· An increased level of urbanisation is evident from the fact that between 2001 and 2011, India added 2,500 towns, earlier classified as large villages. The growth experienced by such towns and the ‘rurban’ region of India has been rapid and haphazard, unevenly spread across the country’s topography. In fact, two-thirds of this region is concentrated in just six states-West Bengal, Kerala, Tamil Nadu, Maharashtra, Uttar Pradesh and Andhra Pradesh, in that order.
· Massive urbanisation will result in the increase in disposable income from about 40,000 INR in 2010 to 78,000 INR by 2016.This is likely to result in higher consumption and needs for financial products in order to enhance savings and investments. The increased consumption of lifestyle products and the ability to ape ‘urban’ lifestyle has led to shifting demand patterns. A variety of goods ranging from smartphones to automobiles and various electronic gadgets are now commonplace in rural India.
· As per the CII report Exploring new horizons: Financial percolation to the ‘rurban’ penetration in rural and semi-urban markets till now been largely driven by the regulator and the government. Multiple roadblocks exist in these regions in terms of inadequate infrastructure, low levels of financial literacy and lack of strong distribution channels. Financial providers do not seem to identify any viable opportunities from tapping these markets, given the cost of reaching the rural areas.
· Gaurav Dev Burman, Associate Director, PwC India, said, “Financial inclusion is a huge project and cannot be undertaken by a single provider working on its own. Partnerships and alliances are necessary in order to collaborate and seek answers to reach the unbanked. Banks and other financial providers will need to partner with technology service providers, mobile operators, FMCG companies, postal department, or will need to identify other alliances which could work out a viable revenue-sharing model. In fact, a series of such models can be modified on a continual basis to tweak peculiar topographical or socio-economic constraints.”
· Commercial banks and institutions need to treat the process of financial inclusion as a viable and (potentially) profit-generating business model. Currently, Indian banks are required to give 40% of their loans to weaker sections of society and farmers, among others. To achieve these twin goals, it is crucial to dissect the diverse nature of rural credit dispersion across states.
· The country’s east gets far less rural credit. The data shows extensive inequality in the distribution of rural credit within the country pointing towards topography as a major factor. Accessing finance in the north east is more difficult that in mainland India.
· C. Jayaram, Chairman – CII Financial Distribution Summit 2013 and Joint Managing Director Kotak Mahindra Bank, said, “The current times are most challenging phases for the financial services industry. Given the constantly changing business environment, with frequent changes in regulations, the industry is struggling to build sustainable models. Market players need to capitalise on the benefits that technology has to offer, making investments in the right pockets of opportunity. The cost-benefit analysis of using technology as a facilitator and enabler needs to be pushed out to customers and market players alike”
· The report suggests that cohesion of the government, regulator and industry players is required to bear the torch of financial inclusion.
· For instance, the government needs to create an enabling infrastructure that holistically encompasses the NPS, RSBY, NREGA and DBT under one umbrella. Coupled with this, physical infrastructure that accentuates last-mile connectivity needs to be in place to save administrative costs. To enhance the percentage of insurance in rural India, passage of the Insurance Bill is crucial.
· Industry players need understanding of the nuances relating consumer behavior in these regions to align their needs and preferences (income, consumption and risk patterns) with product development.
· Innovative use of technology is allowing players worldwide to reach low-income groups. The SMAC (social, mobile, analytics and cloud) concept comes to play to look at device enabled sales forces, STP and paperless branches, using new collaboration techniques to co-create products with customers and better insights to individual customer risk profiling.
· Looking ahead, the report points out that the industry needs to have a relook at their distribution path, product design, technology mix, awareness programmes for investors and service initiatives among other things to increase penetration and business as a whole.
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