Last year the Indian government embarked on a financial inclusion drive of massive proportion. The fruit of this labour: 160+ million bank accounts for the underserved.
Wow. The government’s identity card scheme (that made this achievable) notwithstanding, still a substantive achievement.
But with all the best intentions, these accounts are not yet doing what they were designed for: the account owners haven’t attended the party yet. Estimates are that between 40-45% of the created accounts are zero balance.
The graphic on the left from the Business Standard, approximates total household coverage alongside the percentage of Aaadhar-linked accounts.
State subsidies / benefits payments deposited directly into these accounts have kickstarted adoption.
Now comes the behaviour change needed to get previously underserved to a) understand the benefit of joining the formal financial system; and b) change their habits and do something about it. And there’s the need for coordination.
Public sector banks, private sector banks, payment banks, small banks, microfinance and the informal sector. All players in a changing Indian financial landscape with telcos, banking correspondents and mobile technology. Some players have priority lending targets, while others target the same priority sectors. Competition is and will continue to be intense, and to avoid overlapping and gaps, there will need to be harmonization and possibly, consolidation.
The task remains immense. The opportunity, even greater.