Indian Banking Widens Reach

Yesterday’s Times of India pointed to a development by the Reserve Bank of India (RBI) to extend its services. It has yet to be seen how this initiative will be taken up by BoP users both rurally and in urban neighbourhoods not currently not served by banks.

Yesterday’s Times of India pointed to a development by the Reserve Bank of India (RBI) to extend its services.

“Very soon, the kirana shop and the PCO in your neighbourhood… and the nearby petrol pump, could provide you with a slew of banking services like deposits and withdrawals, opening of accounts etc from their premises. On Monday, RBI permitted banks to appoint these entities to act as their agents and carry out several of the bank’s operations…

In August, an RBI working group was of the view that since the traditional ‘brick and mortar’ banking model had limitations penetrating remote areas of India, the BC model could give banks a workable solution to provide banking services in inaccessible areas in a cost-effective manner. ‘‘Banks need to accept the BC model as extremely vital for achieving the goals of financial inclusion,” the working group had recommended.”

It has yet to be seen how this initiative will be taken up by BoP users both rurally and in urban neighbourhoods not currently not served by banks. And indeed whether it will be appropriately tailored for those on low and unpredictable incomes. Given seasonal income for farmers which need to support them across the year, such services could prove relevant. I’ll be paying close attention to informants’ discussion of savings methods and imagine that Niti (and others who have been researching here) may have relevant field insights and information to add on this development.

Image from Dinesh Cyanam on Flickr

One Comment

  • Some thoughts on the BC or “business correspondent” model, as the agent model is being referred to here:
    1. At first glance, this is a good thing.
    2. On second thoughts, from reading the details in the news article, one wonders how many of the BCs will be former informal moneylenders, as one of the qualifications will be experience in handling money?
    3. Finally, what happens when ICT based initiatives take off in scale and scope? Will they work in congruence with the BC’s to evolve into something like mPesa?

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