Nexus of Good: Highly potent initiative

Both the Central and the state governments have been concerned about reaching out to the masses to ensure their inclusion in seamless financial transactions. Many models have evolved but their financial viability has always been in doubt. This is the reason why some state governments are now experimenting to use existing institutions to facilitate financial inclusion. Karnataka seems to have made a promising start. Several efforts have been made in this regard:

• Common Service Centres (CSCs) at Fair Price Shops (FPS): This was an initiative taken in 2017-18 wherein an attempt was made to convert FPS to CSCs. However, not many fell for this idea. A fresh drive was launched during the current year. Consequently, 700 FPS have been converted into CSCs, and are providing several services to locals including filing applications for several government schemes.

• MUDRA loans to FPS dealers for capital: This is to make FPS into small business enterprises. This initiative is a long haul, which is yet to pick up.

• Sale of non-PDS commodities: As shops are open six days a week except on Tuesdays, FPS dealers are in a position to provide space for other commodities and sell authentic products. This initiative is yet to scale up.

• PM-WANI services at FPS: The basic idea is to provide Internet data at cheaper rates through Wi-Fi to locals. Two pilot projects are being run successfully. The attempt now is to scale it.

• IPPB Business Correspondent (BC) / financial services at FPS: This is the latest initiative where the main objective is to enhance financial inclusion, thereby also increasing the income of FPS dealers. By increasing the footprint of BCs in the local area, an attempt is being made to deliver several authentic financial products, including the broadening of insurance coverage.

The most critical among the aforementioned initiatives by the state government is the one to transform the FPSs into Banking Correspondents (BCs). This has been done to provide additional income and livelihood to FPS owners and curb the irregularities taking place at the FPS, run by the Food, Civil Supplies & Consumer Affairs Department (FCSCAD).

In August 2022, the FCSCAD signed a Memorandum of Understanding (MoU) with the Indian Post Payment Bank (IPPB) to provide banking services primarily to those who didn’t have access to such services. In just four months, 3,317 out of the 20,283 FPSs have been converted into BCs across the state. This is the highest in the country. Madhya Pradesh and Telangana are the only two other states to have signed MoUs with the IPPB. However, the two states have not covered much ground, as MP has reportedly converted only 304 FPSs into BCs and Telangana just 30. Other states are still in the initial stages of discussion. With the initial success, Karnataka is also helping the other states in implementing the initiative.

Apart from other measures, this initial success can primarily be attributed to simplifying the procedure of the application process and continuous follow-up.

The extant procedure for getting an FPS entailed the submission of an application, along with a registration fee of Rs 11,000 and a security deposit of Rs 15,000. This security deposit seemed to be a bottleneck. Hence, this condition was removed from the MoU so that FPS. There were other procedural bottlenecks as well. Each FPS dealer had to submit clearance certificates from the revenue office, police station, banks and food inspector. All these were replaced by a single certificate issued by the food inspector.

India Post banking officials expected all these applications to be submitted in their office, and there was a lack of coordination. Arrangements were worked out for coordination between the food department’s district officials and the IPPB team. IPPB teams were also sent to villages to train and conduct camps at the FPS level.

The authentication process was also simplified, and trainers were identified to train — consequent to the installation of the BC application.

The commission for fair-price shop dealers in the state was relatively low when compared to other states. There were also allegations against dealers of 'stealing' the ration meant for the poor to make money. The idea now was to curb such activities and enhance the income for FPS owners. The initiative to convert FPS to BCs is yielding encouraging results and is making them sustainable.

These BCs under the Aadhaar-enabled payment system allow customers to withdraw money from any bank account through the digital account of IPPB. They can also take insurance policies (low-cost premium: group accident guard of Rs 399 per year with a benefit of Rs 10 lakh and all kinds of general insurance) and other services.

For creating one digital account and selling an insurance policy, the FPS dealer gets Rs 10 and Rs 15 respectively. The dealers who were earning Rs 6,000 to Rs 7,000 earlier are now getting income of Rs 12,000 to Rs 15,000, based on their location and population of the area.

A beginning has already been made and the idea has worked. During the first phase, the aim was to convert 9,000 individual fair-price shops into BCs; 50 per cent of the target has already been achieved. In the second phase, the department aims at converting the remaining 11,000 FPSs which are managed by co-operatives, societies, self-help groups, and others.

What is being made to happen by a committed team of officers under the inspired leadership of Gyanendra Gangwar is a wonderful example of Nexus of Good. The experiment has not only worked, but it is also now being scaled and holds enormous potential to be replicated in other states.

Views expressed are personal