The fear of fraud: Why rural Udaipur doesn’t trust bank correspondents

Across rural India, agents or business correspondents (BCs) provide basic banking services to people at their doorstep. Individuals whose bank accounts are linked to their Aadhaar cards can easily complete simple banking transactions such as balance enquiries or cash withdrawals via a single-step biometric verification by visiting a BC.

However, in the village of Majawari in Rajasthan, people still prefer to travel 3 km to the nearest bank branch in Gogunda for any bank-related work—despite the fact that there are three BCs operating in the village.

“Bank hi theek hai. Inpe vishwas nahi hai (I prefer the bank. I don’t trust these agents),” shares a baasa (elderly uncle). The reason for his scepticism? The fear of fraud.

Imagine a week’s worth of your salary getting debited from your account one day—you don’t know where it went or who did it. This is exactly what happened with Kamla Bai*. Kamla Bai’s bank account statement, which she had gotten updated two days earlier from a BC in Gogunda, showed a transaction worth INR 1,900 on January 7, 2021. However, she confidently claimed that she had not withdrawn money on the said date.

When she approached her bank, the officials dismissed her stating that the transaction had been authenticated by her biometric details. Upon further investigation, it was found that the transaction was not done by a BC officially registered with the bank, and therefore the bank could not trace the agent through the passbook entry. It was only when Kamla Bai remembered that she had given her biometric to an agent to get her Bhamashah card details updated that the agent in question was tracked down and confronted about the missing money from Kamla Bai’s account. Threatened with legal action, the agent conceded to the fraud and agreed to return the money.

Unfortunately, thousands of individuals across the country get defrauded due to their high dependence on agents. Inadequate checks along with complicated redressal procedures make people wary of agents. Moreover, as BCs provide a range of services, the single-step biometric verification makes it difficult for people to differentiate between other verifications and banking transactions. Besides structural improvements to this process, there is also an urgent need to improve digital and financial literacy in the remotest parts of the country.

*Name changed to maintain confidentiality.

Sindhuja Penumarty works with Shram Sarathi, a grassroots finance organisation in Rajasthan and was a 2020 India Fellow.

India Fellow is a content partner for #groundupstories on IDR. Read the original story here. 

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Read more: Read about the need for a gendered approach that encourages women to use digital financial services.

Do more: Connect with the author at sindhuja.penumarty@shramsarathi.org to learn more about her work.