In August 2023, India's Unified Payments Interface (UPI) achieved the remarkable feat of 10 billion transactions. Despite the impressive growth, the rural-urban divide remains in the digital payment ecosystem. The regional experiences during the Covid-19 pandemic emphasise the importance of female banking correspondents in closing the gap to further unlock India's digital payments potential.
Introduced in 2015-16, the female Banking or Business Correspondent (BC) model, promoted by the National Rural Livelihood Mission (NRLM) and supported by the World Bank, has rapidly gained momentum across rural India. Referred to as the 'Bank Sakhi' model, this concept represents a gender-focused transformation of the traditional banking approach in rural areas. Members of self-help groups, often women, extend banking services to areas devoid of physical bank branches.
The rationale behind deploying women as BCs was well calculated, considering that more than half of the Pradhan Mantri Jan Dhan Yojana (PMJDY) account holders in rural and semi-urban regions are women. Yet, paradoxically, most BC agents were men. To address this mismatch, the Bank Sakhi Programme was launched to help first-time women customers navigate the sometimes challenging banking landscape.
Since its launch, over 100,000 women have been trained to operate as intermediaries for public and private banks across 20 states. Equipped with the latest technology and tools such as Micro-ATM devices and smartphones, these women conduct secure digital transactions on behalf of their customers. Besides offering conventional financial services, these Bank Sakhis also educate their customers on the benefits of digital payments, provide training on the functions of digital payment platforms and address their concerns in case of transaction failures.
The triumph of Bank Sakhis has been particularly significant in low-income states such as Bihar, Odisha, and Madhya Pradesh. Recent research by the Asia Competitiveness Institute highlights the pivotal role played by Bank Sakhis in building the digital payment potential of these states. Despite faring low in digital competitiveness, these states leapfrogged in digital transactions following the pandemic, attributed mainly to the success of the Bank Sakhi programme. Data from a private sector bank in Bihar reveals that 33 out of every 40 Bank Sakhis performed at least one transaction daily from March to July 2020. Meanwhile, 90 out of 126 Bank Sakhis of a public sector bank conducted at least one transaction daily in Odisha.
During the pandemic-induced lockdowns, SHG members serving as Bank Sakhis became the frontliners in raising awareness and facilitating doorstep access to cash transfers under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) and other Direct Benefit Transfer schemes. Through this endeavour, more than 200 million women account holders under the PMJDY were able to receive Rs 1500 each spread across three months.
In a strategic move to curb leakages within the Direct Benefit Transfer scheme, the Indian government opted for digital transfers to channel funds to the PMJDY accounts. Recognising the indispensable nature of BC agents' services to increase the awareness and usage of these digital transfers, especially during lockdowns, special identification cards named Lockdown Passes were issued to Bank Sakhis to ensure uninterrupted banking operations.
Although the number of female BCs increased in India, their share is abysmally low as they form less than 10 percent of the total BC network as of April 2022. The 'One Gram Panchayat One BC Sakhi' program, introduced by NRLM, aims to address this disparity by ensuring the deployment of at least one Bank Sakhi in every Gram Panchayat by the conclusion of the 2023-24 period.
The low representation of Bank Sakhis arises due to several factors. Bank Sakhis face mobility hurdles and safety concerns. Often reliant on male family members for tasks such as visiting bank branches for cash deposits or withdrawals, these women experience higher transportation costs and safety concerns than their male BC counterparts. There is no formal financial support to Bank Sakhis to address such shortcomings.
Bank Sakhis are severely time-constrained owing to societal expectations that they fulfil their household responsibilities in addition to being a BC, leading to efficiency losses. Despite working an extra 3-4 hours daily, male agents conduct twice as many transactions as Bank Sakhi agents.
The minimum qualification requirement poses another hurdle in recruiting Bank Sakhis, particularly in underserved rural regions. The current requirement by RBI necessitates a minimum of a 10th pass. However, several banks have raised the bar to 12th pass for eligibility, potentially posing a challenge in attracting talent to serve as BCs in remote rural regions.
Moving forward, numerous viable approaches could be undertaken to tackle the challenges encountered by Bank Sakhis. These include providing liquidity support, expanding social security benefits, and ensuring risk coverage for individual trips to and from the bank. Additionally, banks could increase the cap on working capital loans granted to BCs. But most importantly, the banks must mitigate technical glitches on the backend. A reliable banking infrastructure must exist for Bank Sakhis to deliver a smooth banking experience in rural areas.
During the launch of the recent 'Samarth Campaign' to promote digital transactions in 50,000 gram panchayats, Minister for Rural Development and Panchayati Raj Giriraj Singh recognised the crucial role played by Bank Sakhis in promoting digital transactions. Given the merits of the female BC model, Bank Sakhis are pivotal in promoting India's digital financial inclusion.
About authors: Rohanshi Vaid and Ammu George are researchers with the Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, National University of Singapore.
The thoughts and opinions shared here are of the author.
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