Empowering India with Innovations in Banking

The urban Indian has never had it so good. Locate closest ATM on mobile, before leaving home for work or use a 19-inch touch screen to portray the transaction at hand. Most banks in India utilize biometric smart cards and POS devices for authentication and transaction which also connect rural masses. These technological marvels in banking empower the semi-literate farmer who merely tells the amount of transaction to acquire the money he needs; without the hassle of obtaining or maintaining a checkbook, which in today’s digital age appears prehistoric.

However, Harish K Murthi, Chairman, HMA STARware, the first company in India to sell ATMs to public sector banks, maintains that, “In technology, we have a lot of catching up to do.” He adds, “Korea hs over 2,00,000 POS terminals versus a mere 50,000 in our country.”

Almost 12 million users in Kenya, withdraw cash through their mobiles thanks to M-PESA. 

 In another part of  the world,  NFC Payments capability like Visa PayWave, Mastercard PayPass built right into the handset could be revolutionary for our 21st century, spelling the end of checks and possibly even cash. Whereas the most recently launched Square makes people and organizations, become instant merchants through their iPhone OS.

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.