The era has come when financial inclusion must grow beyond its basic roots and starts covering every individual under its tree. India has to look beyond mere account numbers and focus on educating the masses and making financial services actually relevant. The value at bottom of pyramid will be realised only when people actually start saving, borrowing and investing in the formal financial system. The same will happen only when financially viable business models are invented and the stake holders find real incentive in tapping the underserved markets. The data as on 22nd August of 2015 shows:
- 74 Crore Accounts under PMJDY (No frill Accounts)
- 17 Crore Accounts under PMSBY (Accident Insurance)
- 76 Crore Accounts under PMJBY (Life Insurance)
- 83 Lakh Accounts under Atal Pension Yojana (Pension Scheme)
- 26 Lakh Bank Mitras (Business Correspondents)
Though the accounts have been opened but a whopping 45.74% account holders still have zero balance. Very few have actually got their RuPay Card. More than half of Bank Mitras are not even transaction ready. Their paltry salary is a disincentive making most of them dormant and over 11% untraceable.
TKWs Institute of Banking and Finance highlights 5 avenues that need to be discussed and brainstormed to make a strong business case of Financial Inclusion.
- Financial Literacy
No inclusion program will succeed unless the beneficiaries are financially educated and informed about benefits of the formal financial system. Mass financial literacy requires massive customer awareness programs in an entertaining way.
- Indigenous Products
Financial inclusion would require design of innovative solutions tailored according to local needs of people. In a country of diverse cultures and languages, each region would have its own special needs. Village banking unit system of Bank Ryat Indonesia presents an excellent example of how 22 million micro savers are served with autonomously managed micro banks.
- Post Office Network
In 2007, China’s post office was converted into Postal Savings Bank of China and with only 39,707 outlets it became world’s largest bank (by branches) serving over 4 Crore customers. A network of 1,55,015 post office branches with 89% in rural areas is bigger than the total banking system of India. Given the lack of expertise, how to really use this network needs to be addressed.
- Business Correspondents
The last mile service of the 17 Crore PMJDY accounts has to be activated by Bank Mitras. But the current remuneration of Rs 5,000 per month and the small volume of transactions make it an unattractive profession. The profession is not seen with respect and customers prefer a branch over a salesman.
- Payment Banks
By giving approvals to 11 entities, RBI has paved the way for digital payments in India. A billion mobile phones transforming into a bank will take financial services into every Indian home. But without an ability to take credit risk, how the payment banks build a profitable business with miniscule transaction fee and limited net interest margin still needs to be seen.
To address these challenges and to envision a financial system where financial inclusion is not seen as a social service, TKWs Institute of Banking & Finance is organizing in New Delhi a Bankers Meet focused on Financial Inclusion. The conference will be held at Le Meridian on 23rd September 2015. The speakers and delegates will ideate and prepare a Vision Document titled BFSI Vision 2022, which will be presented to PMO, MoF, RBI and CMDs of all private and public sector banks. Readers can contribute to the BFSI Vision 2022 by tweeting their ideas to @TKWsIBF with #BankersMeet.
About 3rd Bankers Meet
An annual networking and knowledge sharing forum held in Delhi for senior most banking professionals. The conference is attended by CEOs, CXOs, National Heads, Business Heads and Regional Managers of various banks and financial institutions. This year’s conference will be an Interactive event, aiming at making a collection BFSI Vision 2022. The discussions will span areas of Financial Inclusion, Payment Banking and Next Gen Bankers.
About TKWs Institute of Banking & Finance
Based in New Delhi, TKWsIBF provides employability training in the domain of Banking & Finance. With a focus on Skill Development the institute uses Experiential Learning Techniques to prepare the students for various job roles performed in BFSI sector. Offering an undergraduate and a graduate level diploma course the intake to the institute is restricted to 120 students per year.