Rasik Patel, a sugar-cane farmer in Gujarat, will soon be issued a plastic transaction card by his bank, the Gandevi Co-operative Bank. It will look like a credit or debit card, but it is effectively a passbook that will list all his transactions with the cooperative.
So, every time he sells sugar to the cooperative, the amount gets directly credited on to his account, and the details get ‘written on to’ his card. The bank has a passbook (or card) reader, as does the mandi (rural wholesale market) where Patel sells his sugar-cane, so he can check on his account.
The e-passbook, as the bank calls the card, will have more information—such as the quality of produce Patel sold at the mandi on his previous visit, and the amount he received for it.
i-Pay, a technology provider, is helping Gandevi Cooperative Bank roll out its e-passbooks. The company wants to tap the cooperative banking sector aggressively; over the next two years, it plans to sign on 50 of the country’s 2000-odd cooperative banks.
“About six months back, we did some research in the co-operative banking space and found that most of the banks could not match the technological prowess of the private-sector banks in Tier II and Tier III cities. In spite of having been around for decades and having very successful daily deposit schemes, they were losing customers to private banks. As a technological-solutions provider, our proposition to these banks is customer retention,” said Apoorva Wagh, vice-president, marketing, i-Pay.
Cooperative banks are usually based in small cities. Most have one big branch (or nodal branch as the banks term it) and four or five smaller branches. Often, these branches function like silos because the bank does not have a core banking solution, an enterprise-wide software that maps and manages all of a bank’s operations.
Core banking solutions, even in their most rudimentary form, cost Rs3-4 crore and that is beyond the reach of these banks as they have a small customer base of 25,000-30,000.
i-Pay said its solution is almost as good as a core banking one, and although it claims its solution costs Rs1 crore, it charges banks a single-digit fee per customer every time a card is used. i-Pay said it will provide this service for five years to any bank, and over this period, customize solutions as per the requirements of the sector.
“Private banks are pushing us to the corner in smaller cities with their technological solutions. We are losing even our loyal customer base to these banks. We are keen to implement technological solutions but do not have the financial muscle,” said the general manager of a Maharashtra-based co-operative bank who did not wish to be identified.
Ravi Kiran Mankikar, deputy general manager at Shamrao Vithal Cooperative Bank, said while solutions such as the one being offered by i-Pay were good, they couldn’t be considered replacements for core banking solutions.
“End to end automation is what is required to empower cooperative banks, and core banking solutions are a must for such operations,” he added.
According to data available with the Reserve Bank of India, the number of urban cooperative banks has grown from 1,307 in 1991 to 2,105 in 2006, even as their deposit base has grown from Rs8,600 crore to over Rs100,000 crore and advances, from Rs7,800 crore to over Rs65,000 crore.
The deregulation of interest rates, as in the case of commercial banks, have helped these cooperatives garner large deposits.