Central Bank plans to use postmen to reach rural areas

In talks with India Post to deploy its staff as business correspondents.

 Source: Business Line,K.R. SrivatsNew Delhi, March 17

Central Bank of India is in talks with India Post to rope in 

village postmen as business correspondents (BCs), 

its Chairman and Managing Director, Mr S. Sridhar, 

has said.The bank's plan to increase BC appointments 

comes at time when perception is gaining ground that the 

business correspondent model has not achieved the desired 

impact since its inception in January 2006.Most banks do not see 

BCs as a viable model though there is plenty of opportunity to use

it to their advantage, given the extent of exclusion.

Till date, public sector banks have appointed 85 BCs, who have opened about 80 lakh accounts.On the other hand, private sector banks have appointed about 44 BCs, who have opened 8 lakh accounts.

"We are having discussions with the postal department on the commercial terms. Many of the postmen are on contract basis. The postal department has a different system," Mr Sridhar told Business Line on the sidelines of National Microfinance Conference, organised by Sa-Dhan and FICCI here on Wednesday.

Central Bank of India has so far appointed 18 correspondents. Mr Sridhar said that the bank wants to ramp up BC appointments and the focus would be on those districts where it is the lead banker.

As for the banks that had roped in post offices for financial inclusion, only State Bank of India has made some progress.

SBI has covered about 5,200 post offices as part of its plan to adopt them as outlets of BC/banking facilitator model.Conceived as an innovation in financial inclusion, the BC model was expected to give a boost to the banks to reach the unbanked segments of the country, especially the villages. 

The RBI has been constantly improving the model by expanding the definition of BCs. 

Recently, kirana shops in rural areas were recognised as banking correspondents.The model allows banks to do "cash-in-cash-out" transactions at a location much closer to the rural population, thereby addressing the last mile problem. 

Unlike banking facilitators, who act as agents for rendering support services to banks but do not handle cash, BCs are allowed to handle small value deposits or credits and can undertake recovery of principal or collection of interest. The client portfolio will appear in the books of the banks, who are responsible to the customer for the acts of omission or commission of the business correspondents or business facilitators.Mr Sridhar said that Central Bank's perspective on using banking correspondents is different from that of the foreign banks. 

"We are looking at it from the perspective of our national obligation to reach under-banked villages and not so much from the opportunity of expanding business," he said.Out of the 24,000 villages allocated to Central Bank for achieving 100 per cent financial inclusion, the bank has achieved the target in about 17,000 villages, mostly through its own branches. "The balance we will do through business correspondents. 

So it will be a mix of BCs and branches," he said.The Chairman said that the bank is also in talks with telecom service providers to see if their representatives could be appointed as BCs. "That model is not yet crystallised," he added.