The gap between fiscal provision and actual realisation of financial inclusion needs to be bridged, Chief Economic Adviser Arvind Subramanian said on Wednesday, adding that the next stage of work in the area of financial inclusion should focus on banking correspondents.
“Government has tried to provide essential private goods and services by reducing the subsidies and by providing the essential goods and services … that is the first step to convert fiscal provision into something meaningful. You have gas cylinders but you need consistent gas off-take, you have bank accounts but you need to make genuine inclusion, your toilets are built, but are they used? I think that’s the next stage we need to work on,” Subramanian said at the launch of the report titled ‘State of the Agent Network, India 2017’ by MicroSave and Bill and Melinda Gates Foundation.
The MicroSave report, covering 3,048 business correspondents across the country and carried out in the second half of 2017, stated that banking services and government-to-people payments have led to increased transactions and subsequently, revenues and profits. It, however, highlighted that the recruitment of banking agents has slowed down suggesting that providers increasingly look to maintain or develop existing operations in preference to further expanding footprints. It also pointed to the increased frauds faced by banking agents and the low number of women agents in India.
As per the report, about 22 per cent banking agents faced fraud in last one year, sharply up from 2 per cent reported in 2015. Of all the types of frauds reported, most common frauds related to fake or demonetised currency notes at 14 per cent, the report said. “The increase in fraud might be directly related to manifold increase in account-related transactions,” it said.
A Department of Financial Services official said that the business correspondents sector has been asked to formulate a standard operating procedure. “22 per cent (of banking agents) told that they have been subjected to some kind of fraud. We will engage with them. Independent of the study, the department has asked the business correspondents industry to evolve standard operating procedure our focus is more on protecting the customer…it has been mentioned today that business correspondents themselves being subject to fraud. We will engage with them to see how fraud-proof it can be,” Lok Ranjan, Joint Secretary, Department of Financial Services, Ministry of Finance said.
Subramanian said that for achieving financial inclusion, the banking correspondents story still needs more work. “I think that what the study highlights that there is one big impediment as it were between creating the account and actually achieving the financial inclusion that is the banking correspondents story, which still needs more work,” he said.
Pointing to the low rate of women participation as banking agents, the report said that even though women hold about 45 per cent of the accounts opened under the Jan Dhan Yojana, only about 8 per cent of the agents in India are women. “We need more women agents if we are to sustainably offer services to women clients, especially in rural areas,” the report said.
According to the report, there is a 200 per cent increase in volumes of “cash in, cash out” transactions from the banking agent points across India. It added that median daily transactions points had also increased by 140 per cent from 13 in 2015 to 31 in 2017. “Government subsidy payouts and enrolment into government schemes have helped drive this number,” the report stated.