It often takes several hours to complete a single transaction in villages.
Technology is playing spoilsport for banks’ efforts to provide financial services to rural masses.
While banking transactions were conducted on a real-time basis in urban centres, it often took several hours to complete a transaction in villages, leaving ample scope for errors and misuse of funds, industry players said.
At times, in remote villages, depositors seeking to withdraw money from their accounts were asked to come the next day because of poor internet connectivity and power failure, said a senior Reserve Bank of India (RBI) official in charge of customer service.
“This is happening more when it comes to financial inclusion (programme). I have started getting complaints,” the official said.
According to him, banks may have to pay compensations if customers move court.
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With transaction volumes expected to rise following government’s ambitious plan to provide banking services in 73,000 villages with a population of 2,000 or more by March 2012, the problem is only likely to intensify.
About 40 per cent of rural residents are estimated to have no bank accounts. The problem is more severe in the north-eastern parts of the country, where over three-fifth of the population lacks banking facilities.
The Unique Identification Authority of India (UIDAI) was issuing 100,000 cards a day, which would help individuals establish identity for opening a bank account, a senior government official, who did not wish to be named, said.
Till a few months back, the number of cards issued daily was just 500. However, it was expected to reach 10,00,000 in the next six months, the official added.
He expressed doubts if banks, with their current information technology infrastructure, would be able to meet the rising demand for banking services.
Some banks, however, played down the concerns saying business correspondents (Bcs) or branch-less banking had helped improve their financial inclusion objectives.
RBI has encouraged the business correspondent model, wherein an individual or a group is assigned the role of providing financial services on the behalf of banks.
“These minor hurdles will be there in any major initiative. It is not a huge concern for us,” a top official of a government-owned bank told Business Standard.
BCs also echoed a similar view. “As of now, real-time transactions are not that important (for financial inclusion). RBI gives us 48 hours for the reconciliation of records (in case of offline transactions),” said Anirban Roy, managing director, SEED Financial Services, which acts as a business correspondent for several state-owned banks.
“Yes, connectivity is an issue. However, it is also an issue in metros like Delhi and Mumbai. Now, there is a much more focused approach towards providing financial services in rural villages,” he said.
Currently, about 30 per cent of transactions conducted by SEED are online and on a real-time basis.
Some bankers, however, admit that connectivity problems leave scope for errors and misuse.
“While RBI mandates reconciliation of all offline transactions in 48 hours, there are exceptions. Sometimes accounts are not updated even after 72 hours,” a senior official of Central Bank of India’s financial inclusion division said.
“UIDAI has presumed there will be connectivity in villages. However, this is not the case. Connectivity is an issue,” the official said.
Central Bank of India, in partnership with Tata Consultancy Services, has introduced a hand-held device that will transfer data on real-time basis.
Bankers also argue that providing financial services in remote areas often turns out to be expensive due to the lack of proper infrastructure.
“When I ask the chairman of any bank (about financial inclusion), they say it is very costly. If you say you have the technology, cost has to drastically decline...That is why we say core banking solution has not achieved its objective,” the RBI official said.