in Money Talks

Banks have to deal with growing piles of stressed assets in their credit portfolios that constrain their credit delivery. The new FinTech players entering the market have no such ancient deterrents.

But first off, here’s wishing everyone a blessed month of Ramadan.


CASH! The most commonly used object in daily life and yet it’s one of the three causes for creating divide among humans; the other two being religion and politics. On a more serious note, ‘cash’ in it’s physical form,can be a cumbersome and worrying object to be carrying around, especially when its value exceeds your grocery shopping limit. You could carry $2000 easily in your pocket, but carrying the equivalent of that in INR would be out of the question; ₹1,20,000 does require some pretty big pockets.

Which is why the RBI has in recent times proactively tried to shift the Indian economy from a cash based one to a ‘less cash’ economy. The advent of mobile internet and mobile banking has provided a huge assist in this direction. If that wasn’t enough banks are also playing their part in promoting cashless transaction- heard of reward points? Truth is that it’s a win-win situation for all the players involved, when it comes to cashless transactions. .

However, there’s just one major obstacle to tackle in order to realize this vision. The problem looks something like this – 41% of the population in India is unbanked and this is greater in the rural areas; where a staggering 61% of the population is unbanked.



The banking landscape in India is getting a facelift. New technology coupled with initiatives from the government and RBI is bringing banking to the heart of India. Today, more people in rural India have access to internet and banking services; a blessing of the mobile internet penetration into rural India. The future is looking bright for India.

Financial Inclusion (Jan Dhan)

The government along with the RBI has been aiming to bring about 100% financial inclusion in India. In simple terms this initiative advocates bank deposits for every citizen in India; and apparently has achieved more than expected. In the last year alone around 200 million new bank accounts have been created.

Financial inclusion is delivery of banking services at an affordable cost to the vast section of disadvantaged and low income group. It also aims at extending the banking practice among the less privileged and weaning the nation away from unorganized money markets and moneylenders

Bank of India report on Financial Inclusion.


According to a report by the IAMAI and the PCI (Payments Council India) the unbanked population of India has more than halved since 2011. The report states that during 2011 the unbanked population of India stood at 557 million and by 2015 this is down to 233 million. A huge number still but nevertheless a transformational leap. Seriously, even ice cream in the Bangalorean summer doesn’t melt that fast!

Indian Govt launched the Jan-Dhan Yojana (PMJDY) in Aug2014 aiming at providing a bank account to every citizen. Click To Tweet

Within the first 5 months 115 million accounts were opened. The plan is to transfer annual subsidies worth around ₹510 billion directly to bank accounts of 155 million beneficiaries in the next year. The scale of this operation has enabled the PMJDY to make it to the guinness records.

The Shift to a Less Cash Economy

Along with financial inclusion, the focus has also been to shift the economy from one that relies heavily on cash transactions to one that makes use of alternatives such as debit/ credit cards and online transactions. Nothing has been a greater assist in this direction than the penetration of mobile internet in India; because evidently mobile internet is the more popular and easily accessible option among the rural population of India. Automatically, this translates into more mobile phones which support more mobile banking transactions thereby bringing banking to the heart of the nation.


The graph is a representation of the staggering increase in the value and volume of mobile banking transactions in the past 5 years. It’s pretty evident, the scale of mobile internet and the penetration that mobile phones have been able to achieve in India has sort of acted like a boost for financial technology to reach remote parts of the nation. It’s vital to remember that financial inclusion would not have been a success if not for the mobile internet in India.

For example, opening a bank account is just the starting of trouble for much of rural India. According to data from The World Bank, India has a very low commercial bank / population density. As of 2014 this was 13 commercial banks per 100,000 population. Remember, this is just the average across India, which means that the number is much lower in the rural areas. The fact being that banking would not have been feasible for the rural souls had it not been for the penetration of the mobile internet.

What Are We Looking At?

We are looking at the new age in Indian banking. Let’s admit it, there is a gap when it comes to the banking needs in India and the services and infrastructure that banks are actually able to provide. Which is where technology steps in to play the vital role of ‘financial inclusion’. Don’t be surprised if you happen to read that the bulk of mobile banking transaction arise from rural India.

In one of our earlier articles, we had seen how mobile internet has connected rural India to the rest of the country; infact the greater chunk of the people who use internet do so from their mobile phones as this is cheaper and more readily accessible as compared to a fixed line internet. Where banks have previously been ineffective in delivering banking services, new technology is closing that gap.

India is among the top underbanked countries in southeast asia; but it is also the only country that is plugging this gap at such a phenomenal rate. This is all thanks to the innovations that technology is enabling the banks and other financial providers to incorporate but more importantly due to the vision and long term goals of the government and the RBI.

What’s in Store?

Progress is what’s in store for Indian banking- in a nutshell. The future of banking in India has a very transformative appeal about it right now. Perhaps what is really interesting is that it won’t be the banks that will be driving this change. Banks have to deal with growing piles of stressed assets in their credit portfolios that constrain their credit delivery. The new FinTech players entering the market have no such ancient deterrents and as such are more effective addressing the real issues at hand. Furthermore, banks have a narrow portfolio when it comes to lending. Which means that the real suppliants of these loans are not catered to by the banks.

There is already a fusion of banking and technology taking place as we speak. More and more people are using debit/ credit card for purchases, the internet banking population is on the rise and is taking over cheque based payments. After all you can initiate payments from your phone and funds get transferred almost instantly.

Watch this space for more insights into banking trends and fintech evolution in India.

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