It Is All About Money

The Indian banking industry presents two different faces. If you are part of the urban middle class, you will enjoy many facilities — from ATMs to internet banking and phone banking. You will be offered all manner of loans and many facilities on your savings and other accounts. The paperwork will be minimum and banks will even send across officers to your house to help you out.

If you are poor and living in a far-flung village though, you will be hard-pressed to avail of any sort of banking facilities. You might have to travel quite a bit, and to a different village or a city for basic banking services. Applying for a loan will be tedious and getting any sort of credit can be a huge problem.

The reason: opening and maintaining bank branches or ATMs in remote villages does not make economic sense to most banks.
Six years ago, the Reserve Bank of India came up with the business correspondent model to tackle this problem. Business correspondents were people or firms who would act as agents of a bank. They would be allowed to offer some basic services, and paid on a per transaction basis.

Just over half a decade of operations, the results are mixed. On the success side, many banks have managed to provide no-frills accounts to people in many previously unbanked areas. At the same time, most banks still find the operation economically unviable. Most end up subsidising costs. Also, most business correspondents find that acting as an agent for the bank does not even offer them enough money to survive. And many villages still remain without any banking facilities.

Senior associate editor Raghu Mohan, special correspondent Vishal Krishna, and senior correspondents Shrutika Verma and Tanushree Pillai talked to banks, customers and business correspondents across the country for our cover story. It will tell you why the financial inclusion story in India is still incomplete.

A bitter battle is raging between the two partners — Unitech and Telenor — who have set up Uninor. Among other things, there is the issue of what Uninor is worth. Unitech thinks it should be Rs 10,000 crore, if not more. Telenor says its value has dropped to Rs 400 crore. Senior associate editor Anjuli Bhargava went behind the scenes to bring you a blow by blow account of the battle.

(This story was published in Businessworld Issue Dated 06-02-2012)