Innovation in delivery and design of financial services targeting the poor and the excluded, presents challenging policy and regulatory issues. Even the G-20 has set up the Financial Inclusion Experts Group to address these issues of ensuring financial inclusion and global safety nets.
When we talk of reaching to the people, we must understand what types of problems are faced by customers and what is the solution. Any policy and regulatory responses will therefore need to focus on articulating flexible approaches that can take account of multiple and competing objectives and that can accommodate further innovation. A key source of innovation is the capacity of technology to reduce costs and overcome other barriers to the provision of sustainable financial services to the excluded.
Till a few years ago, there was a dearth of appropriate technology. But, now that technology has arrived, we have taken several initiatives to bring about financial inclusion. What we require is a business model and a delivery model.
With this in view, Reserve Bank of India (RBI) advised banks to formulate a board approved financial inclusion plan for the next three years. All banks have drawn up their financial inclusion plans and we are engaged in active discussions with banks on their plans.
Through this approach, we are putting the financial inclusion campaign into mission mode. Based on our assessment and learning, we have advised them to review and revise their plans. Our broad approach on achieving planned, sustained and structured financial inclusion is as under:
First, the transformational role of technology needs to emphasised. Financial deepening is taking banking to people. We are speaking of this for the last four decades post nationalisation; we have failed if we see that the current coverage is of barely 32,000 rural commercial bank branches. Scalable financial inclusion cannot happen without stable and reliable Information and Communications Technology (ICT).
Not only the bank branches but also the branches of Regional Rural Bank’s must also be on Core Banking Solution (CBS), without which it would not be possible to scale up the financial inclusion efforts. The transactions through the hand held front end-devices should be seamlessly integrated with banks’ main server.
These devices must be capable of transacting the four minimum products as mentioned in a subsequent paragraph. There should be a provision in the smart card for integration with the UID number under the Aadhaar Project. Second, it is