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Financial Inclusion in India: Going beyond SCBs

Posted on March 01, 2017 by Sumita Kale

 

So far, in India, the regular full service banks have borne the mandate of financial inclusion. This is now changing. Whether it is the BC network, product offerings or customers, segments that have been overlooked earlier are now getting their due. As more Payments Banks and Small Finance Banks get operational, the RBI should commission a regular annual survey to get a national picture of met and unmet financial needs at a granular level. It is time to move beyond the single Financial Inclusion Progress table in the Annual Report and give the country a true sense of the changes at the village and BC level. 

The government has recently roped in Payments Banks to use Common Service Centres as their Business Correspondents. As reported in Mint, "“We are signing agreements with Airtel Payments Bank, Reliance Jio Payments Bank and Paytm Payments Bank to make our CSCs their BCs. Payments banks are providing an alternative to traditional banks as it involves lower risk and accepts deposits up to a certain amount,” said Dinesh Tyagi, chief executive officer, CSC e-Governance services in the ministry of electronics and information technology, in an interview with Mint. Till date, The IT Ministry has signed agreements with 42 traditional banks (both public and private) and around 12,000 CSCs are already acting as BCs. “Our objective is to ensure that every CSC becomes a BC and all 240,000 centres should be doing some banking services by March 2018. However, most of the traditional banks are not actively supporting us, citing their own set of reasons.”

India Post Bank CEO Mr. AP Singh set up a simple strategy for expansion in an interview this week: Focus on payment solutions and simple third party products like term life insurance,  index mutual funds; work with government and public sector undertakings space "where we have natural affinity in terms of being an acceptable payment service provider", segments that are normally overlooked by traditional players - state transport corporations, "unreserved" rail ticketing etc. 

There are now five Small Finance Banks operational, out of the 10 who have received licences so far. As per a report in Mint, there are 4 things to watch out for in this space: 1. Tie-ups with financial technology firms who provide credit scores; 2. Tapping into micro enterprise, vehicle finance, agriculture and housing loans segment; 3. Giving higher interest in a bid to garner deposits and 4. Offering doorstep banking services through business correspondent (BC) channel

With so much change in the product space and agent networks, it is vital that the RBI move beyond the current supply side parameters in its annual national table - number of agents, number of accounts etc - and bring about a granular understanding of the regions/districts/villages, customer segments and financial needs that remain untapped. 

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