IMPACT OF AGENCY BANKING ON CUSTOMER'S SATISFACTION IN RURAL AREAS OF INDIA: BY VISHAL SHARMA
Introduction
Rural areas do not have proper resources
and facilities and the people are susceptible in those area to suffer. Banking
services and opening of bank account can be of advantage to both the government
and the individuals in rural areas. How does opening of bank account for people
in rural areas help the government? The government in the last few years have
tried to make sure that the subsidies, pension and other concession granted to
individuals in rural areas reach to them directly in their bank accounts
without involving any authority or middle men and which shall also help in
faster transfer of money to individuals without facing issues of red tapism and
corruption in dispensing the funds to the concerned people in rural area. It is
beneficial for individuals since, they get their allocated subsidies directly
in their bank account and while they might not be educated enough it would have
been easier for middlemen involved in this process to dupe them. Hence, direct
transfer of amount in their account helps avoiding such situation.
Every government wants to achieve the goal
of turning high rate of unbanked individuals into opening an account for them.
The traditional thinking of keeping one’s savings with them is safer ,needs to
be changed and even as late as in 2016 in a survey[1] by
National Bank for Agriculture and Rural Development (NABARD) majority of the
surveyed people said they prefer to keep their savings at home. Hence, in 2014
the government had come up with the idea of going digital through the scheme of
“Digital India” and “Jan-Dhan Yojana”[2] under which they would open a basic savings
bank deposit amount for unbanked customers and with no minimum balance
requirement criteria.
The resources are scarce in rural areas
and so are the banking institutions. Hence, the role of agency banking comes
into the picture. These agents are chosen by banks themselves to reach out
public in remote areas and make banking services available to the public at
large. An agent once appointed by the bank plays similar role to that of a
banking institution in rural areas. Namely all the banks[3]
that have set up their branches in urban areas have taken the route of agency
banking in rural areas so that if they can’t target the public in those areas,
amongst them an agent can be made who would carry out a similar function.
Agency Banking in India
There are pre-requisites that a bank
undertakes before selecting an agent. A proper due-diligence is a must in order
to ascertain the agent and similarly like Know Your Customer (KYC) it is also
important to understand what is their background. The financial institution
require that the agents have good reputation, no pending cases or criminal
records in their name, literacy, technical and banking knowledge, etc. Although
a proper set of criteria which might be checked has not been tailored or made
out by banks while selecting an agent. The rise of agency banking in developing
market is all the more important to reach out additional segment of the
society.
Like mentioned before the functions of
agents are similar to the bank even when it comes to the most basic and primary
function that the bank plays i.e. accepting deposit and lending loan. An agent
once appointed after proper due diligence by the bank may set up a dedicated
store so as to also attract the people near-by and make them aware about the
same. When these agents handle government business the RBI pays them agency
commission and the following can be transactions that may attract agency
commission:[4]
-
Receipts on behalf of the government
-
Pension payment
-
Under PPF scheme of 1968
-
Under Senior Citizens Savings Scheme and Kisan
Vikas Patra of 2014, amongst many other schemes.
Impact on Customer Satisfaction
The remote areas have seen a rise in
agency banking being set up in their vicinity and with schemes such as Jan-Dhan
Yojana that has motivated masses to open a savings bank deposit account the
role of agency banking has come into picture. How is agency banking having a
better impact than banks in rural areas?
-
Agents
are selected on the basis of their knowledge and skills and it is easier for
them to communicate and connect with people in rural area and make them
understand the nuances of banking.
-
Banks
offer varied services which might not be of help in rural areas but agents
prima facie deal with primary functions of the banks and selected secondary
functions such as consultation which is what the people want primarily apart
from other functions.
-
Agents
being one of the people from the area, have better knowledge of the people
residing in the vicinity and hence, it is easier for them to carry out the
process of due diligence.
The customers are in turn satisfied with
agency banking as things are easier to understand for them from agents. The
digital era is something the people in rural area are not well verse with and
banks to be updated with time have updated themselves digitally. Hence, it is
only normal for the customers to be availing agency banking since, with less
technology it helps them avail services. The 2018 Annual Report[5] of
Financial Inclusion in India although does tell us that the financial services
to adult have grown over the years and in 2018 it stand at 82% of adults using
financial services, which is a great picture due to the schemes implemented by
the government.
[1] All India Rural Financial
Inclusion Survey (2016-2017) by National Bank for Agriculture and Rural
Development(NABARD)
https://www.nabard.org/auth/writereaddata/tender/1608180417NABARD-Repo-16_Web_P.pdf
[2] Pradhan Mantri Jan-
Dhan Yojana, Department of Financial Services.
[3] List of Agency Banks in
India as on March 31, 2017 by Reserve Bank of India
https://m.rbi.org.in/commonman/English/scripts/Content.aspx?Id=2139
[4] Master Circular on
Agency Commission by RBI as on January 2016
https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9887
[5] Financial
Inclusion in India – Annual Report (2018)
http://finclusion.org/uploads/file/india-wave-6_final-5-28-19.pdf
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