BFSI: Best Practices in Financial Inclusion

22nd SKOCH Summit, 2010

13 Pages Posted: 31 Jan 2011

Date Written: March 19, 2010


Banking Financial Services and Insurance (BFSI) holds the key for the inclusive growth of the nation. Essence of financial service is trust. A bank- customer relationship is fiduciary and not based on a transaction- it is a hard standing relationship and there is every need for banks to act with responsibility. In the area of customer service, cherished principles are: Transparency, Reasonableness, Truth in selling, Confidentiality, and Assistance when needed.

Yet banks charge housing loans with fixed interest and floating interest with the customers not knowing what is really fixed? It is common knowledge that it is easier to get an education loan for 20 Lakhs for pursuing education abroad but very difficult to get a loan for 1 Lakh for education in India for a rural student.

The essence of Financial Inclusion is to ensure that a range of appropriate financial services are available to every individual and all those who need these services are made to understand and avail them. Every citizen must be able to have his/her basic needs – access to food, clothing, education, healthcare, shelter met.

Given the economic level of rural people and given the density of the population, conventional banking methods (brick and mortar) cannot cover all people in a cost effective manner. IT needs to be part of the core infrastructure for development. 72% of the population lives in rural according to 2001 census. Available data shows that only 59% of the adult population has bank accounts. There is many duplicate data as the rich tend to have multiple accounts bringing this figure still less. The unbanked segment in the rural sector is about 61%. Arjun Sengupta report on financing enterprise in the unorganized sector pointed our that only 2.4 million out of 58 million units with investments of less than Rs. 25000 got credit from commercial banks.

The limited access to affordable financial services such as savings, loans, remittances and insurance services for the vast majority in the rural areas and unorganized sector is acting as a constraint to the growth impetus to the rural sector and Indian economy. Government had come with various innovations like: Banking correspondents, Banking facilitators etc., Introduction of zero balance and no frills savings accounts, Simplification of Know your Customer (KYC) procedures, Setting of Biometric ATMs in rural areas for catering to illiterate customers, Removing usage fee on ATMs for use of other Bank ATMs.

After one year of the perusal of sample account reveal that 72% have zero or minimum balance even after one year of opening. Only 15 % accounts had a balance of more than Rs 100 thus leaving 85% of the new frill free accounts inoperative. But these can address only a fraction of the problems. Empowerment and improving the living standards are interlinked. There is a need for coordinated effort on financial inclusion- bank, insurance etc. Duplication need to be avoided to reduce the costs. Different stakeholders have different perspectives based on their perceptions, which need to be addressed.

Mobile telephony is India’s growth story of the current era. It has been found that Voice authentication is superior to even fingerprint. The unique identify card planned by the Government of India should help this to accelerate.

Information and Communication Technologies (ICT) can be used as a tool for making need based solutions at an affordable cost. Creating awareness and empowering the rural youth by increasing their employability levels are of at mostimportance as these schemes can work fully only when there is involvement by the people.

This paper looks critically at the current best practices of BFSI and suggests innovative ways with total involvement of all stakeholders to build an India where there is inclusion with dignity for all its children.

Keywords: Inclusion, Rural ATM, M-Banking, SMS

Suggested Citation

Ramachandran, Ramakrishnan, BFSI: Best Practices in Financial Inclusion (March 19, 2010). 22nd SKOCH Summit, 2010 , Available at SSRN:

Ramakrishnan Ramachandran (Contact Author)

Vivin Consultants Chennai ( email )

J108 S&P Living Spaces, Kamarajar Street
Vanagaram-Ambattur Road, Aynambakam
Chennai, Tamilnadu 600095
+919952669656 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics