Financial Inclusion in Punjab National Bank

Interview with Mrs. Archana Bhargava

and good brand image. Besides being ranked as one of India’s top service brands, PNB has remained fully committed to its guiding principles of sound and prudent banking. Apart from offering banking products, the bank has also entered the credit card, debit card; bullion business; life and non-life insurance; Gold coins & asset management business, etc.

PNB’s Financial Inclusion Initiatives

1. The Bank while providing inclusive finance takes care to offer a packaged finance including “safe savings, appropriately designed loans for poor and low-income households and for micro, small and medium-sized enterprises, custom made insurance and payments services and financial literacy/credit counseling services to facilitate people to enhance incomes, acquire capital, manage risk, and come out of poverty”.
2. Thus Bank’s inclusive initiatives aim at financial empowerment and participation of rural masses. Lack of financial access reduces the saving ability of the bottom of the pyramid population. Access to financial services provides an incentive to save which can be mobilized and used for investment. At the same time, it will provide more capital at the hands of the downtrodden, which they can use for investing in income generating activities.
3. It is widely appreciated that an exclusive dependence on branch banking has two major disadvantages of being the costliest delivery channel (both for the customer and the bank) and higher concentration of bank branches in metropolitanareas. Thus we have utilized the services of NGOs/SHGs, MFIs and other civil society organizations as intermediaries in providing banking services through the Business Facilitator/ Business Correspondent model along with the use of information technology.
4. The BC model allows the banks to do ‘cash in-cash out’ transactions at the doorstep of rural population and to reach last mile customers. The BCs carry portable POS machines (hand-held devices) which are able to read/write smart cards. BCs open the accounts with the help of their laptops equipped with web camera (for taking photograph), biometric scanner (for fingerprints) and pad (for signature capturing). The information captured is transmitted to a central server where the accounts are maintained. The customers are issued smart cards which have their photographs and fingerprints.
5. Thus technology has helped in dramatically reducing the operations costs for large number of small transactions; improve the quality of financial information and has made banking for the vulnerable sections more profitable and less risky for mainstream financial institutions. All this has opened up enormous opportunities for the Banks to adopt inclusive growth in financial sector. Further, our financial inclusion initiatives are aimed at Skill Enhancement measures like training of farmers/women/rural youth through various Farmers’ Training Centres. Such enrichment has been observed to have generated tremendous confidence among’st our rural customers, many of whom have now been offered employment by the Bank as our Business correspondents or facilitators. The Bank has also facilitated many Self-employment Projects at small levels by training the youth as well as the rural women who have become self reliant. Moreover, many of our initiatives are aimed at economic emancipation of the rural poor from the clutches of the moneylenders who make these ignorant people mere pawns in their hands. Some of such pioneering initiatives include our Rickshaw project wherein Bank has helped these rickshaw pullers by extending them finance as well as insuring them against eventualities.

PNB’s Rickshaw Projects

The Bank is financing rickshaw pullers in collaboration with MFIs/NGOs/BCs at Varanasi, Allahabad, Lucknow, Kanpur, Patna, Meerut, Ahmedabad, Ara, Darbhanga, Ludhiana, Agra, Rohtak, Bareilly, Bharatpur and Jabalpur. Further, the scheme has been extended throughout the country at DRI rate to individual rickshaw pullers so as to assist them to stand on their own by supplementing their daily livelihood and thereby improving their standard of living. So far, the bank has financed 6400 rickshaw pullers and the amount disbursed is Rs 629 Lakh.

PNB’s Rickshaw Project

Interview with Mrs. Archana Bhargava

Dr Arvind Kumar, Editor, SAR Economist, recently interviewed Mrs. Archana Bhargava, of Punjab National Bank, with regard to PNB’s policy of financial inclusion, which is reproduced below:

1. How do you define, in simple words, Inclusive Finance?

In Punjab National Bank inclusive finance means the availability of hassle free financial services at an affordable cost to disadvantaged and low-income groups. Recognizing the fact that the branch network is not capable of meeting the requirement of the large rural population we pioneered smart card based financial inclusion with the help of Business Correspondents since 2007. In our existing 39 ICT-based projects across the Indo-Gangetic belt we have opened more than 7 lac no frill accounts. These no frill accounts have an inbuilt overdraft facility.

2. “India has one of the most extensive financial systems comprising of commercial and cooperative banks, microfinance institutions and self-help groups. Yet, the vast majority of rural poor still does not have access to formal financial services necessary for poverty reduction and wealth creation.” Do you agree with the statement?

Yes, the statement is true. Still a large section of rural people does not find it easy to have access to formal financial services.

3. Available evidence based on published research shows that neither banks nor microfinance institutions have been able to replace moneylenders in India. Indeed, the informal moneylenders have dynamically outmanoeuvred formal financial system in their reach to poor by their adaptive management skills and resilient social networks. What are your comments on this statement?

Informal moneylenders are easily accessible in the villages round the clock.  Even if some collateral by way of some jewellery, documents related to immovable properties etc. are provided by the borrower there is no need for any kind of documents except a demand pronote or signature in a register. Entire accounting is simplified in which there is no need for any pass book or statement of account. The moneylender recovers the interest and / or principal and keeps a record which the borrower has confidence. On the contrary the poor villagers lack confidence on the formal institutions like banks.

4. What effective measures, in your opinion, are required to make money work for the poor?

Money should be made available without hassles. The rural poor are not averse to pay higher interest if money is made available at his point of need with flexible repayment schedule. However, the fear factor attached with the moneylenders, so far as repayment is concerned, is not visible in case of borrowing from formal institutions.

5. Do you agree with the opinion that “without a full integration of traditional and contemporary financial innovations any attempt to expand the formal financial system in India is likely to be of limited utility to the poor?”

A viable full integration of the traditional and contemporary financial institutions is necessary to expand the reach to the poor. It is required to strengthen the legal provisions for smooth recovery of loans which can prompt the formal financial system to enhance the reach to the masses. However, at the behest of Govt. of India  73000 unbanked villages with population over 2000 will be provided with banking services by different banks all over the country by March 2012. Punjab National Bank has the responsibility of providing banking services in over 4600 villages by March 2012. We are following the Business Correspondent model to reach these villages. By March 2011 we shall provide banking services in more than 1500 villages in Punjab, Haryana, Bihar, Uttar Pradesh and Rajasthan.

6. What role you do you assign to Punjab National Bank in the realm of Inclusive Finance in the next five years?

Punjab National Bank is the leader and pioneer in the space of financial inclusion. Since 2007 we are implementing 39 ICT based pilot projects to gain experience across the Indo-Gangetic belt.  Based on our experience, we are in the process of implementing financial inclusion to reach additional 20000 unbanked villages within coming 3 years.  This enhanced reach will be possible through ICT based Business Correspondent model. Before March 2012 minimum 5000 unbanked villages will be covered through business correspondents. In this model the business correspondent visits the village with a Hand Held Terminal and opens no frill savings accounts. The savings account has an inbuilt overdraft facility. With gained experience the accountholders will be provided with small value loan facility in the shape of GCC/KCC where the Business Correspondent will also make recovery at the doorstep of the customer. The customer will get the confidence that on repayment he will get fresh advance without any hassle. The documentation process is also getting simplified.

So far in one of our pilot projects at Bulandsahar, we have linked the milk pourers of the district. Earlier the milk pourers were at the mercy of local milk vendors and the selling the milks at non-remunerative prices. Since Mother Dairy came forward and collects milk at the village from the farmers who get their price for the milk supplied through our bank with the help of smart cards. The business correspondents visit the villages and disburse their dues in a hassle free manner. The milk pourers are also financed for milch cattle and other requirements from the nearby branches.  We meet the entire financial requirement of such milk pourers.  Our smart cards having 10 pockets can store the records related to savings account, small value deposit like recurring deposit, overdraft, loan account, insurance, mutual fund, etc. These facilities will be provided in due course. Even UIDAI number can be stored in the smart card.

The implementation of Financial Inclusion plan to provide banking services in unbanked villages with population over 2000 is being monitored by Ministry of Finance, Govt. of India as well as Reserve Bank of India at regular interval. IBA under joint sponsorship of all the banks is going to launch a nationwide publicity campaign on financial inclusion.