Rural banking prove the next development engine for Indian banks

The growth of the domestic economy, the banking sector in India has truly come of age. But with the current slowdown and fears of a global recession, the Indian economy and the banking sector have been looking for new avenues of growth. In the face of these circumstances, it is ironic that rural banking which has hitherto been a slow growth sector could prove the next development engine for Indian banks. With affordable and relevant technology driving penetration as well as providing an improved service experience, rural banking could bring in financial inclusion and help banks grow their business radically.

Indian banks have awakened to the vast potential of the rural sector. Specialized and innovative schemes to improve rural penetration have become the popular mantra. No-frills credit cards, franchisee networks, supply chain financing for agriculture, investments in rural infrastructure and cross-selling of products are only some of the programs directed at the rural sector. Needless to say, at the core of these initiatives lies sophisticated yet reasonably priced technology - playing a significant role both in effective operations and delivery

India’s First Rural Bank to issue ATM Card, Launched in Salem

Customer-friendly: Collector J. Chandrakumar (extreme left) launching the ATM cards of Pallavan Grama Bank to D. Bhuthalingam (GM, Indian Bank, Coimbatore), in Salem on Monday.Pallavan Grama Bank has become the first Regional Rural Bank in the country to launch the Indian Bank co-branded ATM cards for its customers.

Launching the same here on Monday, Collector J. Chandrakumar lauded the efforts of the Pallavan Bank, which he said had been doing good services to the rural populace.He further added that the bank with its innovative schemes had been performing well.He also released a booklet on ‘Guidelines for Recognition and Settlement of Claims relating to Deceased Depositors’ account and on policies’.General Manager, Indian Bank Circle Head Office, Coimbatore, D. Bhuthalingam received it.

Named as Pallavan Bank ATM crads, its customers could withdraw money from any of 1,092 Indian Bank ATMs established in the country with a maximum of Rs. 25,000 as withdrawal amount per day. Its Chairman G. Rangarajan spoke in detail on various schemes of the bank and its future development. It also was determined to take the advanced banking to rural areas, he said.

The bank had touched Rs. 1,300 crores of business and second to none in automation of banking with ATM facility.

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.