IT key to microfinance, urban and rural banking: RBI Deputy Governor

By Naagesh Naaraayana

Microfinance Focus, Sept. 1, 2009: Achieving 9 per cent growth rate is possible when millions of people at the bottom of the pyramid are brought into the banking network, said Dr K.C. Chakrabarty, Deputy Governor, Reserve Bank of India, in New Delhi at the 62nd International Banking Summer School (IBSS) jointly organized by the Indian Institute of Banking and Finance and Indian Banks’ Association on Monday.

This is possible when financial products being offered by banks reach this segment and to achieve this, integration of IT with microfinance or small rural or urban banking sector is an essential step to achieve the ultimate goal of financial inclusion, he said.
“The history of human civilization has always been the technology which has led to mass availability of products and services. Same is the case for banking services. We are in the midst of the most exciting period of human civilization when two billion of population is expected to move ‘up’ from below poverty line to above poverty line (BPL)”. Since majority of these population are in the Indian Sub-continent, banks will have an opportunity to participate in the task to bring sustainable peace and prosperity to the mankind,”  Dr Chakrabarty explained.

Though experts have recommended the Business Correspondent or Facilitator (BC/BF) model to achieve this, some recent studies have pointed out that the BC model at the initial stage, may not be commercially viable due to a high transaction cost for the banks and customers, he noted. Here, the appropriate use of technology can help in reducing the transaction cost and the need of the hour is to develop a scalable huge platform with independent technology solutions. “Technology, thus, really holds the key for financial inclusion to take place on an accelerated scale,” he remarked.
The banking industry is fast growing with the use of technology in the form of ATMs, on-line banking, Telephone banking, mobile banking etc. Plastic card, internet banking could be customized in the retail segments of all types of loans. To study the impact of technology on the sector, RBI has periodically appointed Committees and Working Groups to recommend the appropriate use of technology by banks, he noted.

“Indian banks can sustain their structural high growth trajectory, driven by an under-penetrated financial-services sector, a conducive economic environment and a supportive regulatory regime. Financial penetration holds the key to financial inclusion and inclusive growth.” he added.

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