ICICI Bank plans to add more than 1.5 million accounts in FY15

ICICI Bank, in a move to take ahead its financial inclusion strategy, is planning to add another 1.5 million bank accounts in this financial year.

“We have around 18.5 million zero basic savings bank deposit accounts and by the end of this year, we expect to have close to 20 million such accounts,” said Rajiv Sabharwal, executive director, ICICI Bank, the country’s largest private sector lender.

He added that in order to include more people in the banking fold, the lender apart from opening more branches in the rural areas and relying on business correspondents, will also be using other non-traditional methods such as branch-on-wheels and Tab banking.

“We need to leverage a lot of the infrastructure which we have added last year and increase the penetration using that,” said Sabharwal.

For instance the bank plans to take the branch-on-wheels concept that it introduced last year even further. Currently, the bank has eight such mobile van-based branches that provide banking services to a cluster of remote unbanked villages. Sabharwal, said that similar such number of branches that the bank plans to add hasn’t been decided on, but it will be “significant”.

At the start of this year, the bank has also launched Tab banking for its rural customers to facilitate faster opening of savings account. Apart from savings account, the Tab is also being used to ensure faster processing of loan applications for the consumers.

In the last financial year, more than 75 per cent of ICICI Bank’s new branches were added in the rural and semi-urban areas. And as on now, about 52 per cent of the bank’s overall branch network is in rural areas.

Apart from expanding the branch network, the bank has also been expanding its ATM network in the hinterland and currently has over 2,200 ATMs in semi urban and rural areas. In fact, the bank said that as a result of these measures, in the last financial year, bank’s rural portfolio has grown by 50 per cent.

Apart from rural financial inclusion, the bank has also been focusing on the urban unbanked.

“The focus is also on the urban financial inclusion because there are areas or segments which does not have bank accounts or uses informal means to transfer money and the whole idea is to build on that,” added Sabharwal.

One challenge that banks have been facing in their financial inclusion drive has been the commercial viability of these accounts, as most of these accounts are inactive. Almost out of the 18.5 million account of ICICI Bank, only 30 per cent of the total accounts are active.

Sabharwal explained that generally it takes close to about 1.5-2 years for these accounts to become active. “This is because the state governments also have to digitise the records which are announced, but for the money to move in, the data should electronically go from state government to the banking system. So there is always a lag between the opening of account and the account becoming active.”

Despite the fact that several of these accounts are not active and the financial transaction that takes place via these accounts are relatively smaller, banks still think it makes sense to pursue the financial inclusion path from a long term perspective. “This is a chicken-and-egg situation. You have to start somewhere…I think so as banks one has to start with this opening bank account, these bank accounts may not immediately be viable but over a period of time we expect them to be when the government money starts moving through these accounts,” Sabharwal said.

Apart from viability, banks also believe that distribution and lack of financial education is a huge challenge in bringing the financially excluded in the fold.

Sabharwal believes that the Pradhan Mantri Jan Dhan Yojana — an initiative to bank the poor — will further boost the financial inclusion programme. The new scheme promises a bank account, a debit card and an insurance cover of Rs 1 lakh for poor families in India.