Inclusion drive taking baby steps

The ministry of finance’s plan to radically change the way financial services are sold to the remotest regions in India is running behind schedule and seems stuck in a limbo.

To expand the mandate of financial inclusion, the ministry early last year decided to split the country into 20 clusters and appointed a common banking correspondent (BC) firm for all public sector banks operating in that cluster through a bidding process.

This model is different from the current system in which every bank has its own BCs, who take financial services to the unbanked India at a lower cost, where brick-and-mortar branches have a minimal presence.

However, pilot projects each winning BC firm was expected to undertake by now is still to take off and what’s more, the bidding process is far from over for certain clusters.

“By now, the plan was that each cluster will do one pilot, but as yet all banks are still trying to focus on contracting, and the pilot work has not started. There is some matter of detail that we are trying to figure out,” said Manish Khera, CEO at Fino Paytech, India’s largest BC firm that has won seven out of the 13 clusters that have gone up for bidding. Six clusters were won by other BC firms such as Vakrangee, Srei Sahaj and MP Con.

“Banks have imposed certain conditions which were not there in the initial request for proposals (RFPs). On the assumptions of the initial RFP, we had done our bidding,” said Sanjay Kumar Panigrahi, CEO at Srei Sahaj e-Village. “If you are asking for certain conditions which are going to affect our financials, obviously I am going to raise questions.”

Out of the 20 clusters, seven still have to go for re-bidding after the auctions were stopped midway due to ridiculously low bidding rates.

The department of financial services and the Reserve Bank of India count a wider financial reach as one of their top priorities. They have been pushing banks to open more branches in rural India. Other than this, banks have on their hands UPA’s another pet theme – the direct cash transfer project.

“All banks have 24 hours in a day and there is some expectation that the RBI has of them, something that the finance ministry has of them, something the cash transfers or Aadhar has of them. They are trying to cope up,” added Khera.

@MeghaMandavia