The Inclusive Bank

Everything about the State Bank of India (SBI) has been mammoth-sized. The country's largest commercial bank - in terms of assets, deposits, profits, branches and employees - is now replicating the same in the financial inclusion space, too. Under the Business Correspondent (BC) model, an alternative low-cost banking service channel to cater to both urban and rural customers, SBI has installed over 52,340 customer service points across the country to provide products and services such as savings, term deposits, micro loans, remittances and loan repayments. It is with good reason that the bank has been adjudged the winner in the financial inclusion category of the BT-KPMG Best Banks study.

We asked Mrutyunjay Mahapatra, Deputy Managing Director and Chief Information Officer at SBI, what sets the bank apart. "There is no competition to us. In financial inclusion, SBI has been a pioneer and, in terms of technology, ahead of the pack in all respects," he says.

Experts from the domain say that the way SBI has built the financial inclusion architecture leveraging the BC model (which other banks also use) has been unique. "What stands out about SBI's approach is the way it has devised its architecture, especially when it comes to dealing with last-mile banking operations. Since the bank already has the power of a huge branch network, it is putting up customer service centres close to its branches in remote locations, shifting all the low-value/ low-yield customers to these centres and keeping the high-value customers in the bank branch, leading to cost rationalisation. This is not something others have done while trying to expand their footprint in remote locations with banking correspondents or through use of technology," says Professor M.S. Sriram, visiting faculty, IIM Bangalore, and member of the External Advisory Committee of the Reserve Bank of India that processed applications for small finance banks.

SBI also outsources its customer service centres to third parties, but the advantage it apparently gets through this architecture is lower costs.

The BC channel is employed for "Aadhaar seeding and linking accounts with mobile." The bank claims credit for having "successfully leveraged technology for propagating financial inclusion by introducing Internet-based kiosk banking, card-based and cell-phone based messaging channels".

In its 2016/17 annual report (the last that is available), SBI reported that under the Pradhan Mantri Jan Dhan Yojana (PMJDY), it had opened 8.57 crore accounts till March 31, 2017, and issued 5.85 crore RuPay debit cards to eligible customers. It also reported that 'a substantial number of these cards were issued in some of the most challenging areas of the country'. The total number of financial inclusion accounts, in the process, grew from 9.28 crore in FY 2016 to 11.73 crore in FY 2017. The value of transactions handled through BCs increased by 27 per cent from Rs 58,217 crore in FY 2016 to Rs 73,819 crore in FY 2017.

Under the Self Help Group-Bank Credit Linkage Programme, in which SBI has participated since 1992, it claims to be the market leader with a credit deployment of Rs 6,139 crore to 3.57 lakh SHGs, 91 per cent of which are women SHGs, as of March 31, 2017. On the technology front, several initiatives such as Aadhaar-enabled Payment Systems, automated e-KYC, Immediate Payment Service (IMPS), Micro ATM roll-out, Savings Bank-cum-Overdraft facility under PMJDY and Direct Benefit Transfer (DBT)/Direct Benefit Transfer for LPG (DBTL) payments have been implemented.

According to the 2016/17 annual report, SBI had sponsored 14 regional rural banks (RRBs), covering 155 districts in 15 states, with a network of 3,977 branches. The bank's equity investment in the 14 RRBs is Rs 481.95 crore and its non-equity investment is Rs 23.62 crore. It also states that under the PMJDY, RRBs have opened 81.30 lakh accounts, and it is also extending the benefit of social security schemes - the Prime Minister Suraksha Bima Yojna, Prime Minister Jeevan Jyoti Bima Yojna and Atal Pension Yojna - to its customers.

Further, in a bid to empower youngsters in rural regions and to mitigate unemployment, the bank has set up 116 Rural Self-employment Training Institutes (RSETIs) across the country. These institutes will impart comprehensive, residential training in personality and skill development free of cost. The RSETIs have conducted some 13,681 programmes in all and trained 3,65,848 candidates. Of these, the bank claims, 2,34,935 trainees have been gainfully settled in vocation/ employment.

However, it is not as if the other banks have been twiddling their thumbs. HDFC Bank has launched initiatives like instant loan through net banking and ATMs, Artificial Intelligence-based chatbots and a redesigned mobile application. Standard Chartered Bank has created an early warning risk identification solution using Big Data, analytics and algorithms. IndusInd Bank has redesigned its web portals for online FD opening, among other things; Axis Bank is automating certain processes using robotics and Artificial Intelligence for operational efficiency and risk mitigation; and ICICI Bank offers the ease of opening current accounts through Android-based mobile phones and tablets.

The financial inclusion space, is evolving rather rapidly, and is also becoming competitive. Not only is the landscape changing with different players coming in - like small finance banks - but the approach and keenness to tap this segment is also picking up among the full-scale banks.

Other than putting in practice technological initiatives, many full-scale banks are also acquiring stakes in microfinance institutions. IDFC Bank acquiring Trichy-based Grama Vidiyal Microfinance, Kotak Mahindra acquiring BSS Microfinance, DCB Bank acquiring a stake in Annapurna Microfinance, and the IndusInd-Bharat Financial Inclusion (formerly, SKS Microfinance) merger are some examples. Bandhan Bank, which has retained its initial focus on the financially-excluded segments, is another key player in this space. Clearly, SBI cannot rest on its laurels. It will have to keep up the momentum, lest others catch up.

@EKumarSharma