On Cross-selling & RRBs Business Opportunities

ArindamGautam

The writer works with Assam GraminVikash Bank

Ever since the Narendra Modi-led NDA government came to power, the process of spreading financial literacy and inclusion of all segments of population has gained tremendous importance. The Prime Minister of India for deepening Financial Inclusion launched the PradhanMantri Jan DhanYojana (PMJDY). Union Finance Minister ArunJaitley while lauding the progress said that India has almost become a fully banked country. He has expressed optimism by saying that the success of this mission has paved the way for direct transfer of benefits through bank accounts thus weeding out the scope of siphoning of funds. For a country like India, Financial Inclusion is a very important need. And this certainly is not an absurd dream to have dawned upon our policy makers all of a sudden. Several other countries who were at our phase of economic transformation too have taken such measures as well as the varied types of social security schemes we have recently embarked upon. Having said this, it, however, may not be out of place to question the ‘optimal’ usability of such massive flagship schemes. Is it really making all the citizens financially literate and willing to avail of the banking services? The following few indicative questions back this assumption. One, the forms and other documents of most banks are printed in English making it difficult for a person difficult to comprehend. Two, banks, even rural banks, are located far away from several difficult to commute villages and it very costly to go there to deposit and withdraw money. Thirdly, under the garb of such government schemes are banks not duping customers by cross selling some other products on the pretext of augmenting banks’ ‘non-interest income’ and  fulfilling the personal needs of select senior bank officers’? 

The Sentinel(April 10, 2018) in its front page carried a news story captioned: “RBI to curb banks to take customers for a ride in North East”. The report carried that the country’s banking regulator is contemplating on launching a massive awareness drive in the North East to prevent both public and private sector banks to take their customers for a ride. The report added that the Reserve Bank of India (RBI) has released a Charter of Customer Rights which “enshrines broad, overarching principles for protection of bank customers and also enunciates the ‘five’ basic right of bank customers.” The report stated that banks should not subject to cross-selling without proper consent of the customers and without informing of all the realities. The Charter, as per the news report, stated that customers must not be subjected to unfair business or marketing practices, coercive contractual terms or misleading representations.   

The above news report is definitely a matter of concern. Why is it that the country’s apex bank has to come out with such a Charter, especially in the North Eastern region? Already the north eastern region is suffering from an acute paucity of banking penetration vis-à-vis the rest of India. And such directives in the form of a Charter from RBI indicate that something is terribly wrong with the operational procedures of the banks in North East India both public and private. It infers from the news report that banks—both public and private—are somewhat trying to dupe the gullible people of the North East by selling irrelevant products and services, referred to in banking parlance as ‘cross-selling’.  There is no gainsaying the fact that financial inclusion is aided with sufficient financial literacy but the second must complement the first. That is to say, people must be benefitted after opening an account. Otherwise organizing financial awareness and literacy will not serve the desired purpose if the end product is not customized to the needs of the targeted people. There is a need to identify the needs of the people and then devise products and services to fill that gap. True and agreed that people can receive subsidies and remittances by opening a savings account but is it the only requirement of the people especially those who are still financially excluded? The product should be designed in such a way that by merely opening a saving account, a person is entitled to a life insurance, accidental insurance, debit card and a pension scheme, if applicable. One should be able to get a sort of integrated products at one go and with just one set of documents. There ought to be simplicity in the application forms which should contain only utmost important fields printed both in English as well as the native language of the region. At present even in the RRBs and co-operative banks most of the forms are in English. But this certainly has never been the objective behind cross-selling. In this process of cross-selling actually in the name of earning ‘non-interest income’ by the banks, a section of senior bank officials are fulfilling their vested needs. The more insurance policies a senior officer can force the branches under his jurisdiction to sell, the more pecuniary or non-pecuniary benefits accrue at this end, a sad reality behind all this brouhaha behind ‘cross-selling’. This is a greater misfortune for the clientele of public sector banks whose customers are usually people with average income levels and whatever they have deposited in the banks has been earned by them through the sweat of their brow.

There is also need for banks to move beyond business correspondents and involve some alternate delivery channels. Today every individual has access to a mobile phone and in majority of the cases it is the prepaid phone that has the most subscribers. The outlets where mobile top-ups and recharges can be done are frequented mostly by the people. They can be made a great stakeholder in this process of financial inclusion. Most of the branches even Regional Rural Bank (RRB) branches are located far away from the villages. There remains the problem of people from far off places visiting the branch for depositing money in the limited time frame of the banking hours. Just like a prepaid mobile subscriber visits the mobile recharging outlet and recharges the mobile, this facility can be extended by the banks where one can deposit money in the account with the help of the mobile recharging point.  This process is already in vogue to some extent with some agencies like Airtel Money, Vodafone M-pesaand now recently by PayTM too. It may be suitably customized and modified to work on a large scale. For withdrawal purposes some ATM like low-cost simplified devices can be located at some strategic places for the people residing in the far-flung areas. It is quite apparent that spreading financial literacy requires some holistic approach. But at the same time it needs no reiteration that financial literacy will be a successful endeavour if the final product will find takers. This is where the banks need to work upon. There is an urgent need identify the need and to evolve—customized and integrated— useful products leveraging technology to the fullest. A cue can be taken from the E-choupal initiative of ITC. The task of bringing the womenfolk to the ambit of banking services can also be under undertaken if modalities like the Shakti-ammaproject of Hindustan Unilever is worked upon. This class of hitherto financially excluded people is an immense business opportunity. Owing to their locations and branch network, this assumes special importance for the RRBs as well as cooperative banks provided the fact that they are able to reap it in the right way. For RRBs, at the same time it is imperative that a right selection of their customer base is being made. A core clientele base should be selected and should be operated upon as rural marketing expert PradeepKashyap has been quoted as saying, “Companies should first understand the entire eco-system of the rural market, spend resources on extensive research on consumer behaviour in small towns and then customize solutions around their world view, not by the world view of the Companies.” This prescription by this brilliant thought leader and one who has revolutionized the way corporates now think about rural markets—not as an unviable business proposition but as a prospective and uncharted business area— now should be considered seriously by the Regional Rural Banks too. RRBs would do well to note that they cannot compete with either private sector banks or public sector banks as far as the wherewithal are concerned.  Now even private players and microfinance institutions are encroaching upon this hitherto unsaturated rural markets(especially with regard to financing Self-Help Groups, where repayment too is very high and chance of default are very low). And until and unless the RRBs considering their long standing experience in this field get the ‘first mover’ advantage, one would have to settle for the crumbs. It is however, a welcome augury that Assam GraminVikash Bank, a prominent one amongst Regional Rural Banks has already started organizing training programmes for its staff on these lines. But much remains to be done and until and unless people working in the RRBs consider the SHGs as a viable business opportunity, such training measures will yield little results. A transformation needs to happen in the mindset. They should realize that we will be simply be wiped out by their private counterparts if we don’t mean business. The sooner they realize, the better it is.

(Views expressed are his personal)