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Pigmy Module for Cooperative Banks

A micro-savings service designed to cultivate saving habits through daily deposits via collection agents.

6.1. Overview

The Pigmy Deposit Module, also known as the Daily Deposit Scheme, is a specialized micro-savings service offered by cooperative banks and financial institutions. It is specifically designed to cultivate a saving habit among daily wage earners, small business owners, and individuals by facilitating the collection of small, regular deposits, typically on a daily basis, through dedicated collection agents.

This module, integrated within a Core Banking System (CBS), provides end-to-end automation for account management, deposit collection, interest calculation, agent tracking, and comprehensive reporting.

6.2. Purpose and Target Audience

The Pigmy Module is strategically designed to serve:

  • Small Traders and Daily Wage Earners: Including shopkeepers, street vendors, and individuals earning daily wages.
  • Doorstep Banking Enthusiasts: Customers who prefer the convenience of banking services delivered to their doorstep or have limited access to traditional banking facilities.
  • Rural and Semi-Urban Cooperative Society Members: Extending financial services to underserved geographical areas.

6.3. Key Features and Usages

Feature Usage / Benefit
Daily Deposit Collection Supports efficient daily collection by authorized agents or branch staff.
Agent-Based Entry & Mapping Allows assignment of collection agents to customers with automated commission tracking.
Mobile-Based Collection App Integration Enables field agents to enter deposits in real-time, enhancing operational efficiency.
Deposit Receipts Auto-generates printed or SMS receipts for each transaction, ensuring transparency.
Interest Calculation Facilitates daily or monthly interest accrual based on the specific account type.
Passbook/Statement Generation Provides regular statements or passbook updates for customer transparency and record-keeping.
Premature Closure Support Offers the facility for early withdrawal, with interest and penalties applied as per predefined rules.
MIS & Reporting Generates daily reports, agent-wise collection summaries, and maturity reports for informed decision-making.
Integration with GL Ensures seamless and automatic updates of general ledger accounts within the CBS.
Alerts & Notifications Sends SMS notifications regarding deposits, maturity, or missed installments, keeping customers informed.

6.4. Compound Interest (Optional – Monthly Compounding)

Some institutions may offer Pigmy accounts with monthly compounded interest.

Formula:

$A = P \times (1 + r/n)^{nt}$

Where:

  • P = Total daily deposited amount
  • r = Annual interest rate
  • n = Number of times interest is compounded per year
  • t = Time in years

Example:

If a person deposits ₹50 daily for one year at a 6% simple interest rate:

  • Principal = ₹18,250 (50 * 365 days)
  • Interest = ₹547.50
  • Total = ₹18,797.50

6.5. Pigmy Account Types

The module supports various types of Pigmy accounts to cater to diverse customer needs:

  • Regular Pigmy Deposit Account: Involves fixed daily savings over a predetermined term (e.g., 6 months, 12 months).
  • Variable Daily Deposit Account: Provides flexibility, allowing customers to deposit varying amounts on a daily basis.
  • Goal-Based Pigmy Account: Links savings directly to specific financial targets, such as accumulating funds for marriage, festivals, or other life events.

6.6. Daily Collection Workflow

The collection process within the Pigmy Module follows a structured workflow:

  1. Account Opening: A customer initiates a Pigmy deposit account at the bank branch.
  2. Agent Assignment: A dedicated agent is assigned to the customer for daily collection.
  3. Collection & Receipt: The agent collects the specified amount and issues a receipt, either via a mobile application or a printed slip.
  4. Submission: At the end of the day, the agent submits the collected funds to the branch or digitally uploads the collection data.
  5. CBS Update & GL Posting: The Core Banking System updates the Pigmy account in real-time and automatically posts the transaction to the General Ledger.
  6. Interest Calculation: Interest is calculated and accrued either monthly or upon the account's maturity.
  7. Maturity Payout: Upon maturity, the total accumulated amount (principal plus accrued interest) is credited to the customer's designated bank account.

6.7. Integration & Monitoring

Seamless integration and robust monitoring are key to the module's efficiency:

  • Agent Management System: Facilitates agent ID mapping, area allocation, and comprehensive performance tracking.
  • Mobile App/Collector’s Portal: Provides a user-friendly interface for real-time collection entry and the generation of electronic receipts.
  • Ledger & GL Posting: Ensures automatic ledger posting for each deposit transaction, maintaining accurate financial records.
  • Alerts & Compliance: Generates automated alerts for customers and tracks dormant Pigmy accounts to ensure compliance.
  • Audit Trail: Maintains detailed logs of each collection transaction, essential for regulatory audits and accountability.

6.8. Benefits to Stakeholders

The Pigmy Module delivers significant advantages to both customers and financial institutions:

For Customers:

  • Easy Saving Method: Offers a convenient and accessible way to save with daily flexibility.
  • Secure Collection: Ensures safe deposit collection through bank-authorized agents.
  • Financial Discipline: Encourages and fosters a habit of regular saving and goal-oriented financial planning.
  • Interest Earnings: Allows customers to earn interest even on small daily contributions.

For Banks/Cooperative Societies:

  • Increased Deposit Base: Expands the bank's deposit base by attracting small savers.
  • Market Penetration: Enables deep penetration into previously underbanked and unbanked sectors.
  • Enhanced Brand Presence: Improves brand visibility and presence, particularly in rural markets.
  • High Customer Retention: Fosters customer loyalty through accessible and personalized doorstep services.

6.9. Challenges and Safeguards

The module incorporates robust safeguards to address potential challenges:

Challenge System Response
Agent Fraud or Misuse Real-time digital entry, automated e-receipts, and GPS tracking.
Deposit Misreporting Daily reports and robust branch-level reconciliation processes.
Customer Mistrust Transparent passbooks, immediate SMS alerts, and printed receipts.
Dormant Pigmy Accounts Automated alerts for inactivity, accurate penalty calculation, and detailed dormancy reporting.

6.10. Core Operations

The module facilitates several core operational processes:

  • Add New Pigmy Account: Allows for the efficient creation of new Pigmy deposit accounts for members.
  • Pigmy Withdraw: Manages the processes related to withdrawals from Pigmy accounts.

Conclusion

The Pigmy Module is a vital tool for cooperative banks, fostering financial inclusion, promoting savings habits, and ensuring efficient micro-deposit management.

Its comprehensive features, from automated collections to robust security, make it an indispensable asset for serving underserved communities and expanding financial reach.

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