Zeyaul Haque, who runs a market stall in rural India, likes the respect he earns as the village banker. He has 10,000 customers who previously didn’t have access to savings accounts or cash withdrawals. There’s one drawback: the fear of being robbed.
“I bought a pistol,” says Haque, 31, who took over the business in April after his brother was shot to death and robbed of 500,000 rupees ($8,200) by a customer and motorcycle-riding accomplices who’d staked out his daily route to the nearest State Bank of India (SBIN:IN) branch. “This is a dangerous business.”
Almost 200,000 traders, shopkeepers, and small-business owners across India are serving as so-called banking correspondents, working for India’s biggest banks to sign up customers. The project is an effort by the Reserve Bank of India to reach the estimated 65 percent of India’s adults who, according to the World Bank, don’t have a bank account. That’s about 530 million people, more than the total combined population of the U.S. and Brazil or the entire European Union.
The program began in 2006 and has expanded in the past three years. More than 100 million Indians have opened bank accounts since 2011, according to RBI. Banks that previously shied away from opening rural branches are outsourcing to contractors who manage the thousands of correspondents.
Top-performing village bankers can earn as much as 20,000 rupees a month; less active ones can earn about 900 rupees. Individual correspondents split the fees from the kiosks—they get 70 percent and the contractors get 30 percent.
Using slow and spotty Internet connections, often via USB dongles, correspondents log on to banks’ Web-based platforms to manage accounts and travel to branches to deposit and pick up cash.
“We still have a lot more ground to cover to make banking accessible to everyone in this vast country,” says Arundhati Bhattacharya, chairman of SBI, the country’s largest bank. Extending financial services to those outside of India’s cities who don’t have accounts could generate $21 billion in bank revenue by next year, more than a fifth of total revenue, a McKinsey report concluded. The government could save $22.4 billion annually by paying subsidies for expenses such as education and health care directly into accounts, McKinsey says, reducing corruption and inefficiencies in the banking system.
via India’s Rural Bankers Risk Robbery to Sign Up Depositors – Businessweek.
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