SBI reaches out to the unbanked

In what would herald a radical shift from the brick-and-mortar model of banking, State Bank of India (SBI), the country’s largest bank, has decided to hire 15,000 new banking correspondents (BCs) in 2010-11, its chairman OP Bhatt told FE. SBI’s grand plan on BCs is to add thousands of new correspondents to its network every year, a move that would dramatically expand rural banking. The network of BCs would have a direct linkage to sundry social security schemes, Bhatt said. Pilot projects in states like Andhra Pradesh have shown that the BC model can enhance the utility of such schemes. “To make the business correspondents network the most credible and useful link between millions of farmers in rural areas and the bank branches, it will have to be expanded in a big way,” Prime Minister’s Economic Advisory Council chairman C Rangarajan said. SBI’s move is in tune with the Budget decision to provide banking facilities in all domiciles with more than 2,000 people. The prime role of BCs would be to accept deposits and remit money. They would also provide basic financial services like insurance to the half-a-billion low-income rural people who are outside the banking network. Starting with India Post, SBI has roped in organisations with pan-India presence like ITC, Reliance Dairy Foods, Drishtee Foundation and Zero Microfinance & Savings Support Foundation to expand its BC network. According to Bhatt, the bank would also rope in petrol pump operators, rural kirana shops, retired teachers and agents of small saving scheme as BCs. What complements the BC network would be the technology platform being set up. “Apart from opening more branches, we plan to serve the customer better by leveraging all other channels--ATMs, Internet banking, mobile banking…” said Bhatt. The BCs can act as a mini-bank branch with facilities of cash withdrawals and deposits up to Rs 10,000. The BC is connected to a local branch that supervises the functioning of all BCs in the area. SBI has covered more than 50,000 un-banked villages, including in far flung North Eastern, Eastern and Central parts of the country. Currently, the bank spends Rs 115 on each account managed by the BC and the return may be around Rs 3, as the average bank balance of a BC account is estimated to be around Rs 30.