Since the Reserve Bank of India has been feeling the need for technologically backed financial inclusion, it will be issuing instructions for small finance banks in the next few weeks.
On the occasion of the 10th IDRBT Banking Technology Excellence Awards, Raghuram Rajan, the Governor of RBI, on Thursday said, “In the next few weeks, we will put out guidelines inviting applications for what we call small finance banks. These are banks that will cater to smaller customers across the country. The detailed guidelines will also be put out,”
He said that payment banks should collaborate with regular commercial banks so that they can be offered various services.
[quote]My hope is that by licencing payment banks, we would also further cause of bank payments, bank alliances.[/quote]
The ‘Ps’:
Talking about the significant role of technology in financial inclusion, he said that ‘Price’, ‘Protection’ and ‘Products’ are a few ‘Ps’ that give an idea of the prospects that should be thought over by the bankers.
He also said that Products, which are custom-made to the consumer’s individual needs are the need of the hour and that the Reserve Bank had put out a consumer code that renders banks responsible to ascertain what is suitable for which customer.
[quote]Of course, that’s a harder task than just selling the product to the individual. We have to find out what the individual understands, what the needs are, etc.[/quote]
Technology can go a long way in assessing customer profiles more efficiently and can also help the customers make informed choices, Rajan said.
Recollecting that the apex bank has taken the initiative of reaching the remotest regions, the RBI Governor said that if mobile companies and banks collude together, communications technology will be really able to help the cause.
Coming to ‘Price’, he explained the term ‘affordable excellence’, that promises good quality but affordable products is an absolute requirement.
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He said, “I think technology is critical to affordability,” and added that it may also help in understanding how customers use their bank accounts.
Giving ‘Pradhan Mantri Jan Dhan Yojana’ as an example, he emphasised the point that technology can really help monitor the usage patterns of direct benefit payments by various individuals.
Highlighting the importance of ‘protecting’ the customer, he said that the product should be in accordance to what the user exactly needs, and should also be appropriate for its right usage. But protection cannot be brought about by the banks alone and the customer also needs to be educated for understanding financial issues, example. Savings, interest rates, etc.
Praising technology furthermore, he said that it also helps in grievance redressal at low costs.
He cited an example of bio-metric technology, which is used in IDRBT to identify individual profiles. This, according to the RBI head, makes transactions much safer.
He said, “It (biometric) is a technology we need figure out how to roll it out in rest of India. Because, think of it. The problem today, if I just give a card to an individual, somebody else can take the card.”
He said it might be difficult for a lot of customers to understand the simple fact that they need to enter their PIN numbers themselves.
“Information and analytics are important for bringing small and medium firms into financial ambit as well and low transaction cost is key to make access to finance more easily available to them,” Rajan said.
As much as he appreciated the usage of technology, he also highlighted the shortcomings like cyber security, etc. which need to be taken care of before we become way too dependent on technology.
He added, “We have to be aware that technology brings both good and bad. We have to guard against the bad side of technology. That means, we need institutions like IDRBT to think of defence.”
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Tushita is a political writer at thenational.net. Her deep rooted interest in politics, passion for writing and craze for travelling define her. Writing since her school days, she aspires to write lifelong and make the world a happier place to live with the power of her pen.
