Banking Features
Social Banking Concept at Buldana Urban
The activities and operations of Buldana Urban can be best defined as ‘Social Banking’. The banking extended by Buldana Urban is done with the ultimate aim of catering to all, covering all the stratifications of the society. The aim is not only to deliver service but to also benefit the society at large through such deliverance. It is understandable that by rendering just one type of service or product, all the societal shortcomings cannot be overcome. At such a juncture, an entity can console itself with a thought that will suffice with the simple continuance of rendering the products and services hoping for the change to happen, or be proactive and start chipping away at the shortcomings by bringing in all sorts of activities within its ambit.
The social banking concept as is followed at Buldana Urban can be understood from the words of its Founder Chairman. He explains that there are four types of banking practices in India.
‘Rulebook Banking’ refers to providing banking services within the boundaries of rules and regulations. ‘Banking beyond Rulebooks’ refers to providing banking services with sensitivity and sensibility which may even involve not following in the strictest sense of the spirit and of the laid down rules and regulations. ‘Serving beyond Banking’ refers to providing the customers with social services alongside traditional banking services. ‘Political Banking’ refers to manipulating the banking system for personal gratification and political mileage. In India, most of the public sector banks just follow the ‘Rulebook Banking’. Many of the cooperative banks follow the ‘Political Banking’ and therefore have become bankrupt or are on the verge of becoming so. However; Buldana Urban follows all the first three banking practices and collectively calls it as ‘Social Banking’.
Financial Inclusion at Buldana Urban
Financial Inclusion has been the key focus for Buldana Urban since its inception. In fact, one of the major contextual reasons for the formation of Buldana Urban was the liquidation of a local Cooperative Bank in the 1980s, leaving the community with just one branch of a nationalized bank for all banking requirements. Staff attitude was callous,quality of services in this branch was abysmally low and to top it all, there was preference only to the well-off clientele. So,Buldana Urban was conceived as a vehicle to provide banking services to the ‘common man’. Buldana Urban has never lost this focus aptly captured in one of its credos “For every family & for everyone in the family”. This focus on inclusive growth is manifested in both product designing and service delivery at Buldana Urban.
Innovative Products
Buldana Urban offers a variety of regular banking products to its members like Savings Accounts, Term Deposits and Recurring Deposits, along with regular loan products like Term Loans, Cash Credit, Overdraft, Vehicle Loan and Housing Loan. The continuous development of innovative and need-based financial products is a major manifestation of Buldana Urban’s commitment to its community. Products which focus on inclusive growth are elaborated below.
Micro-Saving Scheme
Buldana Urban has launched a micro-saving scheme wherein small deposits as low as Rs. 5 are collected daily by agents from the doorsteps of members. This particular product has significantly contributed to financial inclusion to such an extent that the number of members saving in any branch of Buldana Urban is often three to five times more than its nearest competitor.
Development Bonds
As a part of its social commitment, Buldana Urban had taken up the mandate of developing Malkapur-Buldana-Chikhali State Highway on a ‘Build, Operate and Transfer’ (BOT) basis. Buldana Urban has taken up this toll based project costing Rs. 45 crores to ensure that this critical route in Buldana district is developed and maintained properly. The majority of funds required for this project were raised from members by offering ‘Road Development Bonds’ for ten years’ duration. This served the dual purpose of providing the members with a high return, long-term investment avenue and reducing the cost of funds for Buldana Urban as compared to borrowing funds from banks. It is the first and so far only UCC which was permitted to offer such long-term bonds.
Agri Implements Pledge Loan
Agro Implements Pledge Loans are one of the earliest innovative products developed by Buldana Urban and is modeled after the local money lender system. Under this product, the farmer can take a loan for the ensuing agricultural season by pledging the machinery and equipments not needed for the season. For example, the electric motors of an irrigation pump set can be pledged during the monsoon season (when external irrigation is not needed) for raising Kharif (monsoon) crops. Buldana Urban also offers such pledge loans against other household items and ornaments. Unlike the local money lenders who always try to gobble up pledged valuables, Buldana Urban ensures that the valuables are returned to borrower on clearing of the dues.
Rural Warehouse Receipt Finance
Buldana Urban was the first UCC to introduce pledge loan against agriculture produce called Rural Warehouse Receipt Finance Scheme (RWRF). This is the most successful example of Buldana Urban’s response to members’ needs. As soon as crops are harvested, farmers are often forced to sell them immediately, partly due to lack of storage facilities and partly due to pressing need for funds. The RWRF scheme of Buldana Urban addresses both these problems in one go by providing a secure warehouse for storage and a loan against the produce so stored. After the peak harvesting season is over, prices of these commodities start soaring and farmers can earn extra profits by such deferred sales, even after paying for interest and warehousing charges.
Stalling with a single warehouse in 2001, Buldana Urban now has a network of around 421 warehouses spread over the hinterlands of all agriculturally important districts of Vidarbha. Every year about 25,000 members are benifitted from the warehousing facilities and about Rs. 200 crores of credit is disbursed against warehouse receipts.
Education Loans
Though loans for education are a common product offered by nationalized banks in urban areas, Buldana Urban has its unique way of offering this product. Generally, no bank offers educational loans to the children of farmers, hence forcing them to sell their land to support a professional education for their children. Buldana Urban started offering educational loans to such cases ‘rejected’ by other banks to help bright students from the farmers’ community to fulfill their educational aspirations. Despite such perceived ‘risky’ lending; Buldana Urban boasts the best repayment track record for educational loans amongst all financial institutions in the area. Buldana Urban never ceases to actively look out for toppers who are unable to afford further education due to paucity of funds and provides them educational loans. Buldana Urban also, at times, sponsors students with outstanding credentials.
Micro Loans
Micro loans refer to very small sized loans usually less than Rs. 5,000/- given to people with limited means. Generally, no financial institution other than the specialized Micro Finance Institutions (MFI) offers such loans. Buldana Urban has also experimented with various micro loans like LPG Loan, bicycle loan and sanitation loan. Most of these micro loans were not recovered mainly due to lack of the organizational mechanism to recover such small sized loans. These experiences have not deterred Buldana Urban from experimenting with micro loans further and it is planning to integrate the elements of successful microfinance methodologies in its future micro loan products.
LPG Loan
Timber and firewood are used for fuel throughout Buldana district, causing deforestation and the traditional ill health effects. Recently, LPG connections have been made available in the area, but the cost of conversion has been prohibitive. Buldana Urban provided loans for the LPG connections with a special focus on the burden of women on two fronts, the freedom from smoke and the cumbersome load of carrying firewood.
Ekalavya Earn While Learn Scheme
Commuting to High School is a major challenge in rural areas due to the lack of public transportation. Though traveling on a bicycle is a cost-efficient option, poor parents cannot afford to buy a bicycle for their wards. Buldana Urban conceived a unique scheme to tackle this problem which simultaneously encouraging students to find enterprising solutions. Buldana Urban gives loans to students for their bicycles to enable them to commute. The loan is paid back in weekly installments, which the student is expected to earn by working on the family farm or by helping in the family shop.
Sanitation Loans
Health, hygiene and sanitation are major concerns in rural Maharashtra. Contamination of drinking water due to open defecation is a major cause of several health problems. A large number of toilets are likely to reduce the instances of defecation in the open. Buldana Urban extended loans for the construction of toilets.
Service Delivery Innovations
Besides the innovations in product development, Buldana Urban has brought in a number of improvements and innovations in service delivery to ensure consistent, high quality and customer centric service to its members.
The 'Rulebook Banking' Foundation
Within the cooperative sector, Buldana Urban is especially strong in ‘Rulebook Banking’, documenting its elaborate systems and processes in operations manuals. From the signboards to the lockers, from branch-interiors to the employee uniforms, Buldana Urban’s operations are carefully designed to create and sustain an image of a disciplined, professional financial institution. Adherence to laid down standards of service is constantly monitored by the elaborately structured regional offices, complemented with Audit Squad1 and the unique Flying Squad2. This solid foundation of ‘Rulebook Banking’ has helped Buldana Urban in managing flawless growth up to 470 branches and a deposit base in excess of Rs. 10,223 crores, especially when examples of successful cooperatives collapsing at exponential growth stage are a plenty in Maharashtra.
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The members of Audit Squad visit the branches at regular intervals and audit all transactions of the branch for given audit period (usually a fortnight).
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The Flying Squad is a special team operating directly under the instructions of General Manager and it tries to find out frauds and deviations in service qualities, sometimes even by sending dummy customers.
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Buldana Urban pays special attention to its human resources. Employees are carefully chosen through informal references, followed by tests and interviews, and finally a personal interview by the Founder Chairman. New employees receive hands on training under the supervision of seasoned staff. The training has a dual focus on inculcating financial discipline (which is the core foundation of any successful financial institution) and imbibing the ‘Apanapan Culture’ of Buldana Urban wherein the members are treated as a family and employees find themselves as part of the family.
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Buldana Urban has also pioneered several customer-friendly initiatives in the cooperative sector such as 12 hours banking, 365 days banking and fund transfer across branches. It is one of the few UCCs which has customized software for its own operations. Soon, Buldana Urban will become the first Urban Credit Cooperative to link its important branches through a core banking software supported by a dedicated datacenter. The operations of its Head Office and affiliated branches are certified to be ISO 9000:2001 compliant and its social initiatives are certified as SA 8000:2001 compliant by AQSR International Inc.
Banking beyond Rulebook
“Banking beyond Rulebook” means sensibly and judiciously deviating from set practices, especially in emergency situations. During non-operating hours, Buldana Urban allows emergency cash withdrawals. In case of medical or educational emergencies, funds are remitted to far off branches within hours.
Buldana Urban is an integral part of its customers, be it dukh (sadness) or sukh (happiness). This is established by the staff paying regular visits to customers’ homes during the times of celebration as well as grief.
This ‘Banking Beyond Rulebooks’ differentiates Buldana Urban from nationalized banks in its vicinity to such an extent that generally within the first year of establishing a new branch, Buldana Urban attracts the highest amount of deposits. The branch managers of every branch become one of the most respected people in the local community.