Over 80 per cent of India’s rural unbanked population is willing to pay for the convenience of banking at their doorstep through a banking correspondent.

The time and money they save by not walking or travelling by public transport to and from the bank, besides the estimated three-four hour wait in queue for basic deposit and withdrawal transactions, were the primary motivators for paying a service fee, finds a survey by financial services solutions provider MicroSave.

In some cases, the villagers must return for a second visit to the bank because tellers are not available to help them, computers are not working or cash reserves are not sufficient, the survey conducted in Tamil Nadu, Uttar Pradesh and Rajasthan found. This results in mounting direct and indirect costs in the form of lost wages and travel expenses, with most agreeing that a local and personalised banking correspondent service with flexible hours would be preferable.

Improved security is another factor cited by the villagers for preferring a fee-based banking correspondent service. Since the correspondent is responsible for cash carried to and from the branch, as well as its loss, this eliminates the risk for accountholders, particularly the elderly and handicapped.

The flexibility and convenience of a banking correspondent model could even translate into more frequency in transactions, even though they might be small amounts, the survey said. Female accountholders have also expressed the welcome prospect of a separate, perhaps clandestine, account that they control and to which their husbands do not have access. The ease of making an emergency withdrawal through a banking correspondent has also been cited in favour of the fee-based model, as the villagers would otherwise have to go to a neighbour or a moneylender for the funds.

Most villagers were also of the opinion that the process of opening an account and transactions would be simplified through a banking correspondent, especially for the illiterate and semi-literate.

Almost half of the survey respondents said they prefer a percentage model of 1-2 per cent of the transaction total as the service fee, while close to 30 per cent opted for a flat fee. Too many fees imposed without justification could easily cause the large number of rural citizens willing to pay for banking services to drop sharply, the survey said.

While the survey findings seem promising with respect to the goal of financial inclusion across the country, MicroSave has warned that the unrealistic expectations of potential earnings and banks’ inability to present an accurate and persuasive case for the correspondent model has resulted in the entire system being reviewed.

Persuading prospective customers, particularly the poor, that recurring deposits, insurance premiums or mobile loan payments make sense requires time, patience, sophisticated sales skills and full bank support. But most banking correspondents lack these.

>arvind.jayaram@thehindu.co.in

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