The finance ministry will treat a bank representative offering basic services in villages using a Net-enabled laptop as a branch, widening the reach of the government's financial inclusion plan and doing away with the need to spend on infrastructure.
The ministry directive comes at a time when banks have raised questions about the viability of setting up brick-and-mortar branches in rural areas. At present, only about 5% of India's 6 lakh villages have bank branches. There are 296 under-banked districts in states with below-par banking services. Under the financial inclusion plan, the government aims to provide banking services to 73,000 villages, each having population of 2,000 during the next three months.
"The purpose is to minimise the cost of financial inclusion and see that the cost has a relationship to the growth in business.
The representative, or "business correspondent", will work from this "ultra small branch", which will be of the size of a 100-200-sq-ft room. The correspondent, who will be appointed by the bank, will deal with all cash transactions and other routine work in that area. Abank officer will visit this ultra small branch once a week and connect this business correspondent to the banks' core banking solution (CBS) through a secured network enabling data access and transfer between the small branch and the bank.
"This bank officer will clear applications for new account openings, loans, recovery follow-up and other business development on the spot
