Banks must be the change agents in the digitisation of the rural economy | opinion | Hindustan Times
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Banks must be the change agents in the digitisation of the rural economy

Over a span of 6 years, the number of banking outlets in villages has increased 8 fold, basic savings bank deposit accounts by 6 fold and agriculture credit off-take has doubled. The focus of the Government on the Jan Dhan – Aadhaar – Mobile (JAM) trinity and more recently demonetisation, have induced a behavioural change in hitherto unbanked masses towards banking services.

opinion Updated: Aug 15, 2017 22:35 IST
Villagers waiting outside a bank near Bhopal in November 2016.
Villagers waiting outside a bank near Bhopal in November 2016. (Chandresh Mathur/ Hindustan Times)

In the last decade, the face of the rural economy has undergone a metamorphosis both from an economic and social perspective. The rural clientele is no longer limited to farmers and the uneducated, but has come to include a generation which can use and adapt technology effectively. This evolution of the rural economy has dictated a change in the nature of the supply of banking services, adopting a more inclusive approach combined with innovative digital solutions.

Over a span of six years, the number of banking outlets in villages has increased eight-fold, basic savings bank deposit accounts six-6 fold and agriculture credit offtake has doubled. The focus of the government on the Jan Dhan – Aadhaar – Mobile (JAM) trinity and more recently demonetisation, have induced a behavioural change in hitherto unbanked masses towards banking services.

India is now at the cusp of the great collision of the 3Ds of disruptive forces – demographics, (de)regulation and digitisation, and banks need to be ready to fully seize this “once in a centennial opportunity”.

There has been early identification of the propellers of rural digital banking and the government has moved fast to lay the foundations for cash alternatives such as debit/credit cards, mobile/internet banking, e-wallets and Aadhaar merchant pay.

Cheaper mobile handsets and the spread of cheap data networks have enabled the mobile phone to become a virtual bank in the hands of rural masses. This trend is going to strengthen as BHIM USSD 2.0 kicks in, to empower 350 mn feature phone users to take advantage of the united payment interface (UPI).

From the bank’s perspective, digitalisation offers low hanging fruit; however to reap the full benefits of the evolving winds of change banks must adopt a 4P approach -

Product strategy: For catering to the varied needs of small ticket size transactions, banks must identify how best to deploy technology to ensure flexible and continuous availability

Processes: More efficient monitoring and tracking of underlying credit generation to enable stronger intent from organised financial sector to extend last mile funding.

People: The experience of plastic money, internet availability in the smart phones at negligible costs, e-commerce boom in youth crowd needs to be ingrained, via efficient frontline staff

Protection: Adoption of appropriate risk practices to ensure that banks protect themselves against flow of any uncertainty in credit culture

Achieving 100% financialisation of the rural economy will require further strengthening of institutional mechanisms, including digitisation of land records, setting up financial literacy centres, and a shift in policy priorities towards encouraging savings, provision of insurance products among others in the rural economy.

The fact that the rural economy largely withstood the impact of demonetisation is a reflection of the evolved face of the rural economy. Ensuring access and equity in the availability of financial services is a necessary building block for the sustainable growth of the country. Digitisation has allowed this transformation to become quicker, easier and at lower costs. I believe the rural economy has never been more ready to embrace this change and it is imperative that banks must adopt the role of ‘change agents’ to become the spark plugs in this endeavour.

Rana Kapoor is MD and CEO, Yes Bank and chairman, Yes Institute.

The views expressed are personal