Connectivity issues stunt no-frills banking: Thorat

Banking Bureau
Posted: Saturday, Sep 13, 2008 at 0225 hrs IST
Updated: Saturday, Sep 13, 2008 at 0225 hrs IST

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Mumbai, Sep 12: Usha Thorat, deputy governor, Reserve Bank of India (RBI) said on Friday that the no-frills accounts in the rural areas are not being operated due to problems of connectivity and accessibility. Hence, the central bank has asked banks to use mobile branch or an extension counter in rural areas.

“There should be some incentives for housel holds to come and operate the accounts. Banks should grab this opportunity as a business growth. They should provide credit products to customers of rural areas. Products offered by banks should be suitable for people who are at the bottom of the pyramid.” she said.

The number of no-frills in India as of March 2008 was 15 million against 5 million in 2006.

On the way forward, Thorat said the challenges are going to be banks using multiple channels for delivery of variety of financial services, developing synergies with MFIs and SHGs by introducing seamless ICT based models. “It is quite clear that financial inclusion has to be an urgent national priority if we are to achieve inclusive growth,” she said. The major challenges in banks extending services to the excluded are large costs of covering the huge numbers (cost of enrollment), relative high maintenance costs for such accounts, small ticket size for each transaction, need for communication modes suited to the illiterate and in local language, affordability of the product or service.

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