AP govt wants four-fold hike in banking correspondents to handle DBT

CM Chandrababu Naidu wants as many as 27,000 women SHG members as correspondents across 13 districts in the state

With Andhra Pradesh government shifting several of the ongoing social sector schemes to the Direct Benefit Transfer (DBT) delivery mode involving the bank accounts of beneficiaries, the need for banking correspondents is set to go up in the state, particularly in areas where no brick-and-mortar branches exist.

The first to understand this imminent need gap was none other than chief minister N Chandrababu Naidu himself, who now wants to promote the women self-help group (SHG) members as the banking correspondents.

AP's state level bankers committee (SLBC) will be discussing this proposal at its next meeting soon.

Chief minister Naidu held a meeting with Andhra Bank managing director and CEO Suresh N Patel, who is the president of SLBC, and proposed that the banks should appoint as many as 27,000 women SHG members as banking correspondents across 13 districts in the state.

"As the SLBC president, Mr Patel has agreed to discuss this proposal with all the bankers at the forthcoming meeting," SLBC convenor D Durga Prasad told Business Standard on Saturday. The number suggested by the government is four times higher than the existing strength of BCs operating in the state.

There are about 8,000 sub service areas, meaning they do not sustain a brick and mortar branch. Therefore banks chose BCs as the next possible alternative to serve the people in these areas. According to Durga Prasad, currently there are around 6,500 BCs working for various banks in AP.  About half of 1,800 BCs of Andhra Bank are located in AP alone.

The Prime Minister's Chief Economic Adivisor Aravind Subramaniyan has recently visited Krishna district. Among other things he also examined the functioning of the DBT in the public distribution system (PDS), which was launched on a pilot basis by the Krishna district authorities recently.

The state government has also moved the social security pension scheme to the DBT mode on a pilot basis in Krishna district. The beneficiaries are given  Rs 1,500 as a monthly pension, costing the government a little over Rs 5,000 crore annually. Added to these are the Central schemes like MNREGA and Jan Dhan Yojana all being linked to the beneficiary bank accounts.

The BCs are the only available medium for banks to reach out to these millions of beneficiaries in sub service areas. Rise in DBT cash transactions will help Banking correspondents generate more commission and thereby more income for themselves. The banks are allowed to charge a commission of 0.4 per cent commission on DBT transactions.

In Krishna district alone Andhra Bank could generate a commission of close to Rs 1 crore on the disbursement of social security pensions since February, 2016.
 
The State Bank of India is using the services of the qualified banking correspondents to sell the insurance products as well . " When I worked in West Godavari district I even used their services for loan recovery," said an SBI officer currently working in Hyderabad.

AP government wants payments to beneficiaries of various welfare schemes and other transactions done through the newly appointed banking correspondents. The government also fixed a commission of Rs 320 per Rs 1 lakh payable to these new banking correspondents.

According to a government statement, Andhra Bank officials have told the chief minister that the process of appointment of new banking correspondents will be taken up soon.