Financial inclusion: Mobile banking set for upsurge in India

Arun Jaitley1In a potential game-changer for internet and banking services in India, the government is planning to launch the Financial Inclusion Mission to ensure that every household in India has access to banking services, with primary focus on mobile banking facilities.

Speaking at a meeting with chiefs of public sectors banks on July 31, India’s Finance Minister Arun Jaitley said that the reformed financial inclusion programme will target both urban and rural poor. “Currently, the reach of the banking system extends to about 58-59% and therefore the dark areas, which are not covered include about 75 million households.”

The programme will use multiple approaches including inclusion through ATMs in rural areas, bank correspondent, branches and other banking platforms to ensure that at least two member of every household have a savings account.

India’s Prime Minister Narendra Modi will officially lunch the Financial Inclusion Mission on August 15, India’s Independence Day.

Where brick and mortar banks are not possible to be built, smaller branches manned by one or two people would be created, said Jaitley.

A major feature of the financial inclusion programme is its reliance on mobile banking platforms that allow the government to target individual households rather than villages. Yet there are challenges that need to be overcome, cautioned Jaitley. He pointed out that the lack of financial literacy, connectivity problems, and inadequate infrastructure needs to be addressed.

In 2013, Internet and Mobile Association of India (IAMAI) estimated that by June 2014 there would be 243 million internet users in India. Of this user base, mobile internet users accounted for 130 million in 2013, a jump of about 92 per cent from 68 million in 2012. IAMAI expects that number to raise to over 185 million in 2014.

As internet penetration improves in India, and banking is made more accessible, one can expect a dynamic shift in the way transactions and commerce takes place, say some experts.

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