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Special feature: Banking to the poor mostly on paper - Page 3 - Economic Times
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Special feature: Banking to the poor mostly on paper

M Rajshekhar, ET Bureau Feb 28, 2012, 06.06AM IST

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Tags: State Bank Of India Banking

Rural banking

reserve bank of india

RBI

NREGA

Nandan Nilekani

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In the process, those who see other advantages in becoming BCs are signing up. "About 75% of the BCs in Punjab are sarpanches or their kin," says a FINO ex-employee who used to work in North India, not wanting to be identified. This can subvert NREGA. Bank payments were started for NREGA workers to ensure sarpanches, who allotted work, did not also handle payments, which would otherwise encourage them to create fake muster rolls. ...And The Resulting Collateral Damage In this state of disharmony, a Mewat happens. Villagers of Rawasan, on the Nuh-Sohna Road, say bank officials collected fingerprints and photographs of 190-odd pensioners in the village in March 2011. They were to receive smart cards and payments through BC agents.
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Haryana moved to the new system in May, but villagers of Rawasan have since received pensions for just one month-November. "We were told the money is safe with Union Bank of India (which handles pensions in Mewat)," says Islam Mohammad, sarpanchpati (his wife is the notional, elected sarpanch). However, adds pensioner Mohammad Sharif: "We have neither received an account number nor a smart card. We cannot withdraw the money." Ashok Khemka, director-general, department of social justice and empowerment, Haryana, blames a 20-25% error in identification using biometrics and severely inadequate BC infrastructure. The minutes of a meeting on December 7, 2011, between banks, BCs and the government state that a BC agent, on average, visited a village once in three months; in some villages no BC visited for six months. Further, 18 of the 20 districts had far fewer terminals than agreed on, with the shortfall ranging from 73.9% to 99.9%. "There were not enough terminals," concedes SS Ghugre, general manger of Union Bank's financial inclusion department. Khera of FINO, one of the BC firms operating in Mewat, says Haryana changed terms midway- it halved the number of customers per agent in January 2011 and in the middle of that year asked BCs to make payments in four days. Such inefficiencies are why villagers like Sharif, who receive a pension of Rs 500-700 a month, are content going back to the old system. "Mil jaata tha, mahina ka mahina (We used to get it, month after month)," he says. That is the collateral damage, which numbers won't capture but any new system will have to avoid.

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Special feature: Banking to the poor mostly on paper - Page 3 - Economic Times
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Special feature: Banking to the poor mostly on paper - Page 3 - Economic Times
Readers' opinions (7)
Sort by: Newest | Oldest Mukesh Kamath (Bangalore) 03 Mar, 2012 03:17 PM Commision to BCs has to increase and the BC model of financial inclusion either through NFAs or EBTs has to be kept alive. It is guaranteed that the Aadhaar scheme would fall flat on its nose if the BC model does not work. My view about MFIs is that they too are required to play their role. Money lenders extract much higher interest than them. Puneet (Mumbai) 28 Feb, 2012 06:41 PM Young people are advised to be doubly cautious before accepting assignments in these projects. They are grossly unsustainable and moreover badly administered. I am happy that at last a section of media has woken up to the ground realities... at least. Otherwise all we saw in the name of financial inclusion were people at the top receiving citations and awards. Few days back only, this very newspaper had a photo which claimed celebrating success of Financial Inclusion in Mewat!!!! Ironically!!! Does anyone know how many youngsters who have toiled day and night to service this value chain haven't been paid their salaries for months? Does anyone care? Sriparna Ganguly Chaudhuri (New Delhi) 28 Feb, 2012 05:00 PM While the feature has captured the inefficiencies in providing banking to the poor, it has failed to show respect to the female Sarpanch of Rawasan. By quoting her husband instead of her, M Rajshekhar has proved that Economic Times is happy with secondary sources of information. Why were you so eager to acknowledge the husband and call the Sarpanch notional? Did it make the job easier, since husbands are easier to approach in Mewats patriarchal milieu? Or did it make the story more sensational? It is ironical that those responsible for influencing public opinion do not take the time to understand that one scathing sentence can demotivate 1.3 million women panch sarpanchs in this country and negate their successes in one stroke. Mr Rajshekhar, as you know language is a very powerful medium and we hope that in future ET will feature women in political processes more respectfully. VITTAL SHETTY K (Bangalore) 28 Feb, 2012 01:12 PM The Financial Inclusion of both RBI & Government of India is only to fool the people and seems to be no intention of reaching out to the poor.The clear indication of this is the active support of the RBI & Govt to MFIs and its opposition to the move of the Andhra Govt which acted swiftly by enacting a law prohibiting exploitation of the poor by taking soft loans from the commercial banks that too particularly from public sector banks and relend to the poor at an exorbitant rate 26% to 48%. Instead of supporting the Andhra government, both RBI & Government placed a bill in parliament taking away the right of state government to make laws prohibiting explotation of the poor.Even while Malegam committee suggested to charge a very high interest of 24%,RBI instead of reducing to a sub PLR rate raised it to 26%. In addition the MFIs were allowed to get cheaper loans at cheaper rates and earn huge profit to give dividends to its share holders.The MFI concept is on no profit no loss basis and not to earn huge profits.If at all MFIs want to be in business they must lend their own money or of their shareholders instead of taking from Public sector banks and even if they take loans they must not be allowed to lend to the poor at more than 2 or 3% from credit taken from the banks. If RBI & Govt. is interested to make the Financial Inclusion a success, Banks both public,private and foreign must be permitted to open branches in area where bank branch does not exist & lend at base rate 2 rajshekhar (delhi) replies to Sriparna Ganguly Chaudhuri 28 Feb, 2012 05:18 PM hi sriparna, this is rajshekhar from et. i spoke to the sarpanchpati because he is the one the villagers pointed me towards. there is also a sarpanchputr i interviewed for this story, incidentally. the reason for quoting them -- and not the sarpanches themselves -- is not because i am propatriarchy but because i want to show that sarpanchpatis and sarpanchputrs exist and call the shots. Sriparna replies to rajshekhar 28 Feb, 2012 05:41 PM You are against patriarchy but have fallen into the same trap as the rest by agreeing to interview the husbands and sons. Your sample size is too small, Mr Rajshekhar for you too make a sweeping generalization. For every non active female Sarpanch there are many active ones. Do take time out to consider their view points as well. Krishna (Bangalore) replies to VITTAL SHETTY K 28 Feb, 2012 05:04 PM It is true. The RBI makes big noise when it comes to financial inclusion etc. But when thousands of crores are siphoned off to companies like King Fisher neither the RBI nor its Directors on board become mute spectators. Today there are two type of flow of Banking services. One to the poor with much fanfare and publicity for paltry amounts and the other is secretive, under the cover flow to corporates and write offs and compromises. Media does not come to know beyond what is uttered by Bankers on platforms! READ ALL COMMENTS

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