Public sector banks (PSBs) have come together to form a new company in an attempt to take banking services to the doorsteps of their customers as they battle the challenges posed by the Covid 19 pandemic.
The new company called PSB Alliance Pvt Ltd will engage banking correspondents on behalf of the 12 public sector banks under a common standard operating precedure (SoP) to provide financial and non financial services directly to customer homes.
Former State Bank of India (SBI) chief general manager and deputy CEO of Reliance Jio Payments Bank, Rajinder Mirakhur has been appointed as CEO of the new company.
“Currrently, different PSBs engage different banking correspondents (BCs) for their doorstep banking services. With this company we are hoping to provide resources which can be used by all PSBs at a low cost,” Mirakhur told ET.
Currently eleven non financial services like pick up of cheques, request for an account statement, request for income tax documents like TDS certificates, delivery of payorders etc can done through this facility. Customers can also request a digital life certificate. Cash withdrawal is the only financial service currently provided. PSB customers can request the services through the web, mobile app or phone after an OTP based verification process.
Customers will have to pay a fee of about Rs 88 per service including GST. A part of this fee will go to the vendor providing the service and rest to the bank.
“We are still finalising the model to scale up. We can either hire different BCs and use their technology and manpower or create our own application to be used pan India by all BCs servicing PSBs which will create standardisation and ensure all can plug into the system, which is more feasible,” Mirakhur said.
Two service providers, Atyati Technologies and Integra Microsystem have already been hired by PSB Alliance as service providers.
PSB Alliance has a capital base of Rs 14 crore and has emerged out of another PSB promoted company Cordex India which was formed in 2010 to study operational risk in banks. The articles of association of Cordex were changed to include door step banking services on 29 April when it received approval from the registrar of companies as PSB Alliance.
Besides public sector banks, two private sector lenders IDBI Bank and ICICI Bank were also shareholders in Cordex but will surrender their stake in favour of PSBs.
“This entity is now one promoted by PSBs but all individually hold less than 10%. Each PSB has deputy one person as employee of this company right now and we will see how much personnel we need going forward,” Mirakhur said.
Bankers said the model provides banks with various benefits besides cost savings.
“It gives us economies of scale, collective bargaining and polling of resources. But most of all it gives us a collective knowledge pool which will help us to benefit from each others experiences,” said Rajkiran Rai, MD at Union Bank of India.
Bankers are hoping that by providing some services at homes they can wean away customers from branches which will help reduce the risk of spreading infections and free staff from routine work to focus on revenue earning opportunities.
The Uttar Pradesh State Rural Livelihood Mission (UPSRLM) has engaged Manipal Technologies Limited (MTL) to train and onboard 8,000 women from self-help groups (SHGs) as banking correspondent (BC) Sakhis.
A company statement said on Sunday that this project is part of UPSRLM’s mission to train and onboard around 58,000 rural women as BC Sakhis or banking agents across 75 districts of the state. Of the 58,000 BC Sakhis, 8,000 will be trained and onboarded by MTL.
MTL signed the agreement with the UP Government in the presence of Rajendra Pratap Singh, UP Minister for Rural Development, recently.
Quoting Rajesh Shet, Vice-President of MTL, it said: “Our secure and easy-to-use technology solution will now support the rural women in UP to deliver several banking services as well as demonstrate their entrepreneur skills to a larger society. BC Sakhis will be the change-agent to deploy the use of digital payments in rural India and offer several new services at the doorsteps”.
Rural livelihood mission initiative
Under this rural livelihood mission initiative, each BC Sakhi will receive financial support of ₹24,000 for the first six months. The BC Sakhi will be provided specific training along with an integrated PoS (point-of-sale) device, cash box, fake-currency detector device, etc. to deliver seamless banking services in her village. To maintain safety and hygiene during the current pandemic, a contactless iris scanner for customer authentication will also be provided, he said.
Shet told BusinessLine that MTL had branded its technology solution as ‘Sahi Pay’ where it has brought banking, payments and some value-added services such as ticketing, electricity bill payment, etc., together.
The Government’s initiative is a big step towards empowering local women to provide banking and other digital payment services in village panchayat so that villagers do not need to travel long distances to access basic banking and payment services, he added.
Over the past six years, India has made significant strides in widening the scale and impact of its financial inclusion efforts. Owing to the Government of India’s initiative to provide a bank account to every household, under the Pradhan Mantri Jan Dhan Yojana (PMJDY),an estimated 80% of Indians presently own a bank account .
But while ownership of Jan Dhan accounts improved remarkably (from 35% in 2011 to 80% in 2017), usage of these accounts continues to remain low. To increase engagement with Jan Dhan’s vast customer base, banks must focus on increasing awareness, reaching out to them via relevant communication and distribution channels, but most importantly, they must acknowledge the potential of women customers as the key lever to household financial empowerment and prosperity.
Low-income women customers are among the most important segment as they form a majority (nearly 55%) of the entire Jan Dhan portfolio . But according to Findex 2017only 33%of women actively use their accounts. This is also because many financial products simply don’t work for women. In the absence of disaggregated data, institutions don’t often realize that women have unique needs and gender neutral policies may be limited in providing solutions tailored to their needs.
Relooking at the financial inclusion agenda with a gender lens has the power to accelerate India’s banking sector’s efforts towards the objective. Data proves that when products are created with women’s specific needs in mind, men are just as or even more interested .Data also shows that any inclusion effort that focuses on women results in better conditions for children, household nutrition, and for the larger community . Women’s increased control over household finances leads to more investment in children and has a positive impact on economic growth. Overall, full, and sustainable financial inclusion of women could have a great impact on the reduction of both poverty and income inequality levels.
How banks can embed a gender focus across financial inclusion efforts
To start with, India’s banking sector needs to understand the unique needs and preferences of its Jan Dhan women customers and design for them. To engage women, banks need to understand their barriers and provide women reasons to proactively engage with the bank. For example, women regularly save small amounts of money, but use informal methods due to habit and convenience. Similarly, a pilot with a large public sector bank found that the promise of an overdraft (linked to small frequent savings) acted as a strong motivator to nudge this behaviour change .
But to understand these differences, it is important for financial service providers to collect and act on sex-disaggregated data in order to understand women customers, and their unique needs, better. Going a step further, regulators can play a crucial role by encouraging, or if needed mandating, sex-disaggregated data collection and usage by FSPs and policymakers.
Secondly, it is important to develop an outreach strategy for the Jan Dhan women customer base that increases their awareness of account benefits and welcomes her. Women customers need to understand how using their Jan Dhan account can benefit them; they need to see the value in changing their established habits of using informal banking methods. Women also find banks unfamiliar and perceive them not be relevant for their small savings. Awareness of savings benefits, low cost micro-insurance, access to overdraft, etc.in the Jan Dhan account is also low among women customers. One of the biggest challenges for the banking sector is to be able to reach women customers directly and through usage of alternate channels. This makes SMS, WhatsApp videos, word of mouth, local community influencers even more important. A sector wide awareness drive supported by government could go a long way in addressing these awareness gaps and provide a boost to financial inclusion.
Finally, India’s banking sector needs to nurture Banking Correspondents as strategic channel partners to deepen the engagement with the Jan Dhan customer base–especially with women. Women prefer transacting at local Banking Correspondent (BC) points because of either proximity or because they trust them .Furthermore, women BCs are natural relationship managers and are better able to deepen banking engagement. In addition, even though 55% of the customer base is female, less than 10% of BCs are women. Banks need to transform this last mile channel into relationship managers who can nudge customers to start small savings in their accounts and cross-sell products that address their needs. Creating a cadre of women banking correspondents will help banks deepen customer engagement beyond transactions and improve the engagement rates of their women customer base.
The road ahead
The Government of India is steadily leading the way for banks to address financial inclusion with a deliberate gender focus. In a revolutionary move announced in March 2020,itundertook a Direct Benefit Transfer (DBT) of INR 500 per month for three months (April2020 to June 2020) targeting women customers under the Pradhan Mantri Garib Kalyan Yojana. The objective of the government was to bolster financial security to the most vulnerable sections of Indian society – low-income women – as payments to women customers further ensures that the money is used for basic household needs5.
As we enter 2021, there is tremendous opportunity for banks to take these efforts beyond mere government cash benefits and embed a gender specific approach to address the needs of the 225 million women Jan Dhan customer base. Building women’s leadership in regulatory organizations is equally important to ensure representation for the cause at senior level and enable a favourable environment at the intersection of leadership development and women’s financial inclusion.
Pallavi Madhok, Senior Solutions Specialist and Ajit Agarwal, Product Manager, Advisory Services at Women’s World Banking)
(The blog has been authored by Pallavi Madhok, Senior Solutions Specialist and Ajit Agarwal, Product Manager, Advisory Services at Women’s World Banking)
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