The petty neighbourhood shopkeeper is your new banker, savior

IN ADARSH Nagar, a small slum district in north Delhi, Sandeep Kumar, a 30-year-old small-time shopkeeper, attends to a line of customers. But they — local ricshawaallahs, other small shopkeepers and housewives — are not looking to buy their daily groceries. They want to withdraw money from or deposit it into their bank accounts.

This may seem unusual, but it is a sign of how the business correspondent model launched by the Reserve Bank of India four years ago is gaining traction. Financial Information Network and Operations Ltd, or FINO, the business correspondent company operating in Kumar’s locality, has more than 25,000 customers, split between 15 agents, in the district. Kumar himself gets about 60 to 70 customers per day.

FINO’s plan is aimed at improving the reach of the services to the unbanked sections of the population. Lenders are allowed to hire intermediary companies that deploy agents in rural and underdeveloped areas to open accounts for people. FINO has been hired by 16 banks and has 15 million customers.

It is a win-win situation for all concerned. Banks are able to reach remote areas without incurring the heavy expenses that opening a branch entails. For the customers, it means a safe place to keep their money, an easier access to loans and a proof of identity by way of their bank cards.

Kasim, a customer at Kumar’s shop who gave only his first name, says he likes to keep his money safe in a bank, but cannot afford to spend half a day every time he needs to deposit his cash. That is not the case with the business correspondent, where he is able to put in and take out small amounts without thinking twice. He also saves on the Rs 10 bus fare to his regular bank.

Punit Bist, FINO’s district coordinator for the area, says that in unsafe neighbourhoods like this one, depositing their money gives people security. Additionally, since most of these people do not have guarantors and an official proof of residence, they cannot open accounts with banks the regular way. He claims that 80 percent of FINO customers are first-time account holders.

The system of withdrawing and depositing money at a FINO outlet is easy. Agents keep about Rs 5,000 with them at all times. Customers come to the agent, who is open for business 12 hours a day, to either deposit money or withdraw small amounts. But first, the person identifies himself or herself through a small ‘point of transfer’ machine by inserting a smart card and using the thumb impression, instead of a PIN. The money is then shown as withdrawn from or deposited into the customer’s account. The agent links the machine to FINO servers through the Internet at the end of the day. Where such connection is not available, the machine can link through wireless GPRS.

On Sundays and holidays, the agent even goes door-to-door to customers, so they can operate their accounts, and get more people to open accounts.

The business correspondent model is fast catching on, with several companies using different technologies.

EKO is one such company. It has tied up with the State Bank of India (SBI) and has over 70,000 customers and 500 service points in Delhi, Bihar and Jharkhand. EKO uses the mobile phone to offer similar service. When a customer makes a deposit with the agent, he or she enters a code and his account number on the agent’s cellphone, and the money is instantly shown as having been deposited in a customer’s account. Further, money can be transferred from an EKO customer’s account to any person with an SBI account, using the phone. This is useful for migrant workers who may work in different areas and may need to send money home.

THERE ARE between 1,500 and 2,000 transactions (deposits, withdrawals and transfers) per day, totalling between Rs 12 lakh and Rs 20 lakh, according to Abhishek Sinha, chief executive officer of EKO. He says cellphones have made financial transactions possible on the move, and his company is making a difference in rural areas.

In India, where only 40 percent of the population has bank accounts, the potential for such no-frills accounts may be large. Whether this potential will be realised will depend on how fast the business correspondent model spreads, but for people who now have a place to keep their savings, and an easy way to send money to their families, this has come as a blessing.

By VILASINI ROY