Local language engagement is key to financial inclusion in rural India

MINI

Banking is a service industry and it always pays to connect with the customers. And there is no better way to connect than in the local language.

Today, India stands tall as the world’s biggest economies battle an impending recession. To sustain this momentum and to unlock India’s untapped growth potential and bring it to the mainstream economy, financial inclusion is key.

Banking is a service industry and it always pays to connect with the customers. And there is no better way to connect than in the local language.

In view of this, the government has announced a campaign in seven districts across the country in order to deepen the financial inclusion framework. With Finance Minister Nirmala Sitharaman suggesting that banks ensure that their frontline staff communicate with customers in their local language, it makes for a strong case as engaging in the local language will help understand the challenges and opportunities in further pushing the cause of financial inclusion.

As India continues to seek to build resilience against global headwinds of slow growth and rising inflation, this move certainly augurs well for the Indian economy.

Rural banking with a human touch holds key

A banker can only offer better financial solutions if s/he is able to understand the needs of the customers and convey to them the possible options. A Jan Dhan accountholder can only be persuaded to get a life insurance policy or a pension product if his or her needs are assessed and the right product mix is easily explained to them.

While technology has changed the banking landscape, at the grassroot level, there is a necessity for the human touch. In the last few years, public sector banks (PSBs) have cut down on recruitment of clerical staff. In fact, the share of clerical jobs in the banking system has fallen drastically during the last 30 years, from 50 percent in the early 90s, to 22 percent as of March 2021. There is a need to restart the recruitment process at this level as clerical staff are the backbone of the banking industry and have an ear to the ground.

Ensuring financial inclusion through improved access to banking

As per the World Bank, 78 percent of the Indian adult population (15 years of age or older) have a bank account. We have also been able to provide banking access to almost every village within a 5 km radius in 25 states and 7 Union territories. We however can not remain content with this and efforts must continue to achieve universal access to financial services and products.

At the same time, the policy focus has now shifted from access to usage and quality of services as well. Although we have a vast network of bank branches (1.59 lakh as of June 2022), there are only around 53,000 branches in rural areas where 65 percent of our population lives in over 6,38,0000 villages. In other words, one bank branch serves more than 12 villages on a pan-India basis, and then there are regional variations.

These issues, however, can be addressed if we strengthen the regional rural banks (RRB). The RRBs are 47 years old and spread over almost all rural districts in the country. But in all these years, they have been a combined entity of only 22,348 branches, with a business share of around 3 percent of the system. In comparison, private banks, which began expanding after liberalisation in the early 1990s, now have 39,000 branches and a 40 percent market share in less than 30 years. The staff of RRBs are mostly from the same state/area, so they can connect with the rural customers well. Also, from a cost point of view, a branch of RRB will cost less in comparison to a branch of a nationalised bank branch or a branch of a private sector bank.

The road ahead: Digital transformation can be a gamechanger

RRBs must undergo transformation and need more support from sponsor banks for digitisation at a faster pace and system upgradation. There is scope for the expansion of RRBs, which may be carried out selectively based on viability. Moreover, if all the one lakh post offices could be brought under core banking and start providing a gamut of financial services, that could also be a game changer.

— The author, Bikash Narayan Mishra, is a senior adviser to the Indian Banks’ Association and holds a master’s degree in economics from JNU. Views expressed are personal.

 

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