Banking for unserved. How far we reached?

The context for Readers. This blog was first published in the year 2016.

With JAM trinity, the present Government is trying its all efforts to encourage financial inclusion through the use of (a) Jan Dhan Accounts (known as BSBDA accounts in banking parlance), (b) Aadhaar as a valid document, and (c) use of mobile as a tech enabler in reaching out to the nooks and corner of India, which is what Digital India campaign is all about.

The recent policies were vocal about initiatives undertaken for the under-banked population of the nation to full fill their banking needs through the Aadhaar authentication mechanism or liberalizing policy on credit to the unreserved population of India.

Now the question arises of how far banking has reached the unreserved population of India.

Let’s evaluate the various initiatives which the Reserve Bank of India (RBI) has undertaken to achieve the objectives of financial inclusion:

1. Allowed in-principle approval to set up Small Finance Banks with the requirement of 75% of the loan portfolio to be Priority Sector Lending advances as also stipulated requirement 50% of loans should be of small ticket size of 10 lakhs and below. Thereby ensuring the flow of credit to the underbanked sector.
2. Allowed in-principle approval to set up Payments Banks allowing the use of high-end technology with a low-cost model for remittances enabling the reach to low strata of the group.
3. Mandated setting up of 25% of branches in under-banked rural centers as per census 2011.
4. Allowed incentive branches for branches opened by banks in under-banked districts of under-banked states.
5. Issued special guidance on Self-help group lending, priority sector lending, and lending to ST/SC borrowers

We have witnessed that from a policy point of view, there is no dearth of opportunities. However, Banks will have to implement the same in order to boost the initiatives undertaken by Gov’t and RBI.

Also, States like Chhattisgarh, Jharkhand, Orissa, Bihar, North Eastern Region opens up a wide range of opportunities in terms of expansion of rural lending and inculcating saving habits for long-term growth.

Banks have been experimenting with technological innovation in acquiring the rural forum by enabling high-end technology with low-cost effectiveness such as Micro ATMs and using Business Correspondents to reach the far-flung areas of rural India.

To sum up, loads of ammunition is available I mean tools and measures to reach out to the rural and under-banked population of India, the only thing which is awaited is firing all cylinders I mean implementing the policies which need to be tracked by PMO office/RBI.

Abhishek R Sharma

(Views are personal)