Financial inclusion means ensuring access to cost-effective, appropriate financial services and products in a fair and transparent manner to all sections of society, including the vulnerable, poor, unbanked remotest villages.
Many initiatives have already been taken — such as nationalisation of banks, the lead-bank scheme, setting up of regional rural banks, service-area approach, self-help groups — but merely 18 per cent of the population have debit cards, and 2 per cent have credit cards.
BUSINESS MODEL
The Reserve Bank of India prescribes at least four products: a no-frills banking account with no requirement for a minimum balance and overdraft facility; a remittance product for electronic benefit transfer, and some other remittances; a pure savings product; and entrepreneurial credit such as General Credit Card and Kisan Credit Card.
The business-correspondent (BC) model is available for low-cost doorstep banking services in remote villages. All banks are directed to implement financial inclusion plans, with a road map to cover villages with more than 2,000 persons, by March 2012.
Recently, the RBI directed banks to open 25 per cent of new branches in unbanked rural centres and simplified know-your-customer norms. Besides providing all rural banks with the core-banking solution, multichannel approach is encouraged, facilitating use of handheld devices, mobiles, cards, micro-ATMs, branches, kiosks and mobile-wallets, integrating the front-end devices' transactions with the banks' core-banking solution.
The three tiers of government, regulators, banks, mutual funds, insurance companies, industry associations, NGOs, community and customer organisations should collaborate and work for financial inclusion. Customised business delivery model should be a mix of low-cost brick-and-mortar structures linked with BCs and intermediaries providing digital and physical connectivity
INTERNET BANKING
Technology deployed for financial-inclusion initiatives include biometric card, handheld biometric points-of-sale (POS) device with voice guidance in the local language for authentication and transaction, GPRS-enabled mobile phones and core banking solution.
Internet-mobile payments service (IMPS) offers an instant round-the-clock interbank electronic-transfer service through mobile phones.
Airtel and SBI have set up a joint venture; Vodafone and ICICI; Idea and Axis bank have also tied up for working together. The freedom of SBI, ICICI's i-Mobile, HDFC's NGPAY and MCHECK permit clients to conduct basic banking needs, such as transfer of funds, purchasing tickets, request for cheque books and utility payments, among others.
What is needed is an innovative business model addressing the key concerns of security of deposits, low transaction costs, convenient operating time, minimum paper work, frequent deposits and easy access to credit and remittances — all tailored according to the income and consumption pattern of the targeted population.
(The author is a Director-General, CAG Office.)