Our banking system is much maligned, so when some good things happen through it, it is only fair to record them. Two came to my notice recently—the preparations for the loan waiver settlements; and NREGA payments.
Nearly 4.5 crore farmers eligible for the Rs 71,600 crore loan waiver, have to receive a credit in their account by the end of June. For many small farmers, this would completely wipe out their overdues and they would be able to borrow again from banks. Without going into the merits of the loan waiver itself (about which I have written separately), one fact cannot be denied—that the only way such a large number of farmers could be helped in such a short time was by making full use of the banking system. It is at such moments that one can see the virtues of a command and control system. The “controlling offices” of various banks have sent officials to the field, to meet the June 30 deadline to wipe out overdue loans. But all of this is being done the old 1970s way—physical presence, paper work, manual entries in the books. The manner in which the waiver is being implemented is as old-style a solution as the idea of the waiver itself is, but at least the system is working.
The second example is a study in contrast. During 2007-08, Rs 10,738 crore was paid as wages under the National Rural Employment Guarantee Act (NREGA), to 3.3 crore households. The Ministry of Rural Development had advised the State Governments to open accounts of NREGA workers in banks and post offices. As a result, 1.62 crore bank/post office accounts were opened for NREGA payments, and more are planned. Andhra Pradesh, with 80 lakh accounts was the leader, but the opening of 21 lakh accounts in Jharkhand and 14 lakh in Madhya Pradesh, is a commendable surprise from the so-called BIMARU states. Banks open accounts for NREGA payments without any charge. Separate accounts are opened for women workers even when their husbands also work in the same site. Data regarding payments through bank/post office accounts is entered in the job cards. Technology is being used because of sheer volume of transactions. In AP, muster rolls are put on the web, and smart cards are being issued to workers, through which they can also operate their bank accounts.
I had a chance to witness such an effort at technology assisted financial inclusion. In the month of May, Somoti Devi Mahavar from the scheduled caste “Indira Colony” of Malarna Village in Dausa district, Rajasthan successfully opened a bank account in State Bank of India’s Dausa branch 12 kms away, without leaving her village.
To help her do this, the BASIX Business Correspondent team used a laptop with a webcam to take her picture, a biometric reader to record her fingerprint, and sent it to the smart card provider, A Little World, in Mumbai, using a mobile phone. A week later, a bunch of smart cards came from Mumbai to Dausa. This included Somoti Devi’s card, complete with her photo, SBI account number, and her fingerprint embedded in a chip. The team was now ready for her to transact.
Self-consciously, Somoti first identified herself by putting her index finger on the biometric reader. Then she deposited Rs 10, the transaction being recorded in SBI’s central server in Mumbai, using a mobile phone. She was given a receipt, printed on the spot by a tiny thermal printer. Somoti showed the slip of paper to her literate daughter, and her nod gave a lot of confidence to the mother. But Somoti was a tough customer—she came back after fifteen minutes and asked to withdraw Rs 10 from her account. When this was done successfully in a few minutes, she smiled across a half-drawn sari pallu and said “Now I am satisfied. Now I will put my money in this.”
So, the “excluded” customers are smart. Can the delivery system match them? It has a new ally—technology, which can ensure complete and accurate recording of transactions, reduce paperwork and cash movement, and thus transaction costs. More importantly, it can enhance convenience and dignity for account holders. This is a great opportunity to use the NREGA to also build the NEFIS—nationwide electronic financial inclusion system, that India’s poor so badly need. Technology, however, is not a panacea.
A lot of corruption prevails, which activists are rightly exposing. We must remember that while exposing malpractices in NREGA, activist Lalit Mehta was brutally murdered last month in Jharkhand. Such heroic efforts, coupled with web display of muster rolls and direct payment into bank accounts, will make a significant difference in reducing leakages. Remember railway reservations before computerization? The same difference can be made in NREGA.
The author is chairman Basix, a microfinance company.
