as “Corp
Shahari Vitthiya Samaveshana Kendra”.
Bank has taken up Financial Inclusion Project for Self Help Groups (SHGs) in Belgaum
and Tumkur districts of Karnataka, in collaboration with an NGO, Sri Kshetra Dharmasthala
Rural Development Project (SKDRDP). The Project envisages formation of 80,000 SHG/JLGs
(Joint liability groups) and opening their accounts and also opening of approximately 6 lakh
individual members’ accounts. Financial Inclusion through Branchless Banking facility shall be
provided at about 1,350 locations. Under this Project, 32,159 Groups have been formed and the
accounts are opened. The balance outstanding in these accounts as at 31.03.2012 is `25.08 crore.
4.9.3 Implementation of Government directions: As per the High-level committee constituted by
Reserve Bank of India, all villages with a population above 2,000 should be provided with
banking facility either through brick and mortar branch or extension counter or service counter or
ICT based BC model by March 2012. Accordingly, our Bank has been allotted 332 villages by
SLBCs of various states. Bank has covered all the 332 locations (25 locations through Branch
Model and 307 locations through BC Model) well within the stipulated time.
Bank is actively participating in Electronic Benefit Transfer (EBT) Programme
in the states of Andhra Pradesh, Haryana and Karnataka. MNREGS (Mahatma Gandhi National
Rural Employment Guarantee Scheme) and SSP (Social Security Pensions) payments are being
disbursed under this programme. Bank has opened more than 7.00 lakh accounts and issued 6.5
lakh smart cards to this segment.
The Bank has an ambitious mission to extend ‘Corp Grameen Vikas’ to around
unbanked villages during the following years, which would certainly be a viable business
proposition apart from being a part of the national agenda of brining about upliftment of
the village communities leading to the overall development of the country.