An interview with Prof. Charan Singh, RBI Chair Professor, IIMB, on the road ahead for Bharatiya Mahila Bank which opened its first branch in Mumbai today
The first branch of Bharatiya Mahila Bank (BMB), India's newest public sector bank, was inaugurated on November 19, 2013 by Prime Minister Manmohan Singh. The BMB will focus on lending predominantly to women, but there will be no restriction on account opening by men. Usha Ananthasubramanian, MD of Bharatiya Mahila Bank, said the bank, headquartered in Delhi, plans to lend to women or to businesses which are either managed by or make products for women.
Dr. Charan Singh, RBI Chair Professor, IIMB, analyses whether such a bank will lead to true financial inclusion, empower women and inspire women with entrepreneurial skill, and wonders in a country where half of the population is still unbanked, how good is the idea to focus on one section of the society.
What is the role you expect such a bank to play? And how do you think it will be different from other public sector banks or banks that have all-women's branches?
I should say the Bharatiya Mahila Bank is a very good initiative. The announcement made 8-9 months ago, in the Union Budget was certainly a welcome step. The focus in in this case is that the Board would be predominantly a women's board, and it's expected that the women on the board would be able to tailor-make schemes for the women to implement them on the ground. So maybe there will be synergy between those who are designing products and those who are using those products at the grass-root level - be it deposit schemes, credit facilities, or timings and days of operations.
In an all-women's branch of a commercial bank, which have been prevalent for some time, general products have been designed for people across the country, and therefore, the focus is really not on the product that would be useful for women. In the case of the Bharatiya Mahila Bank, I think, the instrument or the product as well as the design of the product will have an additional focus exclusively on women.
If you look at the track record of women in the financial sector, we have had some very good entrepreneurs, managing directors as well as senior officers in banking and financial sector who have been women. Therefore having an
all-women's bank will probably give a better opportunity for more women to join such a bank. To that extent, it is a good move.
If you look at micro finance institutions in India, the record of women's performance is better than that of men. So to that extent if the women's bank is focusing on providing credit to women, then I would think there will be better performance and lower non-performing assets (NPAs) for the bank. I think it is a very good initiative.
Do you think the bank should offer subsidized credit to women?
I would like to go back to the times of Mahatma Gandhi who said if you educate a woman, you educate a family. I think if you are able to provide resources to women to create employment, then that is a very good utilization of national resources. A small subsidy to prompt women to come and join in the enterprise of growth and progress is worth it. If 50 per cent of the work force in India is not contributing to active economic growth by participating in economic activities, then the country as a whole is the loser. If we are encouraging them to participate in growth now, then that's a positive thing. A small subsidy for encouraging women to join the work force as entrepreneurs is a very good effort at a nominal cost. It will have far larger benefits in the long run.
What are the challenges for the Mahila Bank?
Last summer, four of my intern students from the Cluster Innovation Centre, University of Delhi, did a study on the feasibility of the all-women's bank, and they interviewed people across the country - some in Delhi; some in Bangalore and other parts of India. In the interview they found that some women in India would prefer to walk into a branch run by women. To that extent, I do see utility of this effort.
Click here to see the full study
But the issue is that, across the world, the all-women's bank has not been experimented very much. Only in Pakistan and in Ethiopia, as some of my summer trainee students found out, there have been all-women's banks. And in these countries also, it was not really restricted to women only; men's participation did emerge. So, the first challenge would be: would we be able to restrict an all-women's bank to women? I don't think that will happen. Sooner or later, the women's bank would have to recruit men and these men would have to be sitting in the branch and this would defeat the very purpose of having an all-women's bank. If news items are to be believed, 35-36 per cent of the work force will be men. I am not sure if that clientage of women who would like to interact only with women in a bank will be served.
The other challenge is the opening of branches. The first branch was inaugurated today (November 19) in a very elite place in South Bombay and in a very elite building. I don't think the objective of financial inclusion will be served by opening a branch in such an area. There could be urban requirement; I am aware that even in urban areas people do not have bank accounts and therefore you will succeed because right below the Air India building (where the first branch of
the bank is situated) is a group of women who sell
flowers and garlands. Perhaps they will come and open a token account. May be that is financial inclusion! I don't know exactly how that will happen. But the challenge is: how would you attract the financially excluded population to feel motivated to come and open an account at the all-women's bank? One must pay attention to the location of branches in such a model. The bank could set up branches in rural areas, especially areas where there is a lack of commercial banks or co-operative banks, and where the business correspondents of commercial banks are already not operating, but that is not going to be easy. The bank must identify pockets where it can extend its services to the financially excluded.
I have interviewed people in Bombay when the RBI was starting the financial inclusion drive in 2006-2007, and the fears in the minds of the people who do not have a bank account are unfathomable by people who are elite and who have a bank account. I think before a women's bank can really be successful there is a need to undertake surveys as to why people don't open bank accounts and only then will we be able to extend financial inclusion to the segment that are targeted by the all-women's bank.
There are a few challenges ahead for the Bharatiya Mahila Bank, but these challenges are not unsurmountable. They have to be identified and schemes have to be chalked up to work on these challenges. Only then would this endeavor be successful.
Are you saying that the Mahila bank is a step before its time or an idea that is not backed by real need?
I think that BMB is a good idea. It's before its time in some pockets; but much behind its time in other pockets! To me, the women's bank is not really a necessity. This segment could have been catered to by all-women's branches, but now that we have such a bank and it has support from all segments of society, I would take it as an initiative that will serve the unbanked sector and give competition to the existing banks. There is nothing wrong in the initiative per se but will there be something really special that the women's bank will bring to the table; I wouldn't think so expect that some segment of society - that is women who feel comfortable dealing only with women in banks - would be served. The board, which right now, seems to be consisting only of women will probably come out with schemes which will address the needs of women.
There's no harm in trying new experiments. It should be welcomed. Over a period of time, one can assess whether this effort was successful.
Do you think the Bharatiya Mahila bank will actually inspire entrepreneurship among women?
Money is fungible. The women who have the entrepreneurial skills could certainly feel inspired coming to the all-women's bank and getting subsidized resources to set up a commercial enterprise. A subsidy is always encouraging; it will help improve the bottom line or the profit margin of the enterprise. Money being fungible, my worry is whether this will be used as a conduit by men to start enterprises in the name of women. One can argue sociologically that such a bank will empower women, which in our country is welcome. But will it realize its objective of encouraging entrepreneurship among women; I am not very sure.
From what I read in the newspapers, some component of the loans extended by the all-women's bank will be for men.
To that extent the bank is not 100 per cent focused on women.
Thirdly, given the objective that a portion of the loans extended by this bank is for women, there is a possibility that the staff will be scouting for young and promising women entrepreneurs and will be encouraging them to start business, which is a very positive thing. If this happens, then proposed mentoring and training will fall in place. I think the move is worth a try. If we succeed, we would have empowered women in our country which is so desperately needed here.
It is very surprising that in a country which had a powerful woman prime minister in Smt. Indira Gandhi, and where you have two parties - ruling and opposition -with women in powerful posts, a move like this one has come so late!
You have been a commercial banker, a central banker and you have extensive experience globally in banking. What are your further thoughts on how to make this "experiment" a success?
Yes, I have been fortunate enough to have this exposure as far as banking is concerned. My thoughts would be that this is a new experiment that is being done in India and it should be strengthened. To strengthen it, we could tap resources from international institutions, and I am aware, at the World Bank, they are very much keen to finance such noble activities. Therefore, this Mahila Bank can tap resources and expertise from such places.
I also feel that the Mahila Bank should tie up with micro-finance institutions that do a lot in terms of empowering women.
Also, in India, NGOs/SHGs play a very prominent role in places where women need to be empowered. Probably this bank will gain by financing their activities that empower women.
This experiment should be strengthened and we should be able to set an example for other countries where women are not empowered, or are weak and exploited. The scheme is being implemented under the stewardship of a respected and renowned economist, Dr. Manmohan Singh, and should be allowed to operate and evaluated after a few years. In general, I think this will be a great service to women in the world if we are able to make this experiment a success.
(Interviewed by Kavitha Kumar)
An interview with Prof. Charan Singh, RBI Chair Professor, IIMB, on the road ahead for Bharatiya Mahila Bank which opened its first branch in Mumbai today
The first branch of Bharatiya Mahila Bank (BMB), India's newest public sector bank, was inaugurated on November 19, 2013 by Prime Minister Manmohan Singh. The BMB will focus on lending predominantly to women, but there will be no restriction on account opening by men. Usha Ananthasubramanian, MD of Bharatiya Mahila Bank, said the bank, headquartered in Delhi, plans to lend to women or to businesses which are either managed by or make products for women.
Dr. Charan Singh, RBI Chair Professor, IIMB, analyses whether such a bank will lead to true financial inclusion, empower women and inspire women with entrepreneurial skill, and wonders in a country where half of the population is still unbanked, how good is the idea to focus on one section of the society.
What is the role you expect such a bank to play? And how do you think it will be different from other public sector banks or banks that have all-women's branches?
I should say the Bharatiya Mahila Bank is a very good initiative. The announcement made 8-9 months ago, in the Union Budget was certainly a welcome step. The focus in in this case is that the Board would be predominantly a women's board, and it's expected that the women on the board would be able to tailor-make schemes for the women to implement them on the ground. So maybe there will be synergy between those who are designing products and those who are using those products at the grass-root level - be it deposit schemes, credit facilities, or timings and days of operations.
In an all-women's branch of a commercial bank, which have been prevalent for some time, general products have been designed for people across the country, and therefore, the focus is really not on the product that would be useful for women. In the case of the Bharatiya Mahila Bank, I think, the instrument or the product as well as the design of the product will have an additional focus exclusively on women.
If you look at the track record of women in the financial sector, we have had some very good entrepreneurs, managing directors as well as senior officers in banking and financial sector who have been women. Therefore having an
all-women's bank will probably give a better opportunity for more women to join such a bank. To that extent, it is a good move.
If you look at micro finance institutions in India, the record of women's performance is better than that of men. So to that extent if the women's bank is focusing on providing credit to women, then I would think there will be better performance and lower non-performing assets (NPAs) for the bank. I think it is a very good initiative.
Do you think the bank should offer subsidized credit to women?
I would like to go back to the times of Mahatma Gandhi who said if you educate a woman, you educate a family. I think if you are able to provide resources to women to create employment, then that is a very good utilization of national resources. A small subsidy to prompt women to come and join in the enterprise of growth and progress is worth it. If 50 per cent of the work force in India is not contributing to active economic growth by participating in economic activities, then the country as a whole is the loser. If we are encouraging them to participate in growth now, then that's a positive thing. A small subsidy for encouraging women to join the work force as entrepreneurs is a very good effort at a nominal cost. It will have far larger benefits in the long run.
What are the challenges for the Mahila Bank?
Last summer, four of my intern students from the Cluster Innovation Centre, University of Delhi, did a study on the feasibility of the all-women's bank, and they interviewed people across the country - some in Delhi; some in Bangalore and other parts of India. In the interview they found that some women in India would prefer to walk into a branch run by women. To that extent, I do see utility of this effort.
Click here to see the full study
But the issue is that, across the world, the all-women's bank has not been experimented very much. Only in Pakistan and in Ethiopia, as some of my summer trainee students found out, there have been all-women's banks. And in these countries also, it was not really restricted to women only; men's participation did emerge. So, the first challenge would be: would we be able to restrict an all-women's bank to women? I don't think that will happen. Sooner or later, the women's bank would have to recruit men and these men would have to be sitting in the branch and this would defeat the very purpose of having an all-women's bank. If news items are to be believed, 35-36 per cent of the work force will be men. I am not sure if that clientage of women who would like to interact only with women in a bank will be served.
The other challenge is the opening of branches. The first branch was inaugurated today (November 19) in a very elite place in South Bombay and in a very elite building. I don't think the objective of financial inclusion will be served by opening a branch in such an area. There could be urban requirement; I am aware that even in urban areas people do not have bank accounts and therefore you will succeed because right below the Air India building (where the first branch of
the bank is situated) is a group of women who sell
flowers and garlands. Perhaps they will come and open a token account. May be that is financial inclusion! I don't know exactly how that will happen. But the challenge is: how would you attract the financially excluded population to feel motivated to come and open an account at the all-women's bank? One must pay attention to the location of branches in such a model. The bank could set up branches in rural areas, especially areas where there is a lack of commercial banks or co-operative banks, and where the business correspondents of commercial banks are already not operating, but that is not going to be easy. The bank must identify pockets where it can extend its services to the financially excluded.
I have interviewed people in Bombay when the RBI was starting the financial inclusion drive in 2006-2007, and the fears in the minds of the people who do not have a bank account are unfathomable by people who are elite and who have a bank account. I think before a women's bank can really be successful there is a need to undertake surveys as to why people don't open bank accounts and only then will we be able to extend financial inclusion to the segment that are targeted by the all-women's bank.
There are a few challenges ahead for the Bharatiya Mahila Bank, but these challenges are not unsurmountable. They have to be identified and schemes have to be chalked up to work on these challenges. Only then would this endeavor be successful.
Are you saying that the Mahila bank is a step before its time or an idea that is not backed by real need?
I think that BMB is a good idea. It's before its time in some pockets; but much behind its time in other pockets! To me, the women's bank is not really a necessity. This segment could have been catered to by all-women's branches, but now that we have such a bank and it has support from all segments of society, I would take it as an initiative that will serve the unbanked sector and give competition to the existing banks. There is nothing wrong in the initiative per se but will there be something really special that the women's bank will bring to the table; I wouldn't think so expect that some segment of society - that is women who feel comfortable dealing only with women in banks - would be served. The board, which right now, seems to be consisting only of women will probably come out with schemes which will address the needs of women.
There's no harm in trying new experiments. It should be welcomed. Over a period of time, one can assess whether this effort was successful.
Do you think the Bharatiya Mahila bank will actually inspire entrepreneurship among women?
Money is fungible. The women who have the entrepreneurial skills could certainly feel inspired coming to the all-women's bank and getting subsidized resources to set up a commercial enterprise. A subsidy is always encouraging; it will help improve the bottom line or the profit margin of the enterprise. Money being fungible, my worry is whether this will be used as a conduit by men to start enterprises in the name of women. One can argue sociologically that such a bank will empower women, which in our country is welcome. But will it realize its objective of encouraging entrepreneurship among women; I am not very sure.
From what I read in the newspapers, some component of the loans extended by the all-women's bank will be for men.
To that extent the bank is not 100 per cent focused on women.
Thirdly, given the objective that a portion of the loans extended by this bank is for women, there is a possibility that the staff will be scouting for young and promising women entrepreneurs and will be encouraging them to start business, which is a very positive thing. If this happens, then proposed mentoring and training will fall in place. I think the move is worth a try. If we succeed, we would have empowered women in our country which is so desperately needed here.
It is very surprising that in a country which had a powerful woman prime minister in Smt. Indira Gandhi, and where you have two parties - ruling and opposition -with women in powerful posts, a move like this one has come so late!
You have been a commercial banker, a central banker and you have extensive experience globally in banking. What are your further thoughts on how to make this "experiment" a success?
Yes, I have been fortunate enough to have this exposure as far as banking is concerned. My thoughts would be that this is a new experiment that is being done in India and it should be strengthened. To strengthen it, we could tap resources from international institutions, and I am aware, at the World Bank, they are very much keen to finance such noble activities. Therefore, this Mahila Bank can tap resources and expertise from such places.
I also feel that the Mahila Bank should tie up with micro-finance institutions that do a lot in terms of empowering women.
Also, in India, NGOs/SHGs play a very prominent role in places where women need to be empowered. Probably this bank will gain by financing their activities that empower women.
This experiment should be strengthened and we should be able to set an example for other countries where women are not empowered, or are weak and exploited. The scheme is being implemented under the stewardship of a respected and renowned economist, Dr. Manmohan Singh, and should be allowed to operate and evaluated after a few years. In general, I think this will be a great service to women in the world if we are able to make this experiment a success.
(Interviewed by Kavitha Kumar)