parallax background

Who Gets Helped First?

Digital Banking Provides Lifeline in Pandemic
April 8, 2020
An Update from Equitas Bank
April 13, 2020

Photo by Raj K. Raj, Hindustan Times

On March 24th, Prime Minister Narendra Modi put 1.5 billion Indians on lockdown for at least 21 days. On April 3rd, eight days later, money from the government began flowing into the accounts of 20 million families hardest hit by that stay at home order.

Photo Credit: Union Bank of India

Equitas Bank has its staff working in shifts throughout the day in all its 412 branches, making sure that the people who receive these deposits can withdraw cash.  It also has its business correspondents fanning out throughout villages to provide access to these funds close to where people lived.  

Photo Credit: PTI

SKDRDP in the state of Karnataka has 3.5 million clients who are receiving these government payments.  Many need to activate their debit cards to get their money from an ATM.  But, under the lockdown, SKDRDP could not gather its clients in groups to give them training.  Instead, SKDRDP staff made calls and sent text messages throughout the day and night, guiding clients through the process of activating their cards.

 For the last three decades the government and the Reserve Bank of India have expanded the country’s financial system to reach the excluded, the marginalized and those living in poverty.  Over the past two weeks that system has faced the ultimate stress test and proved its ability to deliver support payments first to those that needed them most.

I spoke with John Alex, CEO of Equitas Holdings, and Dr. LH Manjunath, Executive Director of SKDRDP, about how their organizations are responding to the COVID crisis and the government lockdown. 

Equitas Delivers

John Alex, CEO, Equitas Holdings

Equitas Holdings owns the Equitas Small Finance Bank, which serves 3 million borrowers in 11 states of India.  Equitas was founded as a microfinance lender by PN Vasudevan in 2007.  In 2016 it became a small finance bank, one of ten approved by the Reserve Bank. 

As a bank Equitas has expanded its portfolio to include loans for vehicles, housing and small and medium-sized businesses.  Half of its portfolio continues to serve those with low incomes.  The bank commits 5% of its profits to Corporate Social Responsibility (CSR).  It has built 8 schools, provides health insurance for 6 million, runs health clinics and financial literacy classes, houses and trains homeless people, and has begun constructing a cancer hospital.  Earlier this year it received an award from the Indian government for its CSR activities.

Alex complimented the government in its handling of the current crisis.  “The government response has been critical,” he said.  “People living in poverty and rural farmers are receiving funds now.  All essential services are still open.  This includes banking, so we have staggered schedules at our branches so people can come and get their government payments and their savings.”

The government has also declared a three-month moratorium on all loan repayments.  I asked Alex how this would affect the bank’s liquidity.  “We will be okay for the 21 days of the lockdown,” he said.  “And we will be providing emergency loans as soon as the lockdown ends.  We expect there will be a lot of pent up demand and businesses will need to recapitalize.”

What if the lockdown needs to be extended?  “If this goes on for 2-3 months, the problems will become more acute.  We have a business continuity plan in case that happens, and the Reserve Bank has relief measures in place for banks.”

And how are the clients faring? “This is causing great hardship for our clients.  They can’t earn during the lockdown.  The government payments will be a big help.  And our people are resilient.  We have groups of women that are busy now making masks and hand sanitizer, because they know there will be a big demand for these things as soon as the lockdown ends.” 

SKDRDP Rises to the Challenge

SKDRDP represents another arm of the government’s strategy for bringing financial services to everyone.  It promotes self-help groups, gatherings of 20 women and men who save money together each week.  It links these groups to banks who provide loans to help the group members expand their small enterprises and agricultural livelihoods.  It currently serves 4.3 million women and men in its Self-Help Groups throughout the state of Karnataka. (See an earlier post on the work of SKDRDP – Can the Holy Grail Be Found in a Hindu Temple?)

Like Equitas, SKDRDP makes extensive investments in CSR activities.  These include scholarships for 12,000 students, a health insurance program, and pensions for homeless people.

The government lockdown orders do not allow SKDRDP and other self-help group promoters to continue operating, as the government does not want people gathering in groups during this time.  This left Manjunath with a challenge – how to get the pension disbursement to the most destitute, who usually came to a branch office to pick them up.  Using WhatsApp he coordinated with his 8,000 field officers, then deposited money directly into their accounts.  The field officers withdrew cash from ATMs and then distributed it, safely, to the correct recipients.

Dr. LH Manjunath, Executive Director, SKDRDP

When I asked Manjunath about the effect of the lockdown on his clients, he did what all good community bankers do – reviewing his portfolio, segment by segment.  “About 25% of our clients collect milk from their cows.  They are continuing to operate, since food is an essential service.  We have another 15% in agriculture who are still operating.  The rest are in trading and services.  Shops are closed.  Autorickshaw drivers, barbers, repair people, they’re all out of work.  The shops can reopen after the lockdown, but the service providers will not be in a very happy position.  Their livelihoods will take longer to get restarted, as people will be afraid.  We will need to work out a plan for supporting those people.”

With the monsoon rains approaching, Manjunath wanted to make sure that farmers could prepare their fields.  “We got permission from the government to operate our agricultural customer service centers, and we have been able to get 153 out of 165 operating.  Our staff are bringing equipment directly to the fields so the farmers can get started.”

Photo by Ketanbhai Nandwana

The lockdown also presented a huge logistical problem for SKDRDP’s health insurance program. Manjunath’s voice radiated the pride he has in his team as he told me how they overcame it. 

“We provide health insurance for 650,000 families.  The policies renew on April 1st, so if we did not submit the data and make payments on these accounts by March 31st, the policies would lapse.  We operate with 10 different banks, and the funds for the payments are spread across 500,000 different group accounts in those banks.  We went on lockdown on the 24th, and banks had sent many of their workers home.

We got permission for a few of our staff to go into branch offices to compile data files for the banks to run.  Our staff worked round the clock for four days.  They sent the files to the bank officers, who ran them remotely.  At 4:30 on March 31st we transferred $6 million to the insurance broker to maintain these accounts.  On April 1st we had 40 members go to the hospital, and we had no problems with the insurance.  All their expenses were paid, seamlessly.”

Photo Credit : Union Bank of India

When a global crisis like the COVID-19 pandemic hits, we soon see what people prioritize.  In India we are seeing the government and private sector financial service providers working together to make sure that those living in poverty get help first.

Previous posts in this series:

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: