ICT continues to be leveraged to migrate banking and financial services from the traditional to electronic mode. When done completely, it holds myriad opportunities for expanding the current cover of banking and finance from urban to rural areas and proofing it against several leakages.
A recent report from the global management consultancy firm McKinsey has observed that the government can save up to `1 trillion through the adoption of electronic payment. Out of a total leakage of one trillion rupee, almost `71,000 crore happens from the government welfare programs.
Currently, around `13 trillion flows between the government and individual households, including subsidies and social services to citizens. The report says that adoption of e-payments will help increase transparency of financial transactions and accelerate financial inclusion.
No country can afford to leave a sizable population of its country—in case of India it is almost 60 percent—from banking and financial coverage. The unavailability of any kind of financial services in general, and formal banking services in particular, has been one of the major reasons of the wide-scale persistence of poverty in many parts of rural and urban India.
Linking financial exclusion with poverty, the Rangarajan Committee report on financial inclusion (2008) has clearly stated: “The poorer the group, the greater is the exclusion.” On the positive side, in his February 26, 2010 budget speech, the Union Finance Minister, Pranab Mukherjee outlined for the first time a deadline to functionalise effectively the various financial inclusion initiatives which include appropriate banking facilities to habitations having population in excess of 2,000 by March, 2012, and insurance and other services to the targeted beneficiaries.
The introduction of banking correspondent (BC) and facilitator model by the Reserve Bank of India for providing banking extension services to rural areas in 2006 and the recent directives (January 2010 and September 2010) on making the retailers and for-profit organisations eligible to work as BCs is an appreciable move. Nevertheless, courtesy the indifferent attitude of most of the bankers towards inclusive banking, these efforts have yielded little positive results.
Also, the inability of banks in seeing a business proposition in financial inclusion has been one of the biggest bottlenecks, while the leveraging of technology for conducting humongous micro transactions is yet to pass the litmus test.
Yet, to ensure rapid, equitable, inclusive and healthy social and economic development, it’s as important to provide the financial services to the rural population as to the urban. The advancement in technology, assigning of unique ID numbers to the rural and urban residents and a serious approach towards inclusive banking could offer some concrete solutions. A one-billion plus citizenry looks up to its state for an all inclusive governance and banking.