... Brings micro-finance institutions’ disbursements to virtual standstill

The demonetisation of old high value currency notes has brought disbursements by micro-finance institutions (MFIs) virtually to a standstill. Micro-finance institutions like Bandhan and Village Financial Services are not being able to make any disbursements to self-help groups (SHGs) since November 9.

This is true for the entire micro-finance institutions industry as well, they said.

“Since small notes are not available, we are not being able to make any disbursements to the self-help groups,” MD of Bandhan Bank C S Ghosh told on the sidelines of a seminar on micro-finance institutions here on Friday.

Bandhan Bank, formerly Bandhan Financial Services, is also into micro-finance institutions’ lending besides extending normal banking credit. Ghosh said while the repayment by micro-finance institutions are on, disbursals have stopped.

“This is a temporary problem. Things will become easier once the new Rs 500 currency notes are pumped into the system,” he said adding “the entire MFI segment is facing this problem.”

Village Financial Services chairman Ajit Maity said, “Disbursements have been put on hold since November 9.

Although it is creating some problem among the SHGs, this is temporary in nature.”  “This is expected to continue for some more time,” Maity added. Digital payments solution provider Oxigen Services is in the process of upgrading its point of sales (PoS) devices into micro ATMs to help customers in the present situation due to ban on Rs 500 and Rs 1,000 notes.

“Micro ATM is a point of sales device which we have developed into a full featured banking access device and payment transaction device. We want to deploy these terminals in rural areas and in urban areas at all kirana and retail stores across India,” Pramod Saxena, Founder Chairman & MD, Oxigen Services said during an interaction.

“We already have 2 lakh retail touch points, of these 60,000 stores have these PoS terminals but they are not micro ATMs, so we have started upgrading these terminals into micro ATMs now.” 

He said Oxigen Services plans to deploy 2,000 micro ATMs by the end of December 2016. After this, approximately 3,000-5,000 micro-ATMs are to be deployed every month, and in due course 1 million micro ATMs across the country in the coming 3 years.

A customer can deposit as well as credit money at these micro ATMs if they have Aadhaar. “If you have a bank account with an Aadhaar linkage you can deposit these Rs 500 and Rs 1,000 notes. You can give your cash and your amount will be credited in your account,” Saxena said.

He hoped that after this current rush is over at banks and ATMs to deposit old high value currency notes as well as to withdraw money and things stabilizes, people will do much digital transactions and make payments directly.

“So over the time, I think the whole payment ecosystem needs to be created for the last mile connectivity. It is not only mobile wallet but you have to have access in the last mile,” he added.  Cash has to be moved and used, so Oxigen is partnering with banks so that money moves through banks and transactions become more digital in nature, Saxena said.