Banks and Financial Institutions - Presence, Functioning, and Challenges

Around Akalpoush, there are three nationalized bank branches.

State Bank of India (SBI) and United Bank of India (UBI) are operating branches out of the village Baidyapur, located at a distance of 5 km from Akalpoush. UCO Bank’s Singerkone branch, near the Block Development Office of Kalna II block, is located at a distance of 8 km and also serves the residents of Akalpoush.

SBI, ADB, Kalna, has also opened a customer service point (CSP) in Akalpoush which allows the residents to avail basic banking services such as opening of savings bank accounts and performing small transactions from the savings accounts (with a limit of Rs. 10,000 a day per account).

The local post office also maintains a few accounts of the residents.

The primary source of credit for the residents comes in the form of micro-loans from a few Non-Banking Financial Companies (NBFCs) and Micro Finance Institutions (MFIs) servicing the village through their local agents called Relationship Officers (ROs). NBFCs like Bandhan Financial Services -- even though these accounts will now migrate to Bandhan Bank, Bardhaman branch -- and Jagaran Microfin Private Limited are well established and are more popular avenues for credit to the local residents compared to nationalized banks.

To better understand the extent and quality of banking services rendered to the villagers and identify challenges faced while availing formal banking services, we distributed a questionnaire through Shri Debashish Mukherjee, the Panchayat Secretary. The idea for conducting the exercise was to identify the gaps in quality of banking services rendered review the deficiencies with the local bank branches.

The questions were as follows:

• Have you heard the word “Bank”?

• Do you know which your local bank branch is? Have you ever visited the branch?

• Do you have a Savings Account?

• Do you use banking services on a regular basis?

• What services of a bank have you ever availed?

• Have you ever faced any difficulties while availing these services?

• Have you ever availed a loan from your local bank?

• Kindly share your experience while availing the loan.

• Are you reliant on a bank for availing benefits under various social security programmes such as “Kanyashree Prakalpa”, “Swami Vivekananda Self Employment Programme”, “Old Age Pension”, “Kisan Credit Card”, “PMJDRY” etc.?

• Kindly mention in brief any other difficulties while availing banking services not covered in this questionnaire.

We also organized a formal meeting with the villagers to understand the challenges faced by them on a daily basis while transacting with banks and to share with them the basics of financial literacy in order to encourage the development of good saving habits.

The meeting was conducted in an “Open Forum Manner” where we encouraged each villager to share their individual experiences and stories pertaining to the local bank branches. Later on, we displayed a short video on financial literacy created by FIDD, RBI Kolkata, to explain the benefits of having savings accounts, time deposits, and credit facilities, the security features of notes, and rules of note refund.

Our formal and informal interactions with the villagers and Panchayat Pradhan led us to understand that more than 90% of the population over the age of 18 hold a savings bank account. However, an even more encouraging fact emerged during the course of our detailed interaction with the students from Arabindo Prakash Ghosh Pathagar. In a group of 150 students of classes VIII, IX and X, only one did not have a savings bank account! [Read more here]

Further interactions with the students, teachers, and Panchayat personnel explained that disbursement of grants in lieu of scholarships was the primary reason for this astonishing figure. Interestingly, most of the students were aware of the functioning of a basic savings bank account. We further educated them on the benefits of developing a good savings habit, FICN, or the security features of notes, and various aspects of educational loans once they opt for higher studies.

We stressed the benefits of maintaining a good credit history while repaying loans and explained how it leads to easier loan sanctions in future. We also elaborated on the risks associated with investing in financial companies without proper registration from RBI, while highlighting in brief the impact of the recent “Sharada Crisis” on the lives of the residents of the village.

During these meetings, we gathered that availing credit seemed to be a real burden for the villagers and, as such, they would often approach NBFCs/ MFIs or even money lenders despite the much higher interest rates offered by and the close proximity of nationalized banks.

We decided to solve the problem in a two-fold manner. First, we interacted in detail with villagers who had applied for loans in local branches and were rejected. Detailed discussions with the villagers led us to understand that the local bank branches were often at fault. It had more to do with the functioning of the banks in a rural setup operating in an environment of inadequate human resources.

Next, we visited branches of UBI and SBI at Baidyapur. Mr. Utpal Kumar Nanda, the branch manager of the UBI branch, informed us that it was plagued with very high rates of NPAs.

As such, the branch has adopted a slow and cautious approach to credit expansion. During our interaction with the credit officer of the branch, we asked for certain data points to better gauge the performance of the branch with regard to credit disbursement, as bank credit was the core concern for the villagers.

The credit officer informed us that for the last two quarters, the branch had sanctioned 21 KCC applications and 12 demand loan applications. No other loans were sanctioned during this time, leading us to understand that there was a substantial weight to the claims of the villagers regarding unavailability of bank credit.

During our interactions with the credit officer and the branch manager, we informed them that despite the cautious approach of the bank in offering fresh credit, the bank should ensure that eligible borrowers should not be rejected credit without valid reasons. The performance of the branch in providing other basic banking services was satisfactory.

We had also arranged for a meeting with the SBI branch manager at Baidyapur, Shri L C Bag. We were informed that the branch started operations in 2013, and found its infrastructure impressive. Out of a Rs. 2.11 crores advance portfolio, the branch had no NPAs. The bulk of the advances were gold loans and home loans.

Lack of personnel was plaguing the branch as the manager was the sole officer in the branch responsible for credit appraisal, disbursement, and monitoring.

We decided to meet with the lead district manager (LDM) of Bardhaman to discuss the issues we had noted during our interactions with the villagers and the branch personnel at SBI and UBI.

Accordingly, we met with Mr. Sujit Sarkar, LDM, UCO Bank, at his office in Bardhaman. During the course of our discussion, we raised the issue of the lack of credit availability and the villager's reliance on NBFCs, MFIs, and money lenders instead. We also suggested to the LDM that setting up a rural branch at Akalpoush would serve the surrounding 19 villages under Akalpoush Gram Panchayat.

The LDM assured us that our suggestions would be presented during the DLBC Meet. He further assured us that the issue of rejecting credit would be taken up with the concerned branch managers.

We also suggested to the LDM that a camp by the local branches on educating the local artisan community of the village on the benefits of opening a cash credit and/or overdraft account with local banks would be mutually beneficial; for the banks, it would attract credit-worthy fresh borrowers, and it would also help the villagers access cheaper credit.

MFIs like Jagaran and Sikshaniketan offering microfinance and microinsurance like services. [Read more here]

During the course of our stay in Kalna and the neighbouring villages, we noticed a few "White Label ATMs" in operation as well. These are positive indicators and gives us hope that rural India is fast adjusting to the technological advances made in the field of banking services.

#financialliteracy #banks #CSP #LDM