Karnataka relies on bank-in-person model for villages

With many villages are devoid of banks, the state government has worked out an alternative to provide last-mile connectivity in terms of banking facilities.

Now, Business Correspondents (BC) equipped with handheld devices will work out of Gram Panchayat offices and provide villagers with access to basic bank transactions including cash deposit, withdrawal and transfer.

Karnataka has 6,153 gram panchayats and each one will get a BC. This comes after repeated pushes from the government, resulting in banks identifying BCs and allocating them to Gram Panchayat offices.

This last-mile connectivity is crucial for the success of the government’s flagship Aadhaar-based Direct Benefit Transfer (DBT). Under the centralised DBT system, payments will be made to only those bank accounts that are seeded with Aadhaar to plug leakage.

"Beneficiaries under several government schemes are located in rural areas. For the success of giving these beneficiaries Aadhaar-based cash benefits, banking services must be made available at the level of a gram panchayat or village," Additional Chief Secretary (e-Governance) Rajeev Chawla has stated in a letter to chief executive officers of all taluks.

A gram panchayat is the first in a three-tier system of rural self-governance. Gram panchayats come under taluk panchayats, which come under the zilla panchayats. A gram panchayat covers one or more villages and has elected members.

The government has directed all taluk panchayats to make sure the BCs are given space on gram panchayat premises with internet connectivity through Bharat Net, the Centre’s rural broadband project.

"Whenever an Aadhaar-based transaction happens, it’s important that people are able to withdraw money," Annapurna K, DBT portal project director, said. "We find that some beneficiaries may not be aware which of their bank account has been seeded with Aadhaar. We hope BCs will help make Aadhaar-based DBT a success."

BCs assume significance because the state’s banking network is skewed. According to data from the State Level Bankers’ Committee, Karnataka has 10,915 operational bank branches and three-fifths are located in semi-urban, urban and metro locations. Of the rural bank branches, the majority belong to the five major banks - Canara Bank, Corporation Bank, Syndicate Bank, State Bank of India and Vijaya Bank.

"BCs did not have any place to sit. Now that we have mandated that the BCs will sit on the gram panchayat office premises, your bank is now in the gram panchayat itself,” Chawla said.