Her children off to school, husband at worksite and household chores completed by noon, Seema Yadav, 24, finally finds time for a very important task that needs to be addressed the same day. She needs to go to the bank.

Having received Rs 100 from her husband, a daily wage labourer, a day before, the first thing that Yadav wants to do is deposit it in her savings account, lest she ends up “spending it”.

Dressed in a pink saree, hair pulled back neatly into a plait, she leaves home – a tiny mud structure among the first row of houses in Jasalpur village of Madhya Pradesh’s Hoshangabad district – and walks up to a house close by. A few other villagers of all age groups have gathered there around an empty plastic chair. “We don’t go to the bank here, it has now come to us,” Yadav says.

Just as Yadav continues talking about the easy access to banking facility, a young woman wearing a cap with ‘Central Bank of India’ written on it walks in, carrying a handheld device. After exchanging pleasantries she occupies the chair in the middle as men and women line up on either side. The device is powered up the next instant as the now officious-sounding woman logs in using her thumb impression. The routine proceedings begin almost immediately.

Meet Sangeeta Chouhan, 23, who has been working as the Central Bank of India’s business correspondent (BC) in Jasalpur since May 2012. Ever since she took guard, the village, with a population of close to 4,000, has never had to go to the bank’s branch in Hoshangabad city, some 7 or 8 km away. From opening accounts to depositing, withdrawing and remitting money (anything from Rs 10 to Rs 10,000), Chouhan is the one-stop point for the villagers in and around Jasalpur, where banking has never been easier.

After some villagers completed their transactions, including balance enquiry and withdrawals, Seema Yadav approaches Chouhan and hands out the Rs 100-note and asks her to deposit the amount in her “bachat khaata (savings account)”. Two minutes for the device to contact the server, two minutes for Yadav to authenticate her biometric details, and another minute to generate the deposit receipt. In five minutes flat, Yadav is good to go.

This model of speedy and convenient access to banking services is fast becoming a reality for the whole of Madhya Pradesh, under the state government’s financial inclusion model ‘Samruddhi’, which promises to cover the remaining 14,676 villages that continue to remain under-banked and unbanked. In all, MP has 53,000 villages.

Together, we can

The biggest push for the evolution of the Samruddhi model came with the focus on direct benefits transfer (DBT) of all government-to-person transactions – MNREGA payments, pensions and now graduating to disbursement of scholarships – that meant cutting out hurdles and pilferages. And with bank accounts being the only solution for implementation of DBT, Samruddhi was born. 

For the country’s second largest state in terms of area and a population density of only 196 persons per square km (as per 2011 census), it was difficult for financial inclusion to become a reality, given the RBI’s mandate of following the population criteria for opening bank branches. As per RBI’s criterion, there is to be a bank for every village with a population of 2,000 and above. Still, around a third of MP’s villages did not have access to banking.

“A lot of our villages continued to remain out of the banking fold due to the low population count. As a result, while other states were reaping the success of the financial inclusion drive, most of our villagers continued to travel enormous distances for making simple banking transactions,” says Dr Aruna Sharma, additional chief secretary to the state government.

In July 2011, thus, the state government decided to digress from the RBI’s population criteria. “We moved towards following a geography criterion, which seemed more promising for us to cover the entire population. Hence, we came up with the Samruddhi model,” she says.

According to Sharma, the model is based on three pillars. First is the creation of a common digitised database called ‘Samagra’, which is being prepared after doing a parallel census in the state since December 2013. Till February this year, details of almost 95 percent of MP’s 7.25 crore population have been captured.

“Using this digitised database we have created two numbers – Samagra individual number and Samagra family number – and that’s how this has given an edge over other identification numbers based on generating random individual numbers. The criterion unit is the family for all government schemes to generate entitlements like  housing, employments under MNREGA, student scholarship, etc. So it is essential to know the (details of a) family,” she explains.

“All background details about an individual and his/her family along with schemes he/she is eligible for is now in our Samagra database. This will help us disburse government entitlements in an efficient and leakage-free manner.”

Besides, these privileges are now “all processed and sanctioned at one stroke, instead of a file doing multiple rounds for approval”.

Following identification of eligible beneficiaries, immediate depositing of welfare amounts was the next problem, and conduits thus became Samruddhi’s second pillar.

“Till very recently more than 50 percent of the people had accounts in post offices and cooperative banks. (But) these were not on the core banking system (CBS) platform and thus carrying out an RTGS/NEFT funds transfer (through which money is transmitted electronically from one bank to another) from the state government treasure into these accounts was not possible. While we could not ask everyone to shift to a commercial bank for convenience of fund transfers, we got the cooperatives to come on the CBS platform. That was completed in a year’s time with the assistance of NABARD.

“Also, we got into discussions with the postal department and today there is a system called ‘Sanchay Post’ through which money is transferred within 20 days. The post office will adopt the CBS platform soon. With these systems in place, more than Rs 3,895 crore has been paid through these conduits under various social schemes,” Sharma says.

The third pillar was the move away from RBI’s population norm for setting up banking outlets to following a geographical model. “So we decided to have a bricks-and-mortar financial institution after every 5-6 km because the idea of financial inclusion is not just for banks to offer doorstep delivery of government benefits but to ensure that people have an access to all kinds of financial products, ranging from deposits to credit to insurance and then investments.”

As part of this model, all 32 banks operating in the state were asked to identify shadow villages after every 5-6 km where ultra-small branches (USBs) and customer service points (CSPs) could be set up. These USBs/CSPs, Sharma says, are meant to cater to the base village as well as all nearby villages within the 5-6 km radius. “It is like killing two birds with one stone. While catering to more customers from a single point meant more savings for banks, it also meant easier access to banking services for the villagers,” she says.

Through the mapping exercise, banks, in close coordination with the district-level coordination committee (DLCC)  and the state-level bankers’ committee (SLBC) convener Central Bank of India, were able to identify 14,676 villages without any banking facilities. She says 2,998 USBs/CSPs would be required to be set up in the shadow villages.

Why it works

But is the shadow village concept viable for banks? Turns out it is!

To start with, capital costs of owning/renting premises to set up the USBs/CSPs has been done away with as banks were offered 100 square feet space in the e-Panchayat room of panchayat bhavans in these villages. So, all that banks had to invest in was putting up a board outside the premises and they were ready to do business.

Having made all calculations, banks finally arrived at an annual turnover of Rs 45 lakh for the model to be viable, and for banking agents to earn adequate commission. “In order to ensure this and a steady business, every villager in the area had accounts opened at these USBs/CSPs through our collective outreach efforts. In addition, we also opened panchayat accounts with them, and this has been a hit,” Sharma says.

According to Sharma, 2,024 of the 2,998 USBs/CSPs had been set up by February 2014, with average annual turnover of above Rs 1 crore. These units, she says, have been able to do business of more than Rs 800 crore, leaving both the state machinery and bankers all smiles.

Asked about the key reason for the model’s success, Sharma is quick to attribute it to the collective efforts of all stakeholders: “While designing this model, we involved all stakeholders – banks, beneficiaries, all state departments, district-level administration, etc – because the job can ultimately be done only through coordinated efforts of all these entities. The leap made through this model is that deposits in each of these accounts, which used to be around Rs 50, has increased to over Rs 1,000 since the individual (account-holder) is not taking out the entire money coming from welfare schemes, etc, immediately after the amount is deposited.

“We have been able to bust the myth that there is no money in rural areas!”

Umesh Singh, convener, Central Bank of India, the SLBC convener in MP says, “We are very bullish on the prospects of financial inclusion in this state and the biggest reason for this is the proactive bureaucracy, which has exhibited that if there is a will to bring about change things can actually move with speed by overcoming all hurdles, taking together all stakeholders on board.”

Sporting a wide grin when asked about the success of the Samruddhi model, MV Tanksale, former chairman of Central Bank of India and at present chief executive of the Indian Banks’ Association, says: “The MP model has been designed very well. The state government is operating on the concept of shadow villages from the first day. The bureaucratic machinery of the state is also very efficient and extremely committed to the task of reaching the last mile, which is why it has been a huge success.

“The state government had identified their challenges from day one and has constantly been working towards addressing these challenges through a perfect coordination between them and the bankers, NABARD and RBI.”

Appreciation for the MP model seems to be coming from all quarters. In January, UNDP released a report on the state’s financial inclusion model, calling it an “excellent one” and the “best practice model for other states to replicate”.

However, additional chief secretary Aruna Sharma does not want to get too complacent with the way things have panned out. She says there are still a few challenges remaining that need to be addressed at the earliest for the model to become the perfect solution.

This success has to be replicated in other financial products, and the postal department is yet to come on the CBS platform, she says. And the most critical of these is internet connectivity in villages, Sharma says. “Having established a terrific road network even to the remotest villages, it is time now to do the same with internet connectivity for the smooth functioning of USBs. We are in talks with the internet service providers, RailTel and V-SAT, to ensure good internet connectivity even in the remotest parts (of the state).”

While sophisticated technology and a faster internet speed may take its own time to materialise, people of Jasalpur are happy even with the good old handheld device which lets them get to their bank at their doorsteps and most of them share plans of moving to the next level – taking a loan. “I now know what a savings account, deposits and loans mean,” Seema Yadav, who studied till class VIII, exclaims.

“Till three years ago, I never visited a bank. Today, the bank is at my doorstep. And I am able to save up to Rs 500 per month in the bank, which is a much safer way to keep my husband’s hard-earned money,” she says.

As for Sangeeta Chouhan, who completed her post-graduation in English through correspondence last year, working as a BC at the USB located and established at a fixed place with a board in her home is an expression of her freedom and empowerment. Chouhan has been able to open up to 2,000 accounts and does around 150-200 transactions per month, which have gone as high as Rs 4 lakh. “It is a big deal to be able to earn on your own, and with the number of accounts and transactions going up, my operations will certainly grow,” says Chouhan, whose monthly take-home is up to Rs 6,500.

Meanwhile, before returning home from her ‘bank’, Yadav enquires about the state government’s housing scheme, as she has been unable to get a loan under the centre’s housing assistance scheme. “Now that we have been able to save enough, my husband and I will apply for a housing loan under the government scheme. Waise bhi iss jhopad-patti mein kya dum hai? (In any case, how sturdy is this hutment)?” Yadav says as she makes way for the next customer to approach the BC.

(This story first appeared in the magazine's March 16-31, 2014 print edition)