October 2015

The Indian government’s push for financial inclusion over the last year has earned India the top rank in country commitment in the latest Brookings Institution's 2015 Financial and Digital Inclusion Project (FDIP) Report and Scorecard. India has been ranked ninth overall amongst 21 countries in the report that analysed progress under four key parameters - country commitment, mobile capacity, regulatory environment, and adoption of traditional and digital financial services. The major turning points in country commitment over the past year have been the tremendous success of the Pradhan Mantri Jan Dhan Yojana (PMJDY) and the new niche bank licenses: while the RBI granted in-principle approvals for 10 Payments Banks in August and 11 Small Finance Bank licenses last month, PMJDY accounts have now crossed 184 million, zero balance accounts have been reduced to 41.31% by end-September and enrolment under the Jan Suraksha pension and insurance schemes has crossed 115 million. The government’s focus on ensuring viability at the last mile remains strong, as remuneration to agents is also being monitored.

Even as Payments Banks and Small Finance Banks are expected to usher in new-age banking for low income customers in India, these non-banks face challenges in adapting to their new businesses. As pointed out by Micro Save in a policy note, “Transformation of Micro Finance Institutions into Small Finance Banks”, new Small Finance Bank licensees will need to work on the following points to transform from “credit only” to “deposit mobilizing” institutions: i) designing appropriate products and processes, ii) finalization of delivery strategy, iii) communication strategy to build demand for deposit products, iv) capacity building of the front line force and v) regulatory compliance and risk management.

Indicus Centre for Financial Inclusion, 2nd Floor, Nehru House, 4, Bahadur Shah ZafarMarg, New Delhi 110002
Contact:sumita@indicus.net Website: www.indicus.net/icfi