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

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2 thoughts on “Branch Banking In India : Excludes the Financially Excluded

  1. There is a lack of incentive for the bank / bank official in expediting such small transactions. If this were made easier – as simple as tack in on a slightly higher fee (Western union in US) private banks may be willing to fill the void. in servicing this market.

    • Hi AKhila:

      Thanks for the comment-appreciate you taking the time to read.Your suggestion is good and logical.However the private sector banks are not interested in ‘such’clientele. They have a certain demographic that they are catering to and this doesn’t fit the bill.The fee has to be that which the market (in this case people belonging to the lesser priviledged socio-economic strata -are able to bear).The fees that the private banks would impose, would automatically leave such people out. The other thing is that there is no stringent ‘stick’ which the RBI wields in order to make the foreign banks/private sector banks actively participate in such activities hence while there is much being said about financial exclusion there is not much being done about it by the private/foreign banks (the public sector complies because of obvious reasons).What these banks generally do is to invest a mandated amount in a fund with the RBI to comply with statutory requirements.What is needed is some active participation in making a positive difference either with the help of using the cutting edge technology or processes that these banks profess to have rather than just skimming the cream =which is pretty much what they are focused on.Thanks

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