Inclusive Growth For Financial Independence - B A Prabhakar, CMD, Andhra Bank

The growth story of India is fascinating as the economy unfolds its vast presence of human and natural resources to the world. India is the second most populous country of the globe with a population of 1.21 billion and has become the destination for quality workforce and a potential market place for domestic and multinational companies. Today, India is one of the fastest growing economies amidst global uncertainties. Nonetheless, it is pertinent to note that the growth is not uniform and inclusive, which is causing aberrations to the desired economic development process.

The vast unorganised sector comprising farmers, landless labourers, micro, small and medium enterprises etc., have limited access to affordable banking services, which is believed to be acting as one of the major constraints to the growth of the country. 

The major reasons, on the demand side, for the exclusion of this vast majority of the population from formal banking are low literacy coupled with scant financial literacy, low income, absence of collateral/assets and social exclusion. The supply side factors are distance, costs, timings, complicated procedures, sub-optimal attitude of staff and offering of inappropriate products, etc.

Andhra Bank: Contributing To All-Round Growth

Andhra Bank, an offshoot of the nationalist movement, was established in 1923 by the great freedom fighter and visionary Dr Bhogaraju Pattabhi Sitaramayya. The founder believed that “political freedom would mean nothing if not combined with financial independence”. The bank has transformed from a small local bank to a leading public sector bank of the country. 

Over the years, the bank has progressed rapidly and has spread its wings with 1867 branches pan India. A majority of these branches are located in rural and semi-urban areas and have been extending support to the rural community for their integrated development by adopting various credit programmes. The performance highlights of the bank with regards to the Priority Sector for the year 2012-13 are as under:

Andhra Bank has initiated several steps to extend banking facilities to the financially excluded with a special focus on the weaker sections. The bank has been associating actively in the implementation of various programmes for all-round rural development. These include:

a) Lead Bank: Andhra Bank was assigned with lead bank responsibilities in the four districts of Andhra Pradesh viz. Srikakulam, East Godavari, West Godavari and Guntur. Subsequently two more districts viz., Ganjam and Gajapathi in Odisha were added, taking the total number to six.

b) Farmers’ Service Co-operative Societies (FSCS): The bank was a part of FSCS as a special agency with a view to blend the business acumen and experience of commercial banks with co-operative societies in providing varied services to rural people at a single point. The societies are functioning under the elected body and the Managing Director of the society is on deputation from our bank. At present, there are seven FSCSs catering to the financial needs of 117 villages covering more than 34000 members. FSCS accept deposits from the members and extend loans to the members. The FSCS assumes the total responsibility for agricultural/rural development of all its members’, particularly small and marginal farmers and artisans at a single point. The societies also undertake non-credit business activities such as trading of produce, fertilisers, pesticides, seeds etc.

c) Regional Rural Banks (RRB): In order to provide banking services to rural people, Andhra Bank established RRBs in Andhra Pradesh and Odisha. Subsequent to mergers, Andhra Bank now has only one RRB i.e. Chaitanya Godavari Grameena Bank (CGGB), operating with 128 branches spread in the East Godavari, West Godavari and Guntur districts of Andhra Pradesh state.

d) Self Help Group Linkage (SHG): Andhra Bank is at the forefront in implementation of SHG Bank Linkage programmes and is always ahead of other banks since the inception of the scheme (1992). The bank has covered 2.27 lakh groups across the country with an outstanding credit of Rs 3395 crore as on 31.03.2013.

e) Andhra Bank Rural Development Trust (ABRDT): ABRDT was set up by the bank, with an aim to participate in the process of rural development through a multi dimensional approach to attain sustainable rural development in its operational area. At present, 11 Rural Self Employment Training Institutes (RSETIs) are providing entrepreneurial development training to educated unemployed youth at no cost, besides extending the required guidance to the trained candidates to avail financial assistance from banks. So far, more than 1.17 lakh candidates are trained in various activities of economic importance and around two-third of the trainees are settled in gainful employment.  The efforts of our Rajahmundry Institute are well recognised by the Ministry of Rural Development, Government of India and adjudged the ‘Best RSETI in the Country’ for the year 2011-12.
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Besides the above initiatives, the bank has been paying focused thrust to provide basic banking services to the needy people residing in the bank’s command area through the following steps:

i) No-Frills Accounts: In order to provide banking services to the common man, branches are advised to open bank accounts by adopting simplified KYC norms. The number of accounts opened by the branches under this category has crossed 42.20 lakh. The initiative has enabled the bank branches to build strong relationships with customers and paving the way to achieve financial inclusion.

ii) Student Scholarship Accounts: As part of the Andhra Pradesh state government’s initiatives to provide online scholarship payments to the students, Andhra Bank has opened savings bank accounts for about 6.52 lakh students and issued debit cards to enable them to withdraw the scholarship amount as per their convenience. Majority of the beneficiaries hail from rural and semi urban areas and belong to weaker sections of the society.

iii) ATMs: To reach the common man with value added banking services, the bank has installed 450 ATMs in rural/semi urban locations. In order to provide operational convenience to illiterate/semi-literate customers, five biometric ATMs are installed, of which three are mobile ATMs.

Current Initiatives

The concept of financial inclusion, though not new, has attained focused attention in the recent years. As part of this programme the government of India has introduced Swabhimaan, which aims at providing branchless banking through the use of technology. Under this government subsidies and social security benefits will be directly credited to the accounts of the beneficiaries.

As per the guidelines, every village in the country with a population of over 2000 must have access to banking service outlets by March 2012. These need not be brick and mortar branches but can also be through Business Correspondents using Information and Communication Technology (ICT). To attain the objective, Andhra Bank initiated the following steps:

i) AB Smart Card: The AB Smart Card Project is implemented for Electronic Benefit Transfer (EBT) of government schemes such as social security pensions in four districts-Warangal, East Godavari, Srikakulam and Guntur of Andhra Pradesh and wages to wage earners of MGNREG scheme . At present, the project is in operation covering 2656 gram panchayats and completed 22 lakh enrolments. The bank has disbursed over Rs 1250 crore of the benefit amounts to the identified beneficiaries.

ii) SHG - Smart Cards: To reduce the footfalls at the branches, Andhra Bank introduced the SHG – Smart Card project on pilot basis at four branches viz., Rayavaram, Kadiam, Anaparthi and Bibinagar. With this, the SHG members are able to complete their banking transactions without paying a visit to the branch. This initiative has enabled the SHG members to save time and resources.

iii) Business Correspondents (BC): Under the Financial Inclusion Plan, 1149 villages are allotted to Andhra Bank, of which 1054 villages are in AP and 95 villages are in other states. In this direction, the bank has commenced the opening of ICT based outlets ‘Grama Kranthi Kendras’ operated by BCs at each village. Through these outlets, the bank is opening ‘AB Grama Kranthi Savings Account’, which has features of a savings bank account with built-in overdraft facility. The account also provides inward remittance facility and no minimum balance and service charges are applicable to these accounts.

iv) Ultra-Small Branches have been set up in all these BC operated villages (1127), having a population of above 2000. A designated officer from the link branch visits the BC location/village on a particular day every week for conducting the specified activities. The visiting official carries a laptop having Virtual Private Network (VPN) connectivity to the CBS in order to render services like clearing applications for new account opening, loans, recovery follow-up and business development.

v) FI Centers: Andhra Bank has established intermediary brick and mortar structures called ‘FI-Centres’ in between BC locations and link branches for providing  logistic support to the surrounding BC agents at five locations (Warangal, Krishna, East Godavari, Guntur and Nizamabad) manned by full-time branch staff with CBS connectivity.

vi) Kiosk: The bank has procured ‘kiosk’ technology from TCS and is under implementation through CSC e-Governance Services India. This eliminates dependency on technology service providers to a great extent in FI implementation.
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vii) Aadhaar Seeding: As part of FI initiatives, Andhra Bank has enabled alternate channels of Aadhaar seeding. Customers can directly request/seed their Aadhaar numbers to bank accounts using ATMs, and internet banking modes. The SMS mode is under customisation and will be ready very soon. So far, 15.52 lakh Aadhaar numbers of customers have been seeded to their bank accounts.

viii) Direct Benefit Transfer (DBT): Out of 121 identified districts, Andhra Bank has presence in 79 districts and implementation is in progress at other districts. So far government departments have furnished the details of 2.16 lakh beneficiaries and bank accounts have been opened to 2.15 lakh beneficiaries.

ix) Financial Literacy and Credit Counselling Centres (FLCCs): Andhra Bank has established six FLCCs in the lead districts of Andhra Pradesh viz., East Godavari, West Godavari, Guntur, Srikakulam to provide personal financial education. It has also formed a new FLCC trust ‘Jana Chetana Financial Literacy and Credit Counseling Trust’ on February 06, 2013 for co-coordinating financial literacy activities.

The Challenges Involved

i) Infrastructure Bottlenecks: Basic infrastructure facilities such as transportation, communication and power supply are not available to the desired level, which is causing hindrance for speedy implementation of FI. There is an imperative need to move towards universal FI Solutions, standardising the interface with CBS platform to address technology issues.

ii) Operational Issues: The beneficiaries of BC services are mostly illiterate/semi literate and are susceptible to misguidance. The success of the model depends on the trust levels among customers, banks and BCs, which is possible through spread of financial awareness.

iii) BC Viability: The viability of the BC model is the most critical issue, which probably is one of the main reasons for the model not taking off as envisaged. The transaction volume is not encouraging since many of the accounts opened are dormant. It is becoming difficult for BCs to continue operations on account of mismatch of revenues earned and costs incurred. This warrants the attention of the government, regulator and the bankers to ensure to have suitable compensation policy for BCs in place. 

iv) Manpower: Trained manpower is very important for last mile delivery of financial products to the excluded. The concept of ultra small branches is going to stay to achieve desired financial inclusion. Similarly, personnel handling BCs need to be trained further to enable them to help customers in understanding financial products and in taking informed decisions.

The Way Forward

Financial inclusion is to be treated as business opportunity instead of a regulatory prescription. Banks need to tap into the untapped business potential for resources to power the growth engine.

Banks would have to continue to adopt a multi-pronged approach, focusing attention on all delivery channels viz., physical branch network, micro and mobile ATMs, branchless banking through BCs and mobile banking to accomplish financial inclusion. In the present scenario, no single channel is to be treated as a substitute, but rather as a subsidiary to other channels.

The products and services offered by banks should be in complete alignment with the characteristics and needs of the target audience and these should be able to translate into tangible benefits for their livelihood.

Technology can be a very valuable tool in providing access to banking products in remote areas. ATMs and cash dispensing machines can be modified suitably to make them user friendly, for people who are illiterate and semi-literates and do not know English.

Handling the diversified needs of the expected burgeoning client base is a daunting task. However, it is an opportunity to enhance the value of all stakeholders with improved business volumes. Banks need to adopt a high volume-low margin business model leveraging technology and human capital to remain competitive.

Financial inclusion needs a holistic approach to make it more effective and sustainable. The public, private and social sectors have to all come together to create an entire ecosystem. The success of this model would become a role model for other developing and emerging economies too.