Financial inclusion is one of the foundations of a developing economy like ours. The Digital India movement has been viewed as a huge intervention in banking the unbanked and underbanked in India. While there has been some improvement in digital exchanges, the divide is yet too wide, with many bottlenecks needing immediate attention. A robust financial ecosystem is crucial in realizing the objective of turning into a market-driven, profitable, and vigorous economy.
In recent times, with the introduction of several government initiatives for digital banking, such as unified payments interface (UPI) coupled with the demonetization drive, this digital endeavor has gotten a considerable lift. Furthermore, the COVID-19 pandemic accelerated the digitalization of banking, as people preferred to stay indoors, executing online transactions all the more and less keen to handle cash in hand. The blend of Aadhaar, Pradhan Mantri Jan Dhan Yojna, and other government schemes with a digital character has reshaped the manner in which people have welcomed the government’s digital initiative.
The most widely recognized obstacles include the non-accessibility of appropriate financial products, the inability of partners to utilize digital services effectively, framework issues, low pay buyers who can't manage the cost of the innovation needed to get to computerized administrations. Another major impediment is the heavily dominated cash economy in the country combined with the majority of the workforce employed in the informal sector.
Outside the Monetary Net
India, with a populace of 1.3 billion, has an enormous number of individuals who are still out of the formal financial net. Despite our concerted efforts toward financial inclusion over decades, the nation has had limited accomplishment in bringing its underprivileged into utilizing banks’ services. Borrowing at a high cost, accepting risky arrangements from loan sharks, dependence on cash-only transactions are still typical practices prevalent today.
Financial inclusion of these unbanked or underbanked individuals will be the stepping stone to achieving the larger financial goals of India. Rural masses, who make a majority of the unbanked segment, will gain admittance to digital banking and may develop a habit to save, thereby expanding capital formation in the country. More direct money transfers to the recipient records will become conceivable, guaranteeing that the assets really arrive at the planned beneficiaries as opposed to being redirected halfway. It will likewise guarantee satisfactory and straightforward credit accessibility from the financial channels, fostering the entrepreneurial spirit, adding to the overall prosperity, and above all, it will help plug the holes in administering public subsidies and government welfare programs.
The Way Forward
Incorporation doesn't only mean providing an individual easy access to a bank account. It calls for every citizen to have full access to affordable and useful financial services and products that guarantee admittance to reasonable and valuable monetary administrations to meet their requirements regarding installments, exchanges, wealth management, and so on.
The majority of the unbanked populace avoid the financial reach due to the costs involved in electronic transactions, for instance, charges levied on NEFT, RTGS, mobile wallets, and so on. Moreover, most banks have a minimum balance requirement on accounts that are hard to maintain for individuals on low pay. These aspects need to be addressed if we want to drive financial inclusion in true spirit.
Banks must also focus on adopting a mobile first strategy by using applications to gain access to account data as well as different functionalities, for example, cash flow and so on. There is also a lack of trust among consumers with respect to the security and reliability of the newly established platforms. To promote confidence, authorities must release clear rules and guidelines shielding customers and allowing them to make informed decisions.
Along with moving to portable banking, it is critical to move away from physical branches. Some of the banks today depend on branches for specific actions like account opening, which could be changed through online administrations by means of biometrics. Most importantly, a well-designed and balanced open banking program can increase the banking activity by providing access to transaction data across banks and enabling low-value payments. Open banking programs can help build credit capacity and offer legitimate alternatives to loan sharks.
On the whole, for the success of financial inclusion program and to reach the last milestone, there has to be a multidimensional approach through which existing digital platforms, infrastructure, human resources, and policy frameworks are fortified, and new technological innovations are promoted with financial inclusion as the lodestar as it carries the potential to amplify the benefits of economic growth to the society at large.