Banking and telecom sector companies expect finance minister Pranab Mukherjee to spell out his version of financial inclusion in the general Budget on Friday. The plan broadly involves using the vast telecom network built up in the country to provide banking services to the poor and remove the physical limits of bank branches.
?There is a high degree of expectation that the Budget will give a direction to the financial inclusion model. I think the telecom companies are expecting it,? said Robin Roy, associate director (banking) at PricewaterhouseCoopers.
Speaking to FE, the global chief of one of the oldest foreign banks operating in India said his bank has asked the finance ministry to nudge RBI to frame regulations soon. RBI now allows banking correspondents to roam 30 km radius from a bank branch to source deposit and even offer small loans but with riders. Using the telecom network could make such physical limits redundant and allow unorganised sector workers to transact with a bank, situated farther away. This would need a common technology protocol for the value-added mobile services offered.
G Srinivasa Raghavan, country head, India business, TCS, told FE that banks are expected to spend upwards of Rs 2,000 crore over the next 12 months on strengthening their technology infrastructure for regional rural banking.
?Banks like SBI, Indian Bank and Punjab National Bank have lined up significant investments in the areas of rural banking and branchless banking and even mobile banking. We expect to grab around 25% of the total spending by banks in the next one year,? he said.
RBI data shows only 54% adults in India have a bank account. Less than 10% of Indian villages numbering about 6,50,000 have a bank branch. Even in urban India, less than 35% of the working population that earned less than Rs 50,000 annually held a bank account.
According to Haragopal Mangipudi, global head-Finacle, Infosys Technologies , ? Over the last decade, banks in India have been very successful in harnessing technology for business transformation. With over 500 million mobile subscribers in India, the proposed use of telecom network for financial inclusion has the potential to take Indian banking to the next orbit by connecting the last mile for banks with the customer.?
Echoing the view, M Narendra, executive director, Bank of India, said the telecom sector can indeed help banks to achieve financial inclusion cost-effectively. Models like business correspondent and business facilitator will be effective for this kind of financial inclusion, he said.
Software firms are betting big on IT spending by the Indian banks over the next 12 months with an increased impetus on financial inclusion and newer ways of banking like over the Internet and mobile.
Says Paul Abraham, chief operating officer at IndusInd Bank: ?The banking industry will have to partner with telecom companies and introduce smart and biometric cards. The partnership will help the remittance and payment business to improve further.?
?Right now the individual banks are more focused on the banking correspondent model. Mobile banking will come at a later stage in lieu of the BC model being not successful towards achieving financial inclusion. There are issues of security, which have to be addressed,? said Punjab National Bank chief general manager LP Aggarwal.
