A State Bank of India employee takes cash deposit
from a man's home in Nerdar Navgaon. (NYT)
Time was, banks employed armies of human tellers. Later, they replaced many of them with automated teller machines. Now, India is using a hybrid of the two - the human ATM - to expand banking to its vast rural population.
Swati Yashwant, a 29-year-old mother of one, is part of a growing legion of roving tellers intent on providing bank accounts to the nearly 50 percent of India's 300 million households that do not have them. Using a laptop computer, wireless modem and fingerprint scanner, Ms. Yashwant opens accounts, takes deposits and processes money transfers for farmers and migrant workers in this small town 70 miles south of Mumbai, India's financial capital.
To reduce the risk of robbery or theft, no transaction by law may exceed 10,000 rupees (about $212). And in practice, many amount to no more than a dollar or two. But with the bulk of India's population living in villages that have never had a bank branch, Ms. Yashwant, with her electronic devices, is a missionary of financial modernity.
Many Indians "don't know anything about banking," she said in her small office here, which is decorated with a garlanded picture of Ganesh, the Hindu god believed to remove obstacles. "I want to open their accounts and help them understand banking."
Economists and policy makers say mobile agents like Ms. Yashwant - who also are employed in countries like Brazil, Mexico and Kenya - represent one of the most promising ways to help the rural poor save and protect their money. Many people in India who do not have bank accounts, for instance, buy gold necklaces or simply keep cash in their unlocked homes.
"This is something that could be powerful," said Abhijit V Banerjee, an economist at the Massachusetts Institute of Technology who wrote "Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty" with Esther Duflo.
The banking agents enable the poor to easily save money they otherwise might be tempted to spend, Mr Banerjee said. And when times are lean, people could withdraw money they had saved, instead of borrowing cash at high rates of interest.
The accounts earn currently earn 4 percent annual interest, which is standard for savings accounts in India. There are no maintenance fees, or charges for deposits or withdrawals.
"It's true that this will not make them rich," Mr Banerjee said, "but it will make them less likely to face starvation someday."
Ms Yashwant is one of an estimated 60,000 of what Indian bankers call "business correspondents," who are not bank employees but earn commissions that the banks pay them for each transaction.
The Reserve Bank of India, the country's central bank, began the push for banking correspondents about five years ago. After slow initial growth, the central bank predicts the ranks of correspondents will more than double, to 126,000, by March. The Reserve Bank has ordered commercial banks to set up correspondents in every village with more than 2,000 people and has assigned each of those villages to one bank or another.
For India's banks, it is a relatively inexpensive way to recruit customers. While about 70 per cent of India's population is dispersed among more than 600,000 villages, the entire country has only 33,500 bank branches. Correspondents like Ms. Yashwant have set up 74 million bank accounts in India.
"If you used the traditional high-cost banking system, you will never reach these people," said Jayant Sinha, who is managing director of the India office of Omidyar Network, a philanthropic investment firm set up by Pierre M Omidyar, the founder of eBay.
Ms Yashwant has been a correspondent in Kolad for four months, for State Bank, India's biggest bank. The $200 or so she earns in an average month is a good wage in rural India, where the average monthly income is only about $65.
Traveling by bus or rickshaw to villages around her town to recruit customers, Ms Yashwant meets a variety of challenges. In some remote villages her wireless Internet connection fades in and out. Frequent blackouts disrupt the work. And the fingerprint scanner can struggle to read the calloused fingers of farm laborers.
On a recent rain-soaked afternoon, in her Kolad office, she patiently persevered to take a print from Rajashri Nakati, a 35-year-old farmhand. "I want to save my money," said Ms. Nakati, a mother of five. "If I leave it at home, it will get spent."
Ms Yashwant dragged Ms. Nakati's rough fingers over her scanner several times, sighing as her laptop beeped when the scan did not render an acceptable imprint. She repeated the exercise with six fingers, three on each hand, as a gaggle of women, friends and relatives of Ms Nakati, dressed in brightly colored saris watched through a window.
Finally, Ms Yashwant captured a print. That scan, with a simple one-page application and a passport-size photo of Ms Nakati, would next go to the bank's back office. It would take two days before the account was ready for Ms Nakati's first deposit of 100 rupees (about $2).
Such banking represents the kind of "frugal innovation" that India has become known for in recent years - finding inexpensive solutions to its development challenges. State Bank is also buying hundreds of solar-powered ATM's that have fingerprint scanners and do not need air-conditioning at temperatures as high as 50 degrees Celsius (122 degrees Fahrenheit) from an Indian company called Vortex Engineering. The machines are being placed in small towns, and, for now, are meant for customers who open regular bank accounts, not the no-frills accounts set up by the roving correspondents, which do not come with ATM cards.
Because of the small sums involved, State Bank says it loses money on most of the accounts opened by correspondents. The balances in those accounts total 1.1 billion rupees ($21.8 million), not even a rounding error relative to State Bank's total deposits of about $200 billion.
Still, officials said that while the average account balance was only 160 rupees ($3.30) at the end of August, it has increased steadily. As recently as March, the average balance was just 100 rupees. Over time, State Bank officials say, they expect the accounts to be large enough to be worth the bank's investment.
"Right now, it's more of a social obligation," Krishna Kumar, a managing director at State Bank, said in his wood-paneled 18th-floor office in Mumbai. "But in a few years, it will be significant."