PDF document (36414 kb)
Satellite Connectivity to facilitate penetration of banking services – Need for financial incentives to banks: Discussion Paper

Department of Payment and Settlement Systems

Satellite Connectivity to facilitate penetration of banking services –
Need for financial incentives to banks: Discussion Paper

1. Introduction:

1.1 Prof.U.R.Rao, member of the Board for Regulation and Supervision of the Payment and Settlement Systems (BPSS) had prepared a paper on the use of satellite communication technology to facilitate penetration of payment services to the rural areas which are presently denied of the facility due to non availability of reliable communication links. The proposal was considered by a Technical Group.  The Group supported Prof. U.R. Rao's view point that satellite connectivity is the appropriate mode of connecting the branches in the areas not connected by terrestrial links and as a fallback system.

1.2 The Reserve Bank has been taking a number of initiatives for upgradation of technology and bringing the masses under the banking system. Towards this, banks are being encouraged to computerize their operation and connect the branch under the core banking solution so that the branch can provide efficient services by participation in all India funds transfer network like RTGS / NEFT / ECS, etc. But the rural branches have remained largely outside core banking due to connectivity problem. The problem is more for the bank branches in the North Eastern Region.

1.3 There is an uneven distribution of banking services in the country. Of the total 611 districts in the country, 375 districts (list in the Annex) are under-banked. The total districts include 82 districts of the North-Eastern Region of which 54 districts are under-banked. The under-banked district is the district where the Average Population per Branch Office (APPBO) is more than the national average. There is a need for banks to open branches at these locations and establishing connectivity with the core banking solution.

1.4 The Reserve Bank, while playing its developmental role is considering a proposal to provide incentive to banks to provide network connectivity to their existing branches in the under banked districts. There is also a proposal to incentivise the banks to open new branches at these locations and bring them under core banking solution right from the beginning.

2. Satellite Connectivity

2.1 As opposed to terrestrial link, satellite connectivity involves use of transponder space on the satellite and communication equipment called Very Small Aperture Terminal (VSAT) at the place being connected for data communication. VSAT is particularly useful in the regions where leased line connectivity cannot be established like hilly areas, ocean, and desert. VSAT technologies ensure link security and reliability. The benefits of VSAT are (i) faster relocation; (ii) quick establishment of new sites; (iii) rapid installation of equipment at the customer's premise with limited infrastructure; (iv) reduced Network implementation time; (v) availability (99.9%) is far better than the availability of ground networks - reliability of data network; (vi) lowest TCO over terrestrial for multistage applications; (vii) highest uptime; (viii) security - VSAT networks are very secure and the ideal option for confidential, business sensitive data transfer; (ix) bandwidth on demand - the bandwidth channels can be regulated Independence from earth networks and infrastructure; and (x) reduced operational cost.

3.  Recommendations of the Technical Group

3.1 The Technical Group studied the various aspects of satellite connectivity including cost benefit analysis. Some of the major recommendations are as under:

  1. Banks should extend connectivity to rural branches through use of latest technology VSATs and other modes of terrestrial or fiber communication, wherever available.
  2. While limited connectivity for the purpose of fast money transfer could be taken up as an immediate goal, the banks should plan for full-fledged branch connectivity to core banking or similar systems, in order to provide all services including mobile banking in future.
  3. For VSATs, banks should explore between VSAT ownership or rental model, based on the cost. The Group provided detailed analysis for both these models so that the banks can take informed decision in the matter.
  4. The report provides bandwidth requirements and cost estimates under various scenarios based on informal inquiries with a few VSAT service providers.
  5. The central hub could be connected to the data centers through a terrestrial leased line with high bandwidth VSAT as a backup (on demand). Therefore, it may not be necessary to set up central servers at the hub site.
  6. Satellite Communications being the most disaster-proof, can be used as a back-up for major centers, where a disaster can otherwise knock out terrestrial connection. Even satellite connection may be disrupted, but if the antenna is small, it can be quickly put back (as satellite, up in the sky, continues to function).

3.2 The recommendations made by the Technical Group were examined and it was felt that the following options need to be examined further

  1. The option of leasing vis-à-vis ownership VSATs;
  2. Using VSAT as a backup to the terrestrial link;
  3. Creating sufficient incentives so that individual banks take initiatives.

3.3 RBI could play the developmental and advisory role. The Standards, Quality and Model Service Level Agreement, Safeguards could be some of the parameters which could be prescribed by Reserve Bank. For better price, IBA may consolidate the requirements from banks and negotiate with the service providers. IBA would only have this one time role and thereafter operational responsibility may be with individual banks.

4. Option of leasing vis-à-vis ownership

4.1 For implementing VSAT based communication link, the user can either acquire the VSAT on ownership basis or take on lease rental basis from the VSAT service provider. The Technical Group examined the cost of ownership vis-à-vis leasing it. The Group estimated the number of VSATs required for this rural connectivity and worked out that average cost per VSAT on rental model as well as ownership model.

4.2 The increasing pace in technology development has increased the pace of technology obsolence. Considering this aspect as also the cost consideration, the lease model would be better option which could be adopted. This is also usually adopted by the banks. Besides, there would be an option available to move to another service provider, if the service is not found satisfactory from the vendor from whom the VSAT has been leased.

5. VSAT as backup to terrestrial link

5.1 Presently, the bank branch connectivity is primarily through the use of landlines, particularly leased lines from telecom operators with ISDN connectivity acting as a backup wherever available. The leased line connectivity with higher bandwidth requires laying of fiber connectivity. However, fiber networking is not available in many semi-urban and rural areas due to the large cost involved in creating such network as also the lack of large customer base in these areas, for high-speed network requirements.

5.2 Satellite Communications being the most disaster-proof, can be used as a back-up for major centers, where a disaster can otherwise knock out terrestrial connection. Even satellite connection may be disrupted, but if the antenna is small, it can be quickly put back (as satellite, up in the sky, continues to function).

6. Suggested Incentive Structure

The incentive structure may broadly be as under:-

a. for branches in the North-East and – upto 100% of the lease rentals to be reimbursed;

b. branches in rural areas in other under-banked districts  - upto 75% of lease rentals to be reimbursed;

c. for branches of under banked districts in semi-urban areas – about 50% of the lease rentals to be reimbursed.

Incentives may be provided by the Reserve Bank of India by way of reimbursement of the leased rentals on a half yearly basis on a certificate of satisfactory service for 3 years. A review on the need for continuing with the incentive structure would be carried out after 3 years.

7. Safeguards

The banks would need to put in place proper safeguards to ensure that the systems are optimally used. The banks going in for this incentive programme would have to put in place an appropriate Information Security (IS) and access policy. The access policy should at the minimum cover: (i) monitoring the operations of the system; (ii) access to authorized users, the roles and access rights of each of the authorized users are well defined; (iii) ensuring that the system is used for the purpose for which it has been provided.


Annex

List of Underbanked Districts (based on 2001 Population census)

ANDHRA PRADESH

ASSAM

1. ADILABAD

8. GOALPARA

2. ANANTAPUR

9. GOLAGHAT

3. CUDDAPAH

10. HAILAKANDI

4. KARIMNAGAR

11. JORHAT

5. KHAMMAM

12. KARBI ANGLONG

6. KURNOOL

13. KARIMGANJ

7. MAHBUBNAGAR

14. KAKROJHAR

8. MEDAK

15. LAKHIMPUR

9. NALGONDA

16. MORIGAON

10. RANGAREDDY

17. NAGAON

11. SRIKAKULAM

18. NALBARI

12. VIZIANAGARAM

19. SIBSAGAR

13. WARANGAL

20. SONITPUR

 

21. TINSUKIA

ARUNACHAL PRADESH

 

1. CHUNGLANG

BIHAR

2. DIBANG VALLEY

1. ARARIA

3. EAST KAMENG

2. AURANGABAD

4. LOHIT

3. BANKA

5. LOWER SUBANSIRI

4. BEGUSARAI

6. TIRAP

5. BHAGALPUR

7. UPPER SIANG

6. BHOJPUR

8. UPPER SUBANSIRI

7. BUXAR

 

8.DARBHANGA

ASSAM

9. GAYA

1. BARPETA

10. GOPALGANJ

2. BONGAIGAON

11. JAMUI

3. CACHAR

12. JEHANABAD

4. DARRANG

13. KAIMUR

5. DHEMAJI

14. KATIHAR

6. DHUBRI

15. KHAGARIA

7. DIBRUGARH

16. KISHANGANJ

BIHAR

CHHATTISGARH

17. LAKHISARAI

13. RAIGARH

18. MADHEPURA

14. RAIPUR

19. MADHUBANI

15. RAJNANDGAON

20. MUNGER

16. SURGUJA

21. MUZAFFARPUR

 

22. NALANDA

DADRA & NAGAR HAVELI

23. NAWADA

1. DADRA & NAGAR HAVELI

24. PASCHIMI CHAMPARAN

 

25. PURBI CHAMPARAN

GUJARAT

26. PURNIA

1. AMRELI

27. ROHTAS

2. BANAS KANTHA

28. SAHARSA

3. BHAVNAGAR

29. SAMASTIPUR

4. DAHOD

30. SARAN

5. JUNAGADH

31. SHEIKHPURA

6. NARMADA

32. SHEOHAR

7. PANCH MAHALS

33. SITAMARHI

8. PATAN

34. SIWAN

9. SABAR KANTHA

35. SUPAUL

10. SURAT

36. VAISHALI

11. SURENDRANAGAR

 

12. DANGS

CHHATTISGARH

 

1. BASTAR

HARYANA

2. BILASPUR

1. FATEHABAD

3. DANTEWADA

2. JHAJJAR

4. DHAMTARI

3. JIND

5. DURG

4. KAITHAL

6. JANJGIR-CHAMPA

5. MAHENDRAGARH

7. JASHPUR

 

8. KANKER

JAMMU & KASHMIR

9. KAWARDHA

1. ANANTNAG

10. KORBA

2. DODA

11. KORIA

3. KUPWARA

12. MAHASAMUND

4. POONCH

JHARKHAND

MADHYA PRADESH

1. BOKARO

6. CHHINDWARA

2. CHATRA

7. DAMOH

3. DEOGHAR

8. DATIA

4. DHANBAD

9. DEWAS

5. DUMKA

10. DHAR

6. GARHWA

11. DINDORI

7. GIRIDIH

12. EAST NIMAR

8. GODDA

13. GUNA

9. GUMLA

14. HARDA

10. HAZARIBAG

15. HOSHANGABAD

11. KODERMA

16. JHABUA

12. LOHARDAGGA

17. KATNI

13. PAKUR

18. MANDLA

14. PALAMAU

19. MANDSAUR

15. PASCHIMI SINGHBHUM

20. MORENA

16. SAHEBGANJ

21. NARSIMHAPUR

 

22. NEEMUCH

KARNATAKA

23. PANNA

1. BANGALORE RURAL

24. RAISEN

2. BIDAR

25. RAJGARH

3. CHAMARAJANAGAR

26. RATLAM

4. GULBARGA

27. REWA

5. KOPPAL

28. SAGAR

6. RAICHUR

29. SATNA

 

30. SEHORE

KERALA

31. SEONI

1. MALAPPURAM

32. SHAHDOL

 

33. SHAJAPUR

MADHYA PRADESH

34. SHEOPUR

1. BALAGHAT

35. SHIVPURI

2. BARWANI

36. SIDHI

3. BETUL

37. TIKAMGARH

4. BHIND

38. UJJAIN

5. CHHATARPUR

39. UMARIA

MADHYA PRADESH

MANIPUR

40. VIDISHA

3. CHURACHANDPUR

41. WEST NIMAR

4. IMPHAL EAST

 

5. IMPHAL WEST

MAHARASHTRA

6. TAMENGLONG

1. AHMADNAGAR

7. THOUBAL

2. AKOLA

8. UKHRUL

3. AMRAVATI

 

4. AURANGABAD

MEGHALAYA

5. BHANDARA

1. EAST GARO HILLS

6. BID

2. SOUTH GARO HILLS

7. BULDHANA

3. WEST GARO HILLS

8. DHULE

 

9. GADCHIROLI

MIZORAM

10. GONDIA

1. LAWNGTLAI

11. HINGOLI

2. SAIHA

12. JALGAON

 

13. JALNA

NAGALAND

14. KOLHAPUR

1. DIMAPUR

15. LATUR

2. KOHIMA

16. NANDED

3. MOKOKCHUNG

17. NANDURBAR

4. MON

18. NASIK

5. PHEK

19. OSMANABAD

6. TUENSANG

20. PARBHANI

7. WOKHA

21. SATARA

8. ZUNHEBOTO

22. SOLAPUR

 

23. THANE

ORISSA

24. WARDHA

1. ANGUL

25. WASHIM

2. BALANGIR

26. YAVATMAL

3. BALESHWAR

 

4. BARGARH

MANIPUR

5. BHADRAK

1. BISHNUPUR

6. BOUDH

2. CHANDEL

7. DHENKANAL

ORISSA

RAJASTHAN

8. GAJAPATI

10. DAUSA

9. GANJAM

11. DHOLPUR

10. JAJPUR

12. DUNGARPUR

11. KALAHANDI

13. HANUMANGARH

12. KANDHAMAL

14. JALOR

13. KENDRAPARA

15. JHALAWAR

14. KEONJHAR

16. JHUNJHUNU

15. KORAPUT

17. JODHPUR

16. MALKANGIRI

18. KARAULI

17. MAYURBHANJ

19. NAGAUR

18. NABARANGPUR

20. PALI

19. NAYAGARH

21. RAJSAMAND

20. NAWAPARA

22. SAWAI MADHOPUR

21. PURI

23. SIKAR

22. RAYAGADA

24. TONK

23. SONEPUR

25. UDAIPUR

24. SUNDARGARH

 

 

SIKKIM

PONDICHERRY

1. WEST SIKKIM

1. YANAM

 

 

TAMIL NADU

PUNJAB

1. CUDDALORE

1. MANSA

2. DHARMAPURI

 

3. KANCHEEPURAM

RAJASTHAN

4. NAGAPATTINAM

1. ALWAR

5. PERAMBALUR

2. BANSWARA

6. PUDUKKOTTAI

3. BARAN

7. RAMANATHAPURAM

4. BARMER

8. SALEM

5. BHARATPUR

9. THIRUVALLUR

6. BHILWARA

10. THIRUVARUR

7. BUNDI

11. TIRUVANNAMALAI

8. CHITTAURGARH

12. VELLORE

9. CHURU

13. VILLUPURAM

TRIPURA

UTTAR PRADESH

1. DHALAI

29. GORAKHPUR

2. NORTH TRIPURA

30. HAMIRPUR

3. SOUTH TRIPURA

31. HARDOI

4. WEST TRIPURA

32. HATHRAS

 

33. JALAUN

UTTAR PRADESH

34. JAUNPUR

1. AGRA

35. JHANSI

2. ALIGARH

36. JYOTIBA PHULE NAGAR

3. ALLAHABAD

37. KANAUJ

4. AMBEDKAR NAGAR

38. KAUSHAMBI

5. AURAIYA

39. KHERI

6. AZAMGARH

40. KUSHI NAGAR

7. BAGHPAT

41. LALITPUR

8. BAHRAICH

42. MAHARAJGANJ

9. BALLIA

43. MAHOBA

10. BALRAMPUR

44. MAINPURI

11. BANDA

45. MATHURA

12. BARA BANKI

46. MAU

13. BAREILLY

47. MIRZAPUR

14. BASTI

48. MORADABAD

15. BIJNOR

49. MUZAFFARNAGAR

16. BUDAUN

50. PILIBHIT

17. BULANDSHAHR

51. PRATAPGARH

18. CHANDAULI

52. RAI BARELI

19. CHITRAKOOT

53. RAMPUR

20. DEORIA

54. SAHARANPUR

21. ETAH

55. SANT KABIR NAGAR

22. ETAWAH

56. SANT RAVIDAS NAGAR

23. FAIZABAD

57. SHAHJAHANPUR

24. FARRUKHABAD

58. SHRAVASTI

25. FATEHPUR

59. SIDHARTHANAGAR

26. FIROZABAD

60. SITAPUR

27. GHAZIPUR

61. SONBHADRA

28. GONDA

62. SULTANPUR

UTTAR PRADESH

 

63. UNNAO

 

 

 

WEST BENGAL

 

1. BANKURA

 

2. BARDDHAMAN

 

3. BIRBHUM

 

4. DAKSHIN DINAJPUR

 

5. HAORA

 

6. HUGLI

 

7. JALPAIGURI

 

8. KOCH BIHAR

 

9. MALDAH

 

10. MEDINIPUR

 

11. MURSHIDABAD

 

12. NADIA

 

13. NORTH 24 PARGANAS

 

14. PURULIYA

 

15. SOUTH 24 PARGANAS

 

16. UTTAR DINAJPUR

 


Server 214
Top