It may be a small beginning but State Bank of India (SBI) is set on making lending to the underprivileged a paying proposition. At last count, the country’s largest lender had turned nearly 500,000 Jan Dhan customers into borrowers.
That’s a tiny fraction of the universe of 63 million savers and the amount loaned is just R30 crore. Moreover, the average balance is inching close to R1,000, which may not sound too exciting. But SBI isn’t too concerned, and believes the investment will pay off.
Even before the Pradhan Mantri Jan-Dhan Yojana (PMJDY), the bank was already facilitating banking services for those without access to formal finance — in all, the lender now has nearly 100 million financial inclusion accounts.
Indeed, the loans under PMJDY are not subsidised — customers are charged the one-year marginal cost of funds-based rate. Which means the bank is making a spread and that takes care of a part of expenses the lender pays banking correspondent (BC).
A pioneer in the BC model, the lender has leveraged its reach in the hinterland to cater to small rural borrowers, providing them with banking services they would otherwise not have had access to. The value of transactions handled by BCs jumped 50% in 2015-16 to R58,217 crore. That might be a fraction of the business that SBI does every day but the thousands of small value transactions have helped create a source of livelihood for many.
The network has been growing over the years and there are now nearly 65,000 customer service points, each of which is linked to a nearby branch. Of these nearly 52,550 in rural areas spread across more than 1 lakh villages.
Banking for the underprivileged isn’t always a primitive affair; 42 million of SBI’s customers use RuPay debit cards. And for some time now, SBI has been encouraging Aadhaar-enabled payment systems, automated e-KYC and even IMPS. In fact, BCs are incentivised to get customers to open accounts via an e-KYC. If BCs are able to mobilise deposits, it’s partly because SBI offers them both attractive interest rates and flexible terms. In what could help it attract more customers in the future, the bank is allocating resources for self-employment courses; in 2015-15, more than 3.5 lakh youngsters trained its institutes. For years now the lender has been conducting financial literacy camps.