Bankers in Punjab are contemplating to widen the scope of the Banking Correspondent(BC) model to make it viable and reach out to unbanked villages having a population of less than 2000 before March 2015.
Bankers are mulling that rather than restricting the BC as a tellar for banks, it should be deployed as a feasible instrument for increasing financial services outreach by way of promotion of Self Help Groups (SHG), Joint Liability Groups (JLG) and getting them credit linked with banks. The process will help in acquiring new clients and business expansion for the banks.
Currently, BC is a person appointed by a bank who acts as a teller for it, carries out a range of transactions on its behalf, and is paid commissions for the services provided. The BC model of banking is being tested as a way to incorporate the unbanked into mainstream financial services. The model was conceived for promoting accessible branchless banking and the financial inclusion of a country’s poorest citizens.
According to bankers, though BCs have been entrusted with the task of making financial inclusion a reality, the financial viability of the model has emerged as a concern. Sources said the BC model is a cost- and people-intensive model which requires high investment in technology and capacity building, which makes it difficult to create a financially sustainable business model. They added that the current compensation structure does not cover the costs involved in staff salaries and training.
Considering these hiccups, Gauri Shanker, executive director, Punjab National Bank, suggested during the state level Bankers Committee meet in Chandigarh that the scope of the BCs should be widened to make the model viable.
“The BCs should be given additional tasks like promoting SHGs, JLGs by getting them credit linked in client acquisition. They can also do recovery for the banks to give them an opportunity and make the model sustainable,” he added.
According to the SLBC (State Level Banker’s Committee) data, out of the 10,132 unbanked villages in Punjab, banking services have been provided to 6,150 villages up to March 31, 2014.
During the recently held SLBC meet in Chandigarh, it was decided that all the unbanked villages in Punjab would be covered by March 2015 to implement financial inclusion plan. Depending upon the viability, the banks might open full fledged branches, ultra small branches, brick and mortar branches, or appoint Business Correspondent Agents.
Punjab has 5,941 bank branches of different banks including commercial, regional, rural banks, cooperative banks with others as on December 2013, out of which, 2,726 are in rural areas.