This year promises to be one with many promising changes for financial inclusion, as India's new niche banks, the Payments Banks and Small Finance Banks will enter the banking sector. There has been a lot of interest shown by prospective applicants, and the RBI has extended the deadline for applications to February 2nd, 2015.
The new banks will enter a landscape that has already gone through change. Banks are reducing their costs of outreach as the past year has seen successful tieups between banks and mobile payment start-ups to use technology to tap rural India. Mobile PoS terminals are being used as mini-ATMs in remote villages and with the e-KYC Aadhaar authentication system in place, ordinary grocery stores are already being turned into bank access points across the hinterland.
With the Pradhan Mantri Jan-Dhan Yojana crossing the 10 crore account mark, surveys are on to ensure that all households have been covered. The next phase will be to get these new account holders to save and transact in these accounts and here banks would need to be as innovative as they can.
The new Small Finance Banks will need to work with different models from the standard banking models to meet the credit needs of the poor. The recently released NSSO report on debt and investment in India shows that the rural poor have a much greater dependence on informal or non-institutional sources of credit; this has to change for meaningful financial inclusion. A MicroSave study in Indonesia has put down the following reasons behind the predominance of informal financial systems amongst the poor:
Trust and familiarity
Easy and hassle free enrollment with limited documentation
Doorstep delivery of service
Product/process design that meets the needs of the community such as flexible schedules, small value payments, easy withdrawals, receipts/passbooks as physical evidence, etc.
Banks in India must take their cue from these insights and work with the RBI to reduce friction points in doing business with the poor.
Section I: Policy – the latest from India's policymakers
Make in India, Largely for India
Dr. Raghuram Rajan, Governor Reserve Bank of India, December 12, 2014
PMJDY Progress Review Meeting with Executive Directors (FI) of PSBs and Private Sector Banks on 10.12.2014
White Label ATMs (WLAs) in India - Guidelines
Mobile Banking Transactions in India - Operative Guidelines for Banks
Issuance and Operation of Pre-paid Payment Instruments (PPIs) in India- Relaxations
Scheme- Special campaign for Opening of account of LPG Consumers
Bringing Dairy Farmers with Banking Fold
Section II: News and Views Digest – the latest from India and abroad
Keeping the Channel Happy for Quick Scale-up: A Case from the Mumbai Remittance Market
Jan Dhan Yojana: Banks achieve target of opening 10cr accounts
Modi's gift for 2015: With ATMs and all, 'Post Bank' is readying itself to serve the poor
Payment banks could aid Jan Dhan over finish line
Firms queue up for payments bank licence
India Post best bet for financial inclusion
All efforts are to make financial inclusion a reality
Five things that impacted the country's banking sector
LIC, banks asked to provide claim forms online
Jan Dhan may be extended to insurance, pension sectors
Axis Bank in talks for tie-up with payments bank
Kochi Metro to sign MoU with NPCI for smart card
ITZCash says open for partnership for payment bank
Paytm set to apply for a payment banking permit; to enter Singapore
Making Jan Dhan Yojana work
Account balance a necessity for Jan Dhan: SS Mundra
Regulation and Innovation: Hand in Hand?
Digital Finance in Cote d'Ivoire: Ready, Set, Go!
Can Agents Improve Conditional Cash Transfers in Peru?
Apple Pay in Afghanistan: Could US M-Payments Work Abroad?
Digital Currencies and Financial Inclusion: 5 Questions
Beyond Mobile: Tablets as Tools for the Extreme Poor
Over The Counter Transactions – Liberation Or A Trap? Part III
Over The Counter Transactions – Liberation Or A Trap? Part II
Over The Counter Transactions – Liberation Or A Trap? – Part I
Lessons from Informal Financial Systems: Indonesian Perspective
Regulating for Inclusive Insurance Markets in Ghana
Section III: Research – surveys and studies on expanding access to financial services
Financial inclusion and optimal monetary policy
Aaron Mehrotra and James Yetman, Working Papers No 476, BIS, December 2014
Business Correspondent Models in Bihar -Constraints and Way Forward
Small Industries Development Bank of India (SIDBI), MicroSave, September 2014
Implementing the Pradhan Mantri Jan-Dhan Yojna
Policy Brief November, 2014
Financial Inclusion Metrics-Part I
Policy Brief October, 2014
Financial Inclusion Metrics-Part II
Policy Brief October, 2014
Operationalising Payments Banks for Inclusion
Policy Brief August, 2014
In the media
Do we need banks for financial inclusion?
Domain-b.com, 17 October 2014
Column: Making PM Jan Dhan Yojana a game-changer
Financial Express, 01 September 2014
RBI releases Final Guidelines for Payments Banks
New legislation in Colombia marks the shift from the bank-led model
Moving beyond remittances