Business correspondents (BC) will significantly help the country’s largest private lender HDFC Bank to meet the target of reaching 200,000 villages by FY24 end, HDFC Bank’s Group head for retail branch banking Smita Bhagat told FE in an interaction.
“If you are able to reach 200,000 villages, by and large, you cut a larger set of people who want banking services and products and participate in the development of their areas,” she said.
Her comments are in line with the bank’s MD and CEO Sashidhar Jagdishan’s plan – to create a new HDFC Bank each four years. In his first address after completion of the merger of HDFC twins, Jagdishan had said that the lender will be adding over 1,500 branches annually for some years to increase its reach to several parts of the country. The lender added 1,479 branches during FY23.
According to Bhagat, due to higher digitisation and adoption of newer technology over the last 10 years in rural semi urban areas, more than 80% of Indian population now has a bank account and do domestic remittances via Unified Interface Payments (UPI).
“It has become very easy for everyone to transfer money. But in India, we still only have between 175,000-180,000 branches. Whereas we have 646,000 villages,” Bhagat said. A large number of branches are also present in just one city, leaving a significant number of villages still unbanked, and approaching all these unbanked villages is tough via physical roots.
In order to reach out to unbanked rural areas, HDFC Bank developed its BC model wherein it first partnered with common service centers (CSC), which is a central government run company under the Ministry of Information and Technology. What motivated the lender to tie up with the company was that their operating infrastructure was completely digital. The company claims to have presence in all panchayats of the country.
In 2019, HDFC Bank went live with the BC partnership with CSC but it could not evolve much due to Covid-19 pandemic. However, post pandemic, the lender was able to integrate its entire product API with the company.
Bhagat added that last financial year, HDFC Bank did more than many small banks in the country, in terms of liabilities and assets from their partnership with common service centres. During FY23, HDFC Bank’s total commercial and rural business loans grew 30% YoY to Rs 6.29 trillion. Overall deposits, meanwhile, rose 21% YoY to Rs 18.83 trillion during FY23.
The bank only signs partnerships with only corporate BCs due to their large scale. CSCs, Bhagat says, provide more than 300 government services through their digital platform and have more than 500,000 common service centers across 80%-90% of India’s rural panchayats.
Even as semi urban and rural area users have become more digital savvy, whether or not newer payment technologies such as UPI Lite and E-Rupee or central bank digital currency (CBDC) gets adopted will depend on good customer experience, added Bhagat.
However, she is bullish on it as she believes that like UPI as been adopted everywhere, if the customer gets a good experience, everyone will go for it. Currently, the bank is regularly running awareness campaigns about new technologies by educating users about the banking journey, steps involved, product benefits, eligibility criteria and terms of documents using digital tools such as WhatsApp groups, videos and hosting content on business partner’s digital platforms.