One of the key public policy objectives in India is that
economic growth should be inclusive, provide opportunities for higher
income and better standards of living, and percolate down to the bottom
of the pyramid.
Banking and formal financial
services play a critical role in this process. As of August 2015, more
than 174 million accounts have been opened under the Pradhan Mantri Jan
Dhan Yojana. The government intends to use the combination of JAM (Jan
Dhan, Aadhar and Mobile) to achieve the national agenda of
inclusiveness.
Emergence of smartness
There are several areas where technology can be leveraged to further financial inclusion. Let us look at three such areas.
Extending reach and delivery:
Reaching out to the remotest corners across India to open bank accounts
is a challenging task and requires innovative channels for delivery of
financial services. Financial services delivery via business
correspondents’ model is an effective tool and can be made successful by
utilising digital tools like smartphones, tablets, bluetooth printers,
etc. The scope of expansion is huge as India is currently the second
largest smartphone market and number of smartphones is expected to
increase manifold to 650 million in the next four years.
Customising products/services:
There is a need to be innovative while designing financial products and
services. The approach of ‘one size fits all’ cannot work and there is a
need for multiple innovative solutions. Banking business models have to
be aligned in a manner that enables complete integration of unbanked
segments to the formal financing network. Data analytics can be
effectively utilised to assess the apt banking model for various target
groups. Since financially excluded people do not have credit history for
assessment by banks, products will have to be uniquely designed to meet
their basic needs keeping in mind their literacy levels, likely incomes
and minimal assets.
Promoting financial literacy:
While opening of bank accounts is the first step towards greater
inclusion, bringing these accounts into active operation is the next big
task which requires a massive push in the realm of financial literacy.
Traditional modes of campaigns and awareness can be supplemented by
innovative use of technology, especially mobile (smart) phones,
television as well as internet. While internet penetration is still a
challenge, the government through its Digital India programme is working
towards universal internet connectivity through broadband as well as
mobile. With 70 per cent of bankable population expected to have smart
phones by FY20 and mobile internet penetration rising rapidly,
smartphones as a tool for literacy can be effectively used through
innovative applications like gaming tools, video-based tutorials, etc.
Other developments such as the entry of payment banks and small banks
are equally amenable to creating disruptions that could leapfrog us on
the road towards financial inclusion.
The Reserve
Bank of India has paved way for new banking structures by allowing entry
of small banks and payments banks. Small banks will support the
financial inclusion process by providing a vehicle for savings,
supplying credit to small and micro businesses, small and marginal
farmers and unorganised sector entities through high technology-low cost
operations.
Payments banks
Likewise, payments
banks can provide the unbanked and unreached population direct access to
simple banking services. They will also facilitate a greater shift in
mode of transactions from cash to cashless.
Clearly,
the banking sector in India is up for major disruptions, posing
challenges for the incumbents with respect to technology, competition as
well as skilling. Since most of the disruptions and challenges emanate
from technology, banks would need to enhance their capabilities in
managing their information technology resources. This requires
investments in creating robust IT infrastructure, procurement, data
analytics, risk management as well as skilling and training of human
resources.
Innovation through digitisation is
imperative today and can be successfully aided by the right policies,
combined with efforts of industry, be it banking, retail, IT or public
utilities.
(Tanksale is the chief executive of the Indian Banks’ Association; Singh is the secretary-General of Ficci)
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