Senior Citizens : Understanding their Banking Needs

Mrs Asha Gupta lives alone in a bungalow in Pune’s Sindh Society. She is a widow and her only child-a son is settled in the USA (working in an IT company in San Jose-California). She is 70 years old and has some health problems typical to her age.

Mrs Asha Gupta goes to the bank once a fortnight, to withdraw funds for her day-to-day requirements and once a year in order to purchase foreign exchange for her trip to the USA.There are many like her-single senior citizens living in her society and in the area.

A leading private sector bank in which she has her account, has given her a ATM Card, a complimentary credit card and have sent her letters asking her if she is interested in a reverse mortgage product that is ‘ideal’ for senior citizens who want to use their property to generate extra cash-but Mrs Gupta is not interested.

Her deceased husband was a senior government official and his pension gets credited to a pension account maintained with a public sector bank ( viz Bank of India). The investments that he had made prior to his death generate income which along with the pension is adequate for her needs. Her son also sends her money from time to time. Mrs Gupta is a Masters in History from Delhi University and has been a home maker all along.

When I met her she showed me files in which she had painstakingly filed the various mailers and promotion letters received from her bank as well as other banks who are wooing her for business.

I asked her about what a senior citizen ideally wants from a bank .

“The first thing is continuity and a customer friendly attitude’ she said. She went on to mention that the frequent turn-over of personnel in the branch breaks the continuity and disrupts the quality of service.”They assigned a young MBA graduate to my account. After three months she was gone. Then came another young chap. In two months, he had quit for a better position in a competitor bank. She rues that people like her have simple requirements like checking on the status of a transaction, asking for duplicate bank statements, getting tax certificates at the time of the financial year end. ” I have never used the credit card, since I hardly travel alone in India. In the USA, my son takes care of everything. For all my small daily purchases like groceries,vegetables etc I pay cash. Hence the credit card has become more of an admin pain than anything else.

“I wish that there would be a number or a pool of people that we could phone and get information easily at the branch level and not some impersonal 1-800 number.That way they know me and I them and incase of any queries we can sit across the table and sort it out.

She talks of the time that she was in the USA and had sent an E mail regarding a bankers cheque that had to be paid to the builder on behalf of her son. ‘The time difference made calling India quite inconvenient. I did not get any response to my e mail which was sent to the general e mail ID( for the banks customer service). Hence I had to call the branch and request assistance. They wanted a written application and not an E mail hence I had to request the branch manager to oblige me” .

She recalls the time that she got a letter from the bank asking her to fill in the account opening form etc all over again to meet KYC (know Your customer requirements). Going to the bank in an auto to submit the form in time – in the searing heat was inconvenient. She said that she didn’t post the form because she was not sure whether it would be misplaced.’It has happened to me in the past and hence I did not want to send my personal information in an envelope to a common address. Atleast I got an acknowledgement from the branch.

Lack of competitive exchange rates at the time of converting foreign inward remittances is another concern.’Whatever rate they use I don’t control and by the time I contact them, its done. Moreover they say that favorable rates are possible in case of ‘large remittances’ and hence I am only entitled to counter rates. I know that some of my other friends have got better rates in a different bank, but its not possible to manage multiple accounts for me, hence I have no choice.

Service charges is another issue. Mrs Gupta feels that senior citizens should not be charged for banking services. ‘If you see the history of the account, it is possible to see the float and the type of services utilized. These banks charge us for everything: duplicate statements, fee for converting foreign exchange, and even issuing foreign exchange .The rates at other authorized dealers are more competitive, but then again its more convenient to go to one place and hence you land up paying for that.

Customer guidance and training is another area where she feels that banks don’t take much effort in ensuring that the senior citizens are brought upto speed about the changes. “We are digital immigrants and hence are not aware of some of the changes taking place in the banking arena. Even when it comes to documentation, processes and new guidelines we hardly know what is going on’. She feels that her bank should organize periodic customer meets of senior citizens like herself so that they are able to voice concerns, queries and benefit from the collective experience.

As she spoke she showed me the ATM Card given to her by her bank. It was packed unopened and in a nice leather casing. ‘I plan to destroy this soon’ she said .

‘Home banking would be helpful if implemented in a regular way.There are times when it may not be possible for me or others like me to go the bank due to ill-health etc and during such times home banking with a human interface and not a computer would be very useful. Better still would be if banks set-up a senior citizens branch that caters exclusively to senior citizens living in that neighborhood.This would be very useful to both the parties: banks would get accounts of the senior citizens and their kith and kin while we would get a place that is better geared to serve our needs. They could have lawyers,notaries who can help with will making etc Right from account opening to health, overseas medical insurance to will making and other things can be done at one place”

Mrs Gupta is not the only one in this situation.The empty nester/single parent phenonmenon is quite common especially incase of parents /individuals whose family is employed in the IT/ITES sector.Its their simple banking requirements that they want fulfilled while banks are busy unleasing a volley of products that are technology oriented or complex for most users to follow or use.It would be useful if a ‘bottom-up’ approach is used by banks and their product development teams so that the ‘senior citizen’ account truly caters to this section of the population  and does not remain a mere namesake

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Branch Banking In India : Excludes the Financially Excluded

Anuj Kumar Singh is illiterate and works as a driver in Pune. He is a native of village Basuhar Zilla Pun-Pun District Patna (Bihar). Every month after ‘payday;, Anuj stands in serpentine queues to remit money to his parents in Bihar. His mother somehow managed to get an account opened at the Punjab and Sind Bank(PSB) and he deposits the money in any PSB branch in Pune so that it reaches his parents in time since they depend on the money to manage their expenses.Anuj has tried to get his own account opened in PSB and had even requested his friend to come along.They managed to get an account opening form and now are waiting on Anuj’s employer to help them out in filling the form and accompanying them to the bank to facilitate with the account opening process since they are unable to get anyone in the bank to help them out. “People are always busy in their work and there is no separate person for people like us”he says when asked about the reason for the delay in getting his account opened. His mother has to make several trips to the PSB-Patna branch from their village to the city in order to get the form and then for the  bank officials to okay the form and the accompanying documents. “The person was on leave when my father went to get the form. Then the second time around there was a lot of rush in the branch and so the bank person asked my father to come back again. After getting hold of the form, they had to find someone in the village who could fill it for them. Then they forgot to take their original land holding document and hence had to make a separate trip to show the same” .

PSB has cut-down on the remittance timings for non account holders. This is not unique to PSB alone,many PSU banks like SBI have restricted the hours during which non account holders can remit funds to their kith and kin who hold accounts in such banks. What effectively has happened that most banks reserve only about an hour in the morning and in the afternoon (10am-11am and 3pm-4pm) during which they accept cash deposits by non account holders for the purposes of remittance. This leads to major queues especially during 2nd to 10th of the month because people are rushing to remit funds to their family members/relatives just after getting their salaries. Serpentine queues outside PSU banks located near labor intensive areas such as IT parks, mega townships etc is a common sight since the laborers rush to remit funds to their families based in far flung villages.

The electronic options such as NEFT (National Electronic Funds Transfer) have cut down on the time taken for funds to travel between accounts.Hence in a matter of minutes, the beneficiary’s account gets the funds. This is far more convenient compared to the conventional Post Office ( Money Order) option and less expensive

But the other side is the expenditure of time and effort taken since the restriction on timings means that individuals desirous of remitting the funds have to necessarily go during the stipulated timings only- sometimes at the cost of giving up on half a day of work and income

The other practical problem is that even if any one belonging to the lesser privileged strata of the society wishes to open a savings account with any public sector bank, there is generally no-one who is interested in taking the time to help such people ( who generally may not be very literate). The very task of reading the account opening form is not do-able for the illiterate and they have to find someone outside who is willing to take the time to explain and fill the form for them. The other hurdle is the interpretation of the documents required for getting an account opened. Most migrant workers, labourers etc do not have address proofs. They typically stay on cash basis as tenants and do not have any formal rent agreements written and documented . Hence when asked for an address proof they are unable to produce anything concrete although most of them generally have some sort of ID (Drivers license, employment ID cards, PAN cards etc)

The RBI has issued guidelines expanding the itemlist that can suffice for the address proof to include a letter from the employer (see appended link)http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=6889 .However the implementation is greatly dependant upon the bank official and in most cases that initiative of helping the people belonging to the lesser privileged section is missing. Various factors contribute to this scenario if understood from the bank officials point of view : staff shortage, stiff targets which generally measure number of high value savings/current accounts opened, credit cards ,loans, lack of infrastructure ( in terms of space available in the branch) and so such cases remain unattended do.

The RBI has even set up the Ombudsman Scheme as a means to address grievances of customers ( see link for details) http://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=4158

Here, the problem is that the complaint has to be given in writing in some shape or form( a daunting task) for most lessor privileged people plus the awareness of the process and the hierarchies of escalation .Hence this section gets excluded from start to finish due to hurdles that they have to overcome at each level

There is a need for  mechanism at the branch level where a bank official in a branch is designated the task of helping and aiding in the process of financial inclusion. Private MFI’s exploited the gap that existed between getting access to mainstream banking and filled that void in a very commercial way and sometimes in a very unscrupulous way.Their growth and expansion was mainly aided due to poor controls and the need of people to get access to formal sources of credit which was not being met by the commercial banks

The ‘Why’of the Blog

Well at first because access to formal sources of banking and credit is something that is desirable irrespective of the section or social strata. No-one wants to get fleeced by a local money-lender even if he/she is illiterate however the fact of the matter is that for a needy person with no other option there is no choice.

The other fact is that commercial banks today want only a ‘limited- edition’ of the Indian cross-section. That section which is limited to metros and is educated and has the funds to park in the CASA accounts. They certainly don’t care too much about the other large half of the population. Our central bank too has been speaking about the need for financial inclusion for the longest time but not much has happened on the action front

Foreign banks and private banks are still been considered as eligible for new branch licenses although they don’t have any presence in what can be classified as the rural and semi-urban areas .Their brazen attitude of ‘for the elite only’ seems to be okay with the RBI. The nationalized banks have little choice in the matter due to the majority govt holding and are left holding and nurturing the financial inclusion idea to the best of their ability. In reality depending upon the situation most public sector branches in rural areas lack people, infrastructure and the technology to be able to cater to financial inclusion in its true sense. In fact the conventional evaluation system still uses parameters like CASA,credit cards issued,home loans etc for evaluating and rewarding the branch personnel. There is little incentive therefore (other than the pure inclination) of the individual to service the lessor  privileged section of the population.This is evidenced by the fact that only about 40% of India’s population has bank accounts and about 20% have access to insurance products.In these percentages the bulk belong to the creamy layer of the rural population-the rich farmers who are able to afford the access to bank accounts.

Microfinance can therefore bridge the gap between the ‘have-nots’ and the conventional banking system as we know it in India.However the irony is that this sector too is in doldrums at the moment largely because it was allowed to grow in an unchecked manner and mainly because of the actions of some of the private players.

Sustainable development initiatives too are important especially in the Indian context. Grassroots level initiatives that impact the lives of the larger cross-section at the bottom of the pyramid can have a larger impact compact to mega ventures that require huge investments and have long gestation periods.Howver such initiatives too require access to formal sources of credit which is an important ingredient to ensure viability

The linkage therefore is as follows: banking and financial inclusion initiatives like microfinance are important to ensure that grassroots level initiatives such as livelihood projects that ensure food and long-term livelihood security get an opportunity to access mainstream banking.This is important to ensure continuity of such initiatives and a long-term impact

The sad part is that despite much ‘educated talk’ about financial inclusion, it’s still a very big challenge for an uneducated individual to get a savings account opened in a nationalized bank (foreign banks and private sector banks in India will not entertain such customers at all!)Even getting hold of a savings account opening form requires multiple visits. Getting assistance in filling the form, guidance on the supporting documents required etc is a whole different ball game. Getting seed-capital and /or guidance to open a small business or engage in a livelihood supporting activity is virtually not possible. Banks just don’t have the time and inclination to cater to ‘such’ customers.

My experience working for a foreign bank in India was no different. While we were incentivized and generously compensated to chase the wealthy and called ‘Relationship Managers’ there was not much that the bank did in the financial inclusion area. We were told that the ‘segment’ of the population that the bank followed had certain demographic profile and that it was the banks conscious decision to cater to such a profile.

But the question is that if everyone is so busy skimming the cream-where is the residue supposed to go?

The good thing is that there are a lot of initiatives that being taken by various committed entities like NGO’s,Self Help Promoting Agencies etc that have positively impacted the lives of many people especially in rural parts of India. Most of these efforts are aimed at addressing the livelihoods issue while also linking the beneficiaries in some way to mainstream banking such that they are not exploited by local money lenders and touts.The idea is to provide a holistic solution such that the livelihood initiatives are able to ensure food and financial security of the participants

This blog is an endeavour to discuss a host of such issues and to highlight both success stories as well as areas of concern.After all needs such as food security, shelter,medical care,safety and livelihood opportunities are aspirations that are all of us want.

To quote Mahatma Gandhi’ Mother Earth has enough to provide for everyone’s need, but not to provide for everyone’s greed’.