NEW DELHI: The postal department and the country's largest lender, State Bank of India (SBI), are gearing up to take basic banking services to the doorsteps of millions of people in rural areas who have no access to the country's banking system. The tie-up will see postmen acting as banking correspondents for SBI in over 12,000 villages, collecting deposits and offering small credit and remittance facility to people in far-flung areas. Villagers in these areas currently have no option but to keep hard-earned money at home, losing out on interest and running the risk of theft.
SBI, which has around 5,000 branches in rural or semi-urban areas, hopes to cover 12,492 villages by 2012. "To meet this initiative a tie-up with India Post will be a great advantage," a senior SBI official said. The business correspondent model, set up by the Reserve Bank of India, allows specific individuals and entities such as 'kirana' shop-owners , NGOs and post offices to conduct banking business as agents of banks at places other than the bank premises.
India Post has a network of over 1.5 lakh branches. A finance ministry official said the government was keen on such initiatives because of the postal network's reach. "We have encouraged banks to explore similar tie-ups to speed up the financial inclusion agenda," he said. Last week, the finance minister had alerted banks to the risks involved with not choosing the right kind of business correspondent.
A senior postal department official said, "India Post, or its employees, are undoubtedly the most reliable partners for any bank." However, not everyone is convinced that India Post makes for the best partner. "What if tomorrow the government grants them (India Post) a banking license? RBI had directed that there should be a business continuity plan (BCP) in place to ensure uninterrupted service... it will be very difficult to find a replacement for such a partner," said a senior executive of Punjab National Bank said.
Source: The Economic Times 15.02.2011