India's financial inclusion update

Posted on April 12, 2017 by Sumita Kale

With 8th March being International Women's Day, March is the month when the world wakes up to gender parity! This year, it also marked the end of India’s failed experiment to bring gender parity through a women’s bank -  the three-year-old Bharatiya Mahila Bank was merged with State Bank of India on 31st March. If women’s access and usage of banking is to increase, rather than a separate bank, we need significant change within all banks – more sensitive KYC requirements, more women agents etc. Yet, the first step to recognising the problem is in measuring it and in India, we have not even got as far as collecting gender disaggregated data – a task that the RBI has yet to commit to.  Indicus has highlighted these issues in a policy brief Closing the Gender Gap in Financial Inclusion - Policy Brief June,2016. Now a guidance note has been brought out by the Alliance for Financial Inclusion (AFI) that showcases national strategies that work, Integrating Gender and Women’s Financial Inclusion into National Strategies.

March was also the month that marked the end of the 18 month deadline for final approvals for Payments Banks. Of the 11 in-principle approvals granted in 2014, there are seven now left in the fray, set to take off this year in India, making for a totally different banking sector. These fledging banks will have to be nimble to face the competition, not just with each other but also with regular full service banks. The payments business is set for major disruption– read how Kotak Mahindra Bank’s disruptive 811 may spell trouble for payments banks.

With the withdrawal of the high denomination notes last November, the government's mission towards a less-cash economy has also brought out the need for payment apps to be customer friendly. A detailed user interface design guide is now available for payment apps, based on a comparative review of the Airtel Money, BHIM, Buddy, Jana Cash, PayTM, and Pockets apps ( See Anand Raman and Leena Datwani, CGAP, March 2017). This will be extremely useful for all digital financial services as adoption of the new payment modes will depend crucially on customer experiences. However, NPCI and RBI should release more detailed analytics of the transaction volumes under each player, to help highlight the laggards, and hence the issues to address, in payments solutions.

With a plethora of new digital payment modes now (UPI, Bharat QR, Bhim etc.), the massive policy push towards a less-cash economy will succeed with a) reliable connectivity across the country and b) a focus on consumer protection. Read Nandan Nilekani’s take: Seminal year for move towards cashless payments

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