Extending the reach of banking services

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the overall well being of society. While increasing their reach, banks should ensure the benefits of wider network and technology also reach their customers. Customers too shouldn’t misuse banking services. Regulators need to provide and implement a legal framework to banks and customers to perform the above. This column attempts to highlight some of the significant aspects of Indian banking as it tries to cater to the aam aadmi.

Financial inclusion: Although upper and middle classes in urban areas have access to banking services through multiple technology platforms, much of the rural populace does not have access to basic banking services. The aam aadmi actually have huge potential to become valuable banking customers. This large un-banked or under-banked segment is not averse to formal banking. The inability to access financing from formal channels have pushed the aam aadmi to access financing from the informal sector, often at usurious rates and on exploitative terms.

There is a compelling need to use technology to cater to various financial services requirements of the rural people. Banks could play a vital role in providing cost effective banking products and services to the people in un-banked areas. They could give solutions in providing simple and flexible banking products and services to these areas.

Collaboration among various types of players in the banking sector to leverage the strengths of one another, could pave the way for profitable banking opportunities in un-banked areas. Local organisations such as self help groups (SHGs), regional rural banks (RRBs), and co-operative banks are better positioned to reach out to the end-customer, understand their requirements, and service them.

But they lack in using the latest technology to acquire, retain, and service customers, skilled employees, adequate capital, and more importantly, a sharp focus on the need for financial inclusion. Private sector banks have the latest technology to provide low-cost banking products and services, skilled manpower, adequate capital, and a compelling need to diversify to untapped markets but do not possess the reach to these areas. These complementary strengths need to be wedded together to tap the vast bankable markets in un-banked areas.