Historically, financial institutions (such as commercial banks or agricultural or rural development banks) have been reluctant or unable to provide sustainable services in rural areas. Due to this exclusion, rural communities are prevented from unleashing their capacities. In rural areas, financial literacy is generally low. This makes it difficult for individuals and businesses to develop effective risk management plans. “This is where the network of business correspondents and the Customer Service Points (CSP) come in”, explains Ajeet Kumar SinghMD, CEO and Founder, SAVE Solutions in an exclusive interview with Bizz Buzz
How do correspondent banking networks provide last mile banking services to customers in rural India?
The rural population in India does not have access to structured sources of credit due to a lack of information, awareness and even documentation. Additionally, physical distances and language disparities present a greater challenge for this group of people. Rural residents are educated about the value of having bank accounts and loans at community meetings organized by correspondent banking networks. These networks of commercial correspondents work closely with disadvantaged groups with the “Doorstep Banking Service” to bridge this gap and bring the rural population into the field of organized finance. Home banking services are provided through home banking agents (DSAs) engaged through commercial correspondents, which includes both non-financial and financial services.
How important is a formal financial system to bring the unbanked rural Indian population to provide easy access to the financial needs of rural India?
Historically, financial institutions (such as commercial banks or agricultural or rural development banks) have been reluctant or unable to provide sustainable services in rural areas. Due to this exclusion, rural communities are prevented from unleashing their capacities. In rural areas, financial literacy is generally low. This makes it difficult for individuals and businesses to develop effective risk management plans. This is where the network of business correspondents and the Customer Service Points (CSP) come into play. This model allows deep penetration into the Indian hinterland. The Business Correspondent (BC) has a number of tasks to perform, such as promoting the importance of banking, investment options, deposit systems and interest rates to the unbanked population; provide banking assistance in processes such as opening bank accounts, fixed/recurring deposits and collecting money to be deposited in own or beneficiary accounts. This is only possible with a network closely tied to a specific domain as it provides greater protection for both tied banks and customers. Therefore, if properly implemented, this concept could contribute to the financial inclusion of rural populations.
Brief us on the birth of Save Solutions?
SAVE (Society for Advancement of Village Economy), an NGO entity, was envisioned to provide last mile banking services to unbanked and underbanked people in the rural segment of India. SAVE became a Trade Correspondent of the Circle of State Bank of India and after that based on the performance State Bank of India gave the status of Domestic Trade Correspondent to SAVE in 2012. SAVE Solutions is a registered entity in under the Companies Act 2013. SAVE made this transition in 2014 to create an enabling environment for expanding the CSP network and improving service quality.
SAVE currently operates with 4 PSU banks and 2 RRB banks, namely State Bank of India, Bank of India, Bank of Baroda, Punjab National Bank, Baroda UP Bank and Jharkhand Rajya Gramin Bank respectively. Acquiring a wholly owned subsidiary of Karmayogee Finance in 2014, the subsidiary was renamed SAVE Financial Services. This company has helped to offer internal loans to SAVE CSPs as well as loans to MSMEs. In addition, it also offers LAP products.
Which financial institutions have you partnered with?
CSPs are instrumental in building the bridge that connects banks to remote customers. SAVE Solutions CSPs have been activated since 2010 with State Bank of India as the first partner. Today we also provide the CSP networks for Bank of Baroda, Bank of India and Punjab National Bank and are looking to onboard more PSU partners. These banks not only leverage the CSP network for banking and lending, but also for collection and collection. This is due to the micro-level engagement these staff enjoy with end customers, earning their trust and helping banks in the process. Furthermore, CSPs are also involved in identifying first-tier borrowers, after which banks step in to provide their services.
This is possible thanks to a well-evolved internal IT architecture with an integrated MIS running through SAP ERP, as well as high quality human resources. This mechanism provides better fund management systems and smooth operations across the country; and continuous monitoring as well as initial assistance with a very fast grievance mechanism. All Customer Service Point (CSP) or Kiosk staff receive computer training and cash management system training to improve customer registration and service delivery, as well as their revenue. Recently, we have forged links with SBI in the field of co-loans and AT-BC Business.
What are the business sectors you address?
Save Solutions offers a bouquet of financial services and products under one roof. Not only does it provide last mile banking and all banking liability products through its CSP network, but it also offers a diverse range of lending products including Micro Finance through the JLG model, loan against property, business loans , co-loans, 2/3 -Wheeler loans, home loans. The company’s robust computing platform enables essentially paperless operations.
What are the company’s future plans?
We plan to add more products to our portfolio over the coming year. Our discussions with other PSU banks are ongoing and we plan to introduce agricultural loans and co-loans with other PSU banks. In addition, we have also taken the initiative to expand the asset business and home lending through our existing channel. We aim to be registered with the Indian Stock Exchange by 2025.