Financial Inclusion and the Role of Technology

Abstract

India is the second most populated country in the World with great geographic spread and diversity. Majority of the people live in villages and it is estimated that there are over 6, 28,000 villages in India in far flung and remote areas. The number of inhabitants in each village is many times less than 2000 that makes it nonviable fo r banks to open branches to serve the banking needs of the inhabitants. Commercial viability of opening such branches and the return on investment factor have been acting as dampening features fo r the spread of the banking system. At the same time, it must be stated that the spread of the Indi an banking apparatus across the nation since Independe nce has been commendable. Given the heightened awareness being exhibited presently by va rio us stakeholders o n the need fo r eli minating financial excl usion or unto uchability, seve ra l alternative measures are being explored. Amongst ochers, the role and impact of technology in overcoming this problem is actively being debated. There are uccess stories of technology penetration in other countries that hold promise in the Indian context. This paper dwells into the varied d imensions of technology that aids increasing the spread an d reach of the traditio na l bank operation s. Savings, rem ittances, cas h withdrawa ls, loan disbursements and repayments constitute the bu lwark of financial inclusion. Some of the findings of this paper are: a) mobile banking has to be resorted to b) Product innovations are the need of the hour and c) very vital to have high scale of operations.