BackOrix Auto seeks to cash in on its ‘banking on wheels’ business
Firm, which has been offering fully customized vehicles equipped with an ATM, is in talks with private banks to lease out such vehicles
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Mumbai: Riding on the government’s financial inclusion agenda, Orix Auto Infrastructure Services Ltd, the local arm of Japan-based Orix Corp. is betting big on its “banking on wheels" business.
The firm, which has been offering fully customized vehicles equipped with an automated teller machine (ATM) and other amenities required by a bank for the last three years, is now in talks with private banks to lease out such vehicles, a top official at the company said.
The local arm of the Japanese firm has been working with some public sector banks under a pilot project.
In India, Orix, besides offering customized vehicles for varied applications, operates in the car leasing and renting segment, employee transportation and commercial vehicle loans. Deploying such vehicles, according to Sandeep Gambhir, managing director and chief executive at Orix India, will help banks cut the time required to set up a brick-and-mortar branch, and save on real estate, staffing and other costs. Moreover, the vehicles also offer the advantage of offering banking services in distant areas in a very short span of time. “We have the capability to put out 90 such vehicles in 100 days," said Gambhir, adding that currently Orix has 30 vehicles offering the mobile banking solutions in 100 villages in states such as Uttar Pradesh, Bihar, Rajasthan, Gujarat, Delhi NCR (National Capital Region) and West Bengal.
The vehicles have been hired by Central Bank, Allahabad Bank, Oriental Bank of Commerce and Bank of Baroda. Orix leases out the vehicles equipped with a driver, gunmen and GPS (global positioning system) for a period of three years for a monthly fee ranging from ₹ 40,000 to ₹ 1 lakh.
The “mobile bank" offers services ranging from an automated teller machine to account opening and selling of financial products.
According to a World Bank Findex Survey (2012), only 35% of Indian adults have access to a formal bank account. Only 2% of adults used an account to receive money from a family member living in another area and 4% used an account to receive payment from the government, the survey revealed.
To address these issues, the Nachiket Mor committee on financial inclusion has suggested setting up micro “payments banks", which will tap telecom companies’ networks to facilitate financial transactions.
Senior officials of some of the banks using Orix’s services agreed that the “banks on wheels" help in reaching out to unbanked areas in the interiors, and added that customers have more confidence in transacting business when a bank official travels along with the mobile bank, in contrast to dealing with so-called correspondents who work on behalf of banks in rural areas.
However, they disagreed that it’s a cost-effective means. “It can’t be a model which is scalable to the national level, but yes, it is one of the means to reach out to interior villages along with branches, kiosks, banking correspondents etc. Cost-wise it is not cheap, but is okay given its utility," said a senior official from Bank of Baroda who did not wish to be named.
Oriental Bank of Commerce has leased five vans from Orix, said a senior official at the bank. Each van visits one village a day, he said. Typically, individuals work as agents for banks and collect money from villagers where banks have not yet set up a brick-and-mortar branch.
“These are rather costly alternatives, but initially it earned us the confidence of the people," he said. Oriental Bank, he added, will eventually phase out these vans as in many such villages either the bank has opened branches or its business correspondents have gained greater acceptance among depositors.
To be sure, there are banks which have launched their own vans to address the gap. On 26 February ICICI Bank Ltd, India’s largest private-sector lender, launched a “branch on wheels" initiative to cover 100 villages.
Orix’s Gambhir says there is a huge untapped potential and is hoping to get business from new banks that will come into existence after the country’s apex bank grants them licences.
“Most of them already have a huge retail presence but we can help in scaling up to the next level," he said.
According to Vishal Narnolia, banking analyst at SMC Global Securities Ltd, setting up a physical branch along with an ATM typically costs around ₹ 60,000- ₹ 100,000 in rural areas.
Considering that ATM and branches are static in nature, a bank will have to open at least five to six branches in an area. In contrast with this, the same service can be provided by a single van, making it cost-effective. “Since these vans are non-static, it will cover a larger area at a lower cost," said Narnolia.
Vivina Vishwanathan contributed to this story.
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