Financial Inclusion: Coming in from the Cold
Regular commercial banking is one of those real boring professions; but, occasionally one has a Eureka moment. Mine consisted of a matter-of-fact statement made by one of my customers to the effect that “Hajoor, if someone had helped me open this account 5 – 10 years ago, the truck that I drive would have been mine.”
 
I drifted into banking after graduation and, after completing the two year probation period, was posted to a rural branch somewhere in the back of beyond. I decided that instead of wasting nearly three hours every day in commuting from the nearest semi-urban centre on dirty, over-crowded buses on roads which were more of an apology, with a high possibility of ending as a road accident statistic, it made better sense to find a place and stay in the village where I was posted. With some difficulty, I managed to convince a retired school teacher to rent me a room in his house in that village. 
 
I slowly settled down to the pace of life there and befriended a number of people and was never short of good company. One major problem, which remained, was access to clean, regular and healthy food. The options available were either to cook for oneself or eat at a small way-side eating joint where basically farm labourers or other itinerant workers ate.
 
This is where I befriended the truck driver; a poor fellow, barely literate, driving someone else’s ramshackle truck on some kind of commission basis, and just about managing to make both ends meet. He was about 40 – 45 years old, lean, dark, of middling height, and always had a week-old salt and pepper stubble on his face.
  
One day, this truck driver came to me with the request, if I could help him open an account with the bank, something we immediately arranged. Incidentally, opening a bank account at most banks in India used to be a massive exercise in bureaucracy, which only people who have gone through it would know. Unfortunately, even today for many Indians there is little change in the situation.
About six to nine months after the savings bank account was opened, this truck driver came to get his pass-book updated. While returning the updated pass-book I was pleasantly surprised to notice that the fellow had been able to save close to Rs10,000 and I jocularly remarked that look, you are a rich man.  
 
The man bent down with folded hands to thank me for helping him open the account and then made the statement which I mentioned above. I no more remember this fellow’s name, but his face and the look of gratitude in his eyes remains forever fresh in my mind.
 
This experience gave us a psychological boost to help open bank accounts of anyone who approached the bank or felt would be able to make regular savings. We had to make a little effort in streamlining the back-end operations to ensure that opening a large number of accounts did not overload or impair the branch’s normal functioning. Under fully manual accounting systems the amount of time, effort and expense increases exponentially compared to the number of accounts.
 
But the more-than-enthusiastic support from the branch staff ensured that opening a new account was no more an issue at that branch. The net result was that we were soon surpassing all our deposit budgets!
 
All this took place more than 30 years ago when the concept of 'financial inclusion' was not even a twinkle in the eyes of the Reserve Bank of India (RBI) or our mighty economists and policy-makers, leave alone the barely educated bankers like me.
  
Today, with the use of technology, opening and maintaining a large number of accounts is hardly an issue. The fixed costs have already been largely met. The operating costs are minimal.
  
What seems lacking is the realisation about the contribution that enabling easy and safe access to simple deposit facilities can make to the life of the common man. It not only helps de-risk consumption levels and smoothen expenditure by building up a financial cushion against income shocks and emergencies, it also enables capital accumulation.
 
There are other spin-off benefits too, such as, access to large, stable, low-cost deposits for banks, lower dependence by the nation on higher-cost foreign savings for investment, and lower incidence of emergence of Ponzi schemes offering deposit services. With less spare cash lying around, the incidence of gambling, drinking and such other vices also comes down!
 
The banking market is sure to explode if we can use technology for bringing down transaction costs by simplifying and redesigning processes which do away with a host of anachronistic, wasteful traditional banking practices. Instead of just translating existing manual practices to an electronic platform, we should be using technology to rethink and redesign the entire banking interface with customers afresh for a brave new banking world.
 
To do this, many of these skills are not available with regular traditional bankers. Rather, these skills are available with the micro finance companies, the mobile phone industry, the information technology (IT) companies and the retail customer marketing industries. 
 
This is where small finance banks, payments banks and fintech companies et al can play a transformational role and help the common Indian come in from the cold.
 
(The author worked with various banks - public, private, and foreign both in India and abroad - for nearly 30 years and is currently on a self-imposed sabbatical to try and understand as to what ails Indian banking and what, if anything, can be done to improve its functioning.)
Comments
viki440
11 months ago
Gone are those good WHITE COLLAR JOB days sir, Now it is save your Collar Job.
In my 4 year experience ,30 years ago a/c opening is all about filling document and having an Introducer..
Now it is..
VALIDATION of KYC
STORING with CERSAI
LINKING WITH AADHAAR(for DBT)
Issuing ATM
GENERATING PIN
ISSUING PASSBOOK
UPDATING IT
PMJJBY
PMSBY
PM KISAN
IF EDUCATED GIVING NET BANKING
SELLING PAI
Etc etc.
Ac opening is 10 min work with advent of technology ,
It is with the AADHAR every begins with..
Opening of accounts is extendingbthe business for future..
We welcome customers ,we never deny opening of account..
But really sir ,Gone are those days where you feel proud in doing your duty alone ...
We were asked to deal with 250 to 300 customers per day which is impossible yet at the core of our heart we are happy,
But with salary and all a banker is the least paid among their peer industries..

sushilprasadassociates
Replied to viki440 comment 10 months ago
The challenges in banking thirty years ago were very different but it was very much there. Under manual accounting systems, the work load at branches increased exponentially versus linear increases in business volumes. Just trying to maintain the integrity of the books kept everybody on their toes and much beyond. Most bank staff, especially at the managerial level, spent their Sundays and holidays trying to reconcile the books of account, apart from sitting late everyday. But the monster kept getting bigger day by day. Even small innovations in mechanization (which were more of an apology), such as, something known as "Advanced Ledger Posting" machines were looked upon in wonder and were considered a godsend.

The point however remains is that the business of banking remains the same, and customer acquisition and maintaining a profitable relationship is something which should not be lost sight of.
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