Role of Banks in Promoting Financial Inclusion

The Indian economy is growing strongly which ensures better recovery and asset valuation. Progressive bank reforms and low interest rates will increase borrowing activity to meet their financial targets. Banking industry is making rapid strides with Information technology driven initiatives and has led to expansion of products (i.e.) expansion of financial services giving birth to the concept of Financial Inclusion.

Financial inclusion is the availability of banking services at an affordable cost to the disadvantaged and low incomegroups. In India, the basic concept of financial inclusion is having a saving or current account at any bank. In reality, it includes loans, insurance services and much more, for all members of an economy. An inclusive financial system has several merits. It facilitates efficient allocation of productive resources and thus can potentially reduce the cost of capital. In addition, access to appropriate financial services can significantly improve the day to day management of finances.

An inclusive financial system can help in reducing the growth of informal sources of credit such as money lenders, which are often found to be exploitative. Thus, an all inclusive financial system enhances efficiency and welfare by providing avenues for secured and safe saving practices and by facilitating a whole range of efficient financial services.

In India, the Reserve Bank of India has initiated several measures to achieve greater financial inclusion, such as facilitating “no frill” accounts and “General Credit Cards” for low deposits and credits. The German Bankers’ Association introduced a voluntary Code in 1996 providing for an “everyman” banking transactions. In South Africa, a low cost bank account called “Mzansi” was launched for financially excluded people in 2004 by the South African Banking Association. Alternative financial institutions such as micro finance institutions and Self Help Groups have also been promoted in some countries in order to reach financial services to be excluded.

Impact of Technology in Rural Banking

In the world of banking and finance nothing stands still. The biggest change of all is in the, scope of the business of banking. Banking in its traditional from is concerned with the acceptance of deposits from the customers, the lending of surplus of deposited money to suitable customers who wish to borrow and transmission of funds. Apart from traditional business, banks now a days provide a wide range of services to satisfy the financial and non financial needs of all types of customers from the smallest account holder to the largest company and in some cases of non customers. The urban banks are far ahead with the technology. In rural banks changes are happening but not as fast in urban areas. The range of services offered differs from bank to bank depending mainly on the type and size of the bank.

Historically, rural markets have been less competitive for the financial services industry, if simply because lower population density and higher transportation costs have discouraged infiltration. That's changed, of course. By lowering transaction costs and allowing complex human interaction independent of distance, the information revolution offers the possibility to enhance competition in rural areas. Private sector Banks also realized the potential in rural market. In the early 2000's ICICI bank began setting up internet kiosks in rural Tamilnadu along with ATM machines.

Now What are rural banks doing about it? The range of [rural] institutions involved is likely to be different, often narrower than that serving urban communities, and competition for rural loans is often not as keen as it is for urban loans. The structure of non metro financial service markets and the way in which they operate remain remarkably similar to the structure and processes in place half a century ago. But the rural are not lagging behind more metropolitan areas in its adoption of PC and Internet use. Current market conditions suggest that the percentage of households and farmers "wired" and able to access financial services electronically is poised to grow rapidly. Now the common man can use ATMs and enjoy the benefits of e-banking.

Technology has been one of the most important factors for the development of mankind. Information and communication technology is the major advent in the field of technology which is used for access, process, storage and dissemination of information electronically. Growth in Banking industry is fast with the use of technology in the from of ATMs, on-line banking, Telephone banking, Mobile banking etc., plastic card is one of the banking products that cater to the needs of retail segment has seen its number grow in geometric progression in recent years. This growth has been strongly supported by the development of in the field of technology, without which this could not have been possible of course it will change our lifestyle in coming years.