Financial inclusion, when will it be priority?

In 2010, RBI Governor Duvvuri Subbarao and Deputy Governor Kamalesh Chandra Chakrabarty had taken bankers head on when the latter adopted the stance that financial inclusion is unviable.  “Commerce for the poor is always more viable, more profitable than commerce for the rich.” Mr Chakrabarty is quoted as saying.

What is it that makes Indian banks shy away from extending technology to rural markets and capitalizing on vast untapped potential of rural India? With 70% of India’s population living in villages and these households having growing incomes, corporate should make a beeline to stroke demand for consumer goods specially jeeps, scooters, televisions, fans and even washing machines. There is also an increasing market for cosmetics and mobiles and with multi-brand retail channelizing over Rs 400 billion, it will surely be boom time for the rural populace.

In this scenario, banks can project themselves as facilitators and project an image of being caring, much like a family member by initiating jatras and forums to educate about thrift, saving, availing loans for education and building small enterprises; establishing kiosks so that even the semi-literate farmer gets a feel and convenience of an ATM. In one such programme, Syndicate Bank adopted a poor locality in Hyderabad and mobilized 2,000 new savings accounts.

At the other extreme, social control of interest rates on loans less than Rs 2 lakh, renders financial services to micro-clients uneconomical and hinders financial inclusion.  Another factor for serious consideration is whether co-operative banks are fulfilling the lacuna? Probably a common accounting system without external influence and audit procedures will help to provide the much-needed co-operative credit reform. While few reforms have led to diversification of financial services, rural banking yet, till date continues to receive step- motherly treatment from the banking industry.

Can banking follow a Darwinian led evolution?

Has India made seismic progress with digital technology as compared to Australia or Singapore, given or inspite of our rather dismal internet penetration of just 1.65% and a diverse geography that makes even formalizing a central policy a mind-boggling task? While the world has made gargantuan strides with pocket-sized calendars that help one view financial history and make on-the-spot decisions, or a 19-inch touch screen which portrays currently relevant info about the transaction at hand, is India lagging behind with its sparsely scattered ATMs?

Opinions vary.  While most banks in India have in place their biometric smart card, handheld biometric POS devices for authentication and transaction, GPRS-enabled mobile phones and core banking solutions, Louwke van der Steen, Country Manager at Logica for India and SAARC firmly emphasizes that “…India needs to adopt technology more rapidly, especially on the mobile fronts.”

 Indian banks spend an average of Rs 150 crore on internet banking and developing banking software and hardware. The World bank has also allocated a whopping automation fund whereby banks like Dena Bank, Bank of India, Bank of Baroda each can mobilize Rs 100 crore. This augurs well for the Indian banking scenario so that it can rewrite ground-breaking rules much like PayPal integrating micropayments into its Facebook application as though building the world’s first virtual global currency.

Another interesting factor is how this translates for the average urban Indian comfortable with the ICICI launched iMobile, to pay bills, check balance, locate an ATM and order a checkbook. Surprisingly, our culture that does not permit us the glossy ‘spend-now-pay-later’ rhetoric provides us with perks we have taken for granted. While our US counterparts have to restrict calls to customer care and ATM transactions to just two in a month; we enjoy unlimited privileges; most of which play a major role in striking the right work-life balance.