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FINANCIAL INCLUSION THROUGH BUSINESS CORRESPONDENT MODEL IN HARYANA: A CRITICAL ANALYSIS Manoj Siwach 1 and Kavita Gahlot 2 Declaration of Author: I hereby declare that the content of this research paper has been truly made by me including the title of the research paper/research article, and no serial sequence of any sentence has been copied through internet or any other source except references or some unavoidable essential or technical terms. In case of finding any patent or copy right content of any source or other author in my paper/article, I shall always be responsible for further clarification or any legal issues. For sole right content of different author or different source, which was unintentionally or intentionally used in this research paper shall immediately be removed from this journal and I shall be accountable for any further legal issues, and there will be no responsibility of Journal in any matter. If anyone has some issue related to the content of this research paper s copied or plagiarism content he/she may contact on my above mentioned email ID. Financial exclusion is lack of access to sustainable financial services, may it be savings, credit or insurance, at low cost to vulnerable sections of the society. It is proving to be a major roadblock in the path of economic growth and is the main cause of poverty. To achieve greater financial inclusion, a two prolonged approach is suggested. Financial literacy on one hand stimulates the demand side, making people aware of what they can demand, financial inclusion acts from supply side providing the financial services what people demand. It is not possible to establish bank branches in every village due to costs like building rent, telephone, electricity, security guards and staff salary etc. Another reason of this is low volume of business. But at the same time, poor villagers face the problems of time and cost due to long distance from bank branch, illiteracy and inability to understand banking process. Business Correspondent Model was presented as a solution to the above mentioned problems which serves as a mediator between financially excluded people and the banks. A Business Correspondent is a representative of the bank who provides fair and safe financial products and services through cost effective technology at affordable costs to vast sections of vulnerable and low income groups including households, enterprises, traders etc. Objectives The present paper assesses the performance of Business Correspondent Agents (BCA) model in Haryana in terms of the coverage of banking services. As the banking services have been extended to the villages through other modes as well, the paper also assesses the relative role of BCA model in extension of banking services in rural Haryana. Methodology Business Correspondent model was implemented in 2006 in Haryana. But it was 1 Associate Professor, Deptt. of Economics, CDLU, Sirsa. Email: manojsiwach70@gmail.com 2 Research Scholar, Deptt. of Economics, CDLU, Sirsa. 2
effectively implemented in 2012. There are 6841 in Haryana. In First Phase of Financial Inclusion Plan under Swabhiman Scheme, villages having a population of over 2000 were covered as on 31.03.2012. The total number of such villages covered till due date was 1838. The study assesses the performance of Business Correspondent Model in these villages only. It is based on secondary data. Sources of secondary data are RBI, NABARD reports and State Level Banking Committee (Punjab National Bank) reports of Haryana. In order to analyze the data, simple statistical techniques like average, percentage methods have been used. Results and Discussion The findings of the study have been presented under three subheads given below. I. Coverage of Banking Services through Business Correspondent Agents Financial inclusion does not mean merely opening of saving bank account but also signifies creation of awareness about banking products and its uses. In order to accomplish this, the banks have opened their Customer Service Points (CSPs) in unbanked area to cover the whole vulnerable population as permitted by RBI. To cover the villages with population over 2000, Business Correspondents have been the dominant mode as compared to other modes such as brick and mortar branches, ultra small branches and mobile van for providing banking facilities at their doorstep. This mode is cheaper and easiest way compared to other modes. Banks have appointed 1727 Business Correspondent Agents to cover 1838 villages. Almost 94 per cent villages have been served with banking facilities through BC model. Maximum number of BCs (503) was appointed by PNB with 503 followed by SBI with 214 villages. A total of 1258 villages have been covered by Public Sector Banks, while 467 and 2 villages have been covered by Private Sector and Regional Rural Banks respectively through Business correspondent Agents. In relative terms, the public sector banks have appointed Business correspondent agents in 94.30 per cent villages. Rest of the villages allotted to them (i.e. 5.70 per cent) were financially included through other modes. Private Sector Banks have appointed BCAs in 100 per cent of the villages allotted to them. Regional Rural Banks have appointed Business correspondent agents in 93.02 per cent villages allotted to them for financial inclusion. Rest of the (6.98 per cent) villages allotted to RRBs were covered by them through other modes. In this way, the business correspondent agents have major share in financial inclusion of the villages with population of more than 2000 people in Haryana. 3
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II. Coverage of Banking Services through other modes than Business Correspondent Agents The coverage of villages for financial inclusion has been very little through other modes like brick and mortar branches, ultra small branches and mobile vans as it is too costly to cover the villages through these modes. So, only 100 (5.44 per cent), 3 (0.163 per cent) and 8 (0.435 per cent) villages were covered through brick and mortar branches, ultra small branches and mobile vans respectively. So the contribution of these modes has been only 6 per cent in financial inclusion of the villages with population of more than 2000 people in Haryana. III. Role of Business Correspondent Agents in Opening Accounts under Financial Inclusion Plan 2012 In this section, it has been studied that whether or not the CSP/ BCA has enrolled at least 25 per cent of target households in the area of operation within six months of starting the activity as per RBI guidelines. To achieve the 100 per cent financial inclusion in 1838 villages, 737641 accounts have been opened. The highest numbers of accounts 321332 were opened by PNB followed by SBI with number of 51387 accounts. As individual account opening details through Business Correspondent Agents are not available, projected value of account opening details has been worked out by multiplying with percentage of villages covered through BCAs observed. It was found that maximum accounts were opened with the help of Business correspondent Agents. Public Sector Banks have opened 560060 accounts out of 593913 accounts. Private Sector Banks have opened 768 accounts out of 768 accounts. Regional Rural Banks have opened 132981 accounts out of 142960 accounts. Conclusion For achieving 100 per cent financial inclusion Banks have appointed Business Correspondents. This channel has been developed by the banks as one of the regular alternate channels to reach out to its customers. Even after establishment of this model, the last-mile connectivity is very crucial for the success. It may be concluded that although the banking is being extended rapidly to the rural areas through Business Correspondent model, still a large number of households are outside the formal banking system. 5
References NABARD (2012), Commentary on the Rangarajan Committtee Report 2008. RBI (2008) Financial Inclusion, Report of the Reserve Bank of India. SLBC (2012), Progress in Implementation of Financial Inclusion Plans of Villages having a Population of over 2000, Haryana, Report on Financial inclusion. 6
Table 1 Coverage of Banking Services through Business Correspondent Agents Sr. No. Name of Bank Total no. of villages allotted to the Bank Villages covered through BCAs Relative share of BCAs (%) 1 Punjab National Bank 511 503 98.43 2 State Bank of India 217 214 98.6 3 State Bank of Patiala 146 137 93.83 4 Central Bank of India 96 94 97.91 5 Oriental Bank of Commerce 101 90 89.1 6 Canara Bank 42 37 88.09 7 Syndicate Bank 66 37 56.06 8 Union Bank of India 31 29 93.54 9 Punjab & Sind Bank 27 27 100 10 Allahabad Bank 23 22 95.65 11 UCO Bank 21 21 100 12 Bank of India 20 19 95 13 Corporation Bank 10 10 100 14 Indian Bank 10 10 100 15 Indian Overseas Bank 4 4 100 16 Bank of Baroda 7 2 28.57 17 Bank of Maharashtra 2 2 100 Total (Public Sector Banks) 1334 1258 94.30 18 HDFC Bank 1 1 100 19 ICICI Bank 1 1 100 Total (Private Sector Banks) 2 2 100 20 HGB 268 263 98.13 21 GGB 234 204 87.17 Total (RRBs) 502 467 93.02 GRAND TOTAL 1838 1727 93.96 Source: State Level Banking Committee, Punjab National Bank, Haryana. 7
Table 2 Bank wise Coverage of Villages through other modes than Business Correspondent Agents Sr. Name of Bank Total no. Villages covered through other Relative No. of modes than BCAs share villages Brick & Ultra Mobile of Other allotted mortar small van Modes (a+b+c) to the branches branches (c) than BCAs Bank (a) (b) (%) 12 Punjab National Bank 511 8 0 0 8 1.57 13 State Bank of India 217 3 0 0 3 1.40 14 State Bank of Patiala 146 9 0 0 9 6.17 10 Oriental Bank of Commerce 101 6 0 5 11 10.9 6 Central Bank of India 96 2 0 0 2 2.09 15 Syndicate Bank 66 29 0 0 29 43.94 5 Canara Bank 42 5 0 0 5 11.99 17 Union Bank of India 31 1 1 0 2 6.46 11 Punjab & Sind Bank 27 0 0 0 0 0 1 Allahabad Bank 23 1 0 0 1 4.35 16 UCO Bank 21 0 0 0 0 0 3 Bank of India 20 1 0 0 1 5 7 Corporation Bank 10 0 0 0 0 0 8 Indian Bank 10 0 0 0 0 0 2 Bank of Baroda 7 0 2 3 5 71.43 9 Indian Overseas Bank 4 0 0 0 0 0 4 Bank of Maharashtra 2 0 0 0 0 0 Total (Public Sector 5.7 Banks) 1334 65 3 8 76 18 HDFC Bank 1 0 0 0 0 0 19 ICICI Bank 1 0 0 0 0 0 Total (Private Sector Banks) 2 0 0 0 0 0 20 HGB 268 5 0 0 5 1.87 21 GGB 234 30 0 0 30 12.83 Total (RRBs) 502 35 0 0 35 6.98 GRAND TOTAL 1838 100 3 8 111 6.04 Source: State Level Banking Committee, Punjab National Bank, Haryana. 8
Sr. No. Table 4 Role of Business Correspondent Agents in Opening of Accounts Name Villages Accounts Relative share of Account opened of allotted opened villages covered by BCAs Bank to the (A) through BCAs (%) (projected) Bank (B) (A X B) 1 Punjab National Bank 511 321332 98.43 316387 2 State Bank of India 217 51387 98.60 50668 3 State Bank of Patiala 146 53808 93.83 50488 4 Oriental Bank of Commerce 101 33234 89.10 29611 5 Central Bank of India 96 5391 97.91 5278 6 Syndicate Bank 66 27200 56.06 15248 7 Canara Bank 42 12514 88.09 11024 8 Union Bank of India 31 13324 93.54 12463 9 Punjab & Sind Bank 27 3055 100 3055 10 Allahabad Bank 23 2287 95.65 2188 11 UCO Bank 21 6240 100 6240 12 Bank of India 20 32315 95 30699 13 Corporation Bank 10 28627 100 28627 14 Indian Bank 10 2052 100 2052 15 Bank of Baroda 7 634 28.57 181 16 Indian Overseas Bank 4 250 100 250 17 Bank of Maharashtra 2 263 100 263 Total (Public Sector Banks) 1334 593913 94.30 560060 19 ICICI Bank 1 564 100 564 18 HDFC Bank 1 204 100 204 Total (Private Sector Banks) 2 768 100 768 20 HGB 268 81715 98.13 80187 21 GGB 234 61245 87.17 53387 Total (RRBs) 502 142960 93.02 132981 GRAND TOTAL 1838 737641 93.96 693087 Source: State Level Banking Committee, Punjab National Bank, Haryana. 9