Rajendra Singh, 27, who moved from Uttarkashi in Uttarakhand to New Delhi three years ago to work for a mobile repairing firm, sends money to his brother back in Uttarkashi every month. For that, he either visits a State Bank of India (SBI) branch in New Delhi as his brother holds an account with SBI in Uttarkashi or goes to an SBI-Eko point, which is authorized to remit money to any SBI account. However, this month when he visited the SBI branch in Nehru Place, New Delhi, to send money, there was a long queue for transactions and he would have to wait for at least an hour to make the deposit.
While Singh was weighing his options—whether to go back to work and come another day or wait for his turn—a person at the branch came to his aid.
Singh was informed about Cash-Neft (National Electronic Funds Transfer) option, which enables a person to go to any bank branch to deposit money in the savings account held in any other bank. Singh’s deposit was accepted in the Canara Bank branch nearby.
What is Cash-Neft?
This facility essentially works like this: say person A wants to deposit money in person B’s account who holds the account in bank X. Person A can walk into any branch of bank Y anywhere in the country which is core banking solution-enabled and deposit cash in person B’s account.
There is a small cost attached to Cash-Neft transaction. As per RBI guidelines, for Neft up to Rs. 10,000, the charge is Rs. 2.50 plus service tax; beyond that amount, the charges are Rs. 5 plus service tax.
The product was meant mainly for the migrant population like Singh. The facility aimed to include these migrants under the purview of financial inclusion thrust.
The product has not been advertised much and bank employees also seem to be ignorant about the facility.
“The lack of awareness among bank employees has been a major hurdle,” says DK Mittal, secretary, department of financial services, ministry of finance.
The department of financial services has of late started pushing the product and has commissioned pilot projects to ascertain its effectiveness.
Says Ashish Das, professor, Indian Institute of Technology-Bombay, who has been spearheading the projects and has put out reports on the projects too, “Our first pilot was in Hadapsar in Pune and another one is going on in New Delhi right now and soon we will be starting the same in Mumbai. This will also decongest bank branches that are overcrowded.”
The report ‘Financial Education on Remittances-Impact on Inclusive Growth’ by Das states that the basis of the success of this pilot is to have a proper awareness programme, initial handholding and showcasing the convenience and economics.
“The bank management knows about it, but maybe it has not percolated down to all other employees. Also, the bank might think that what is the point of serving a person who is not our customer,” says Das.
But then why has the product not been popularised yet?
“If cash is dumped on a bank, which they cannot use, unless there is payment requirement, then it is additional cash in hand,” says MD Mallya, former chairman and managing director, Bank of Baroda. It is also not very cost-effective for the banks since the costs are very low, says Mallya.
The other concerns include target market—high net worth individuals and regular customers.
“One has to look at the capacity of banks too. It is a low-cost product but definitely a low-cost model can be developed to cater this segment, say through business correspondents,” says a former retail business head of a private bank on condition of anonymity. Das, too, has similar suggestions.
The way forward
The department of financial services plans to take this project to every city of the country where there are migrant workers. “Soon there will be campaigns as well to popularise this product,” says Mittal. He adds that the department has interacted with many bank managers and convinced them to offer this product.
Nevertheless, the product at its core remains valuable as it is demand-driven, says Das. One of his recommendations has been to increase the charges that a bank can levy. This he says will incentivise banks and, while letting those from the low-income group use the facility.