The banking industry is regarded as slow-moving and conservative; but this impression is erroneous. Eight years ago, banks were asked to open accounts only in name: the depositor did not have to keep any money in them. His name was enough for him to own an account, provided he was impecunious. Since such accounts omitted such inessential details as deposits, they were called no-frills accounts. But that was not serious. The Reserve Bank of India realized its levity, and has renamed the accounts Basic Savings Bank Deposit Accounts. It recognizes that the name is a mouthful, so it has allowed the use of the acronym BSBDAs. It had earlier banned from recruitment as banking correspondent anyone who was in business or who made a profit. It has now realized that no one in a village would maintain villagersí BSBDAs, keep loads of cash, and give it out to those who want to withdraw money from their deposits, unless he made a bit of profit out of it. Now it has allowed such self-interested persons to become business correspondents ó but not if they have already been in the business of taking and giving loans. For those that were have already been condemned by the RBI as non-banking finance companies and hence banned from the business. It had also flattened mobile phone companies that had entered the business of sending money across the country. But anyone who avoided that fate is now free to start an NBFC and use it to take agencies from banks as business correspondent.
Once a name was declared sufficient to open a bank account, a difficult question arose: how could someone who claimed a name be proved to have the name? The RBIís initial view was the standard official view, that any claimant of a name had to be certified as its rightful owner by a government functionary of sufficient seniority. But there are too many Indians who cannot count a bureaucrat amongst their treasured acquaintances. So the RBI has now told banks to take it on trust that anyone who walks in and says he is Aaya Ram is indeed one.
This revolutionary permissiveness led to the opening of 182 million BSBDAs in 268,000 bank outlets by last March. The holders of these accounts carried out 490 million transactions in three years. That comes to less than a transaction a year; and given the long-tailed quality of such frequency distributions, it can be guaranteed that a large proportion of those bank accounts showed no transactions at all. But that does not matter, for the measure of the RBIís success lies, not in the results achieved, but in the effort expended. It would have been easy to achieve results by creating an account for every owner to operate through his cellphone; but that would have been a solution sans red tape.