Financial Inclusion- News and Views - January 2015
This year promises to be one with many promising changes for financial inclusion, as India's new niche banks, the Payments Banks and Small Finance Banks will enter the banking sector. There has been a lot of interest shown by prospective applicants, and the RBI has extended the deadline for applications to February 2nd, 2015.
With the Pradhan Mantri Jan-Dhan Yojana crossing the 10 crore account mark, surveys are on to ensure that all households have been covered. The next phase will be to get these new account holders to save and transact in these accounts and here banks would need to be as innovative as they can.
The new Small Finance Banks will need to work with different models from the standard banking models to meet the credit needs of the poor. The recently released NSSO report on debt and investment in India shows that the rural poor have a much greater dependence on informal or non-institutional sources of credit; this has to change for meaningful financial inclusion. A MicroSave study in Indonesia has put down the following reasons behind the predominance of informal financial systems amongst the poor:
Trust and familiarity
Easy and hassle free enrollment with limited documentation
Doorstep delivery of service
Product/process design that meets the needs of the community such as flexible schedules, small value payments, easy withdrawals, receipts/passbooks as physical evidence, etc.
Banks in India must take their cue from these insights and work with the RBI to reduce friction points in doing business with the poor.
Section I: Policy – the latest from India's policymakers
The Indicus Centre for Financial Inclusion was launched in 2011 to distil and disseminate information on accelerating the poor’s access to high-quality financial services. The Centre is supported by the Bill & Melinda Gates Foundation. http://www.indicus.net/icfi