Nearly half of Indians financially excluded

Aug 2007
New Delhi, India, August, 12 2007 - Theme India may be rocking Wall Street and the City of London even as we enter the 60th year of Independence. But back home, the Indian government is waking up to the fact that over 40% of Indians don’t even have bank accounts.

In fact, financial inclusion (FI) could be the next buzz word as the government is working on its plans for achieving inclusive growth. The unbanked population, it has been found, mostly hail from the North-East and eastern regions.

The statistics are startling. According to the saving bank accounts data available with the Reserve Bank of India (RBI), and assuming that one person has only one account, a mere 59% of adult population in the country have accounts in a bank. The actual figure could be much less as many individuals have multiple bank accounts. In rural areas, the coverage is as low as 39%.

Various banks have already responded to the government’s initiatives such as allowing no-frills accounts, utilisation of services of NGOs and micro-finance institutions in providing banking services, and tying up with the postal department for branchless banking.

So while SBI has a target of opening eight lakh no-frills accounts by the end of the current fiscal, HDFC Bank is banking on the growing aspiration of rural Indians to get small ticket loans which in turn need them to open bank accounts. Similarly, StanChart, which is relatively a new entrant in this segment, has adopted a Saral strategy.

In fact, the RBI deputy governor Usha Thorat had recently said that the initiatives underway for greater financial inclusion include setting up of financial literacy centres and credit counselling, launching of a national financial literacy campaigns and facilitating low cost remittance products.

SBI’s chief general manager, rural business (non-farm), Soundara Kumar told SundayET that the bank had already opened five lakh no-frills accounts and had a target of opening three lakh more by March next year. “Under the financial inclusion initiative, the SBI plans to cover one lakh villages in two years. We are targeting one crore SBI tiny smart cards by March, 2009 and 10 crore by 2012.

This card works like a personalised cell phone through which you can avail of insurance, small-ticket loan, or even open a fixed deposit account. Andhra Pradesh and Mahrashtra are the states where maximum no-frills accounts have been opened so far. In future, we expect North-Eastern states to lead in this segment,” she said.

It’s learnt that the SBI has applied for a Rs 25-crore funding from the government’s proposed $125 million Financial Inclusion Technology Fund. Also, the bank has asked the World Bank to assist its smart card initiative.

The other fund that the ministry of finance has been developing now is Financial Inclusion Fund for developmental and promotional intervention.

Nationally, no-frills accounts have become extremely popular in tier-II and tier-III cities. “We believe that the future of the banking industry lies in rural markets. The majority of the customers opening no-frills accounts are the ones who are availing of small-ticket loans such as two-wheeler loans at our branches in tier-II and tier-III cities.

After all, having a bank account is mandatory for getting a loan,” says Chitra Pandeya, executive vice-president, HDFC Bank. Significantly, HDFC Bank has received good response for the no-frills segment from towns such as Pondicherry, Warangal, Trichy, Rajahmundry, Palakkad and Coimbatore.

Standard Chartered Bank which launched no-frills accounts two months back, is getting very good responses from places such as Bhopal, Lucknow, Kanpur and Ahmedabad. “We branded it as Saral, which requires you to maintain Rs 250 as quarterly monthly balance,” a senior StanChart official said.


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