And now for something completely different

Earlier today, my friend Rafat sent over snaps of some of our earliest reportage. This is circa 1998, from our first job at now-shuttered A&M, India’s first magazine on advertising and marketing. Am pasting them below and noting – with much pride and approval – the pun in one of these headlines, for a report on a tieup between an ad agency and pr firm. 🙂

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The End of the Silly Common Banking Correspondent Model?

since may this year, i have been tracking a plan from the department of financial services to split india into 20 clusters, and to appoint a common banking correspondent company for all public sector banks operating in each cluster. it is a textbook case of policy adventurism. the department, a part of the finance ministry, has not paused to wonder whether putting one company in charge of all financial transactions of the poor — between the government and them, and amongst themselves — can result in that company developing monopolistic tendencies. something that banks themselves are deeply apprehensive about. strangely, alarm bells did not go off inside the department even when the auctions to appoint BCs started, and bids touched unexpectedly low levels.

well. there is good news at the end of all that. as this story reports today…

The government is likely to shoot down the Department of Financial Services’ (DFS) plan to appoint common banking correspondent (BC) companies for transferring cash to poor people and replace it with a country-wide network of ‘micro ATMs’, as it seeks to finalise the last mile payment architecture for cash transfers.

In a meeting on Monday evening, Rural Development Minister Jairam Ramesh, UIDAI chairman Nandan Nilekani, and Planning Commission officials met Finance Minister P Chidambaram to share their reservations about the common banking correspondent model. An official who attended the meeting told ET that it was agreed in-principle to junk this model but a final decision will be taken by the Finance Minister.

In a SMS to ET, Ramesh confirmed the development. “The DFS model is now history. Women SHG, Ashas, anganwadi workers, post offices, teachers, kirana stores, fertiliser shops, etc, can now be BCs,” he said.

the government is now thinking of using micro-atms, as the nandan nilekani report on micropayments had suggested, to make cash transfers reach across the last mile to targeted beneficiaries. whether these will work or not is an open question as well. but that is another story. to be written after another set of field trips. for now, i am glad that this one cluster, one BC model might be on its way out.

Another update on the banking correspondent auctions

A newly-formed association of banking correspondent (BC) companies has criticised the finance ministry’s ongoing plan to split India into 20 clusters, and to appoint a common BC company for all public sector banks operating in each cluster. In a white paper released on Thursday night, the Business Correspondent Network Managers (BCNM) Forum, a grouping of 25 BC companies, faulted the ministry’s decision on a number of grounds.

The complete story here. For context, see this and this. Or scroll down this page and you will see a bunch of more granular posts on how this finance ministry plan has unfolded since it was first unveiled three months ago.

On the banking correspondent auctions…

for some time now, ET has been reporting on a worrying move by the philosopher kings in the department of financial services (the offshoot of the finance ministry tasked with managing the banking sector) to overhaul the banking correspondent (BC) model.

well, the auctions to appoint common BCs for all public sector banks in a “cluster” (one large or a couple of smaller states clumped together = one cluster) are underway. and the bids are frankly astonishing. after complaining for years that a 2% fee to deliver payments, etc, is not enough, companies are bidding ridiculously low amounts – the fourth auction was won by a company that bid 0.11% (or 11 paise to deliver to hundred rupees).

till now, i had been filing online stories (only for the ET website) after each reverse auction. the story out today, however, is written for the paper. it takes stocks of how the auctions are going and flags the fact that companies, about to be entrusted with a lot of public money for welfare, are bidding oddly low amounts.

this raises three possibilities. either, the economics of the BC model have changed entirely in the new approach (perhaps due to the fact that a monopoly is being created). two, companies are bidding out of desperation and they will fail to deliver. or, three, they are going all out to win contracts figuring they will work out ways to make it viable later (the time-honoured strategy of contract renegotiation after winning the bid, perhaps).