Financial inclusion has been viewed as the buzz word of the year. Experts and policy makers in the banking sector are entangled in heated discussions regarding the various aspects of financial inclusion. Financial inclusion mainly intends to bring the poor unbanked rural community to the main stream of economic development by making access to banks and other financial institutions easy.
RBI has put forward certain norms regarding the number of rural branches that a bank should have, in order to grant them the banking license. Setting up a new bank in a rural area requires new capital, investment, promotional campaigns and sourcing of human resource. For any private sector bank, their activities are measured against their profitability. It is a fact that starting a new bank in rural areas is not seen as a viable option and the net results of these branches can not be more than the urban branch operations. Naturally, private parties will be least interested in entering the rural segment. They are trying to play safe by leaving these matters of social service to other nationalized banks.
Rural people are giving more importance to the safety and security of their deposits. This most sensitive customer group is always concerned about their hard-earned money and hence, they might not be ready to take a chance on these matters. To understand better these well rooted aspects of financial inclusion, experts and policy makers should come down to the ground level. Their decisions should be based on realistic opinions and experiences.
Co-operative banks and the Indian postal service are the two government entities that are functioning on a large scale among the rural areas. Since these are operated by the government, the rural people have a confidence that their money will be safe in these entities. Further, dealing with such entities is more comfortable for the rural people than dealing with a business correspondent who has been appointed by the private corporate bank. What we need to do is strengthen the base of rural co-operative banks and other such local establishments and develop a network which is accessible to the local people. This will definitely help the government to ensure inclusive growth in the banking and financial sector.
By Parvathy Menon
Parvathy Menon is a MBA finance graduate from Cochin University of Science and Technology (CUSAT), Kerala. Also possess a diploma in Banking and Finance from Indian Institute of Banking and Finance, Mumbai. Freelance writer who is interested to work on Economics, Finance and developmental issues. Articles published in a number of Indian magazines. Regular writer at The Indian Fusion magazine. Particularly interested in the research and analytics field. Contact: vkparvathy1990@gmail.com