class to mass

Global recession, stagnant economies, inflation and so on are the top stories among the middle and high class. But has anyone thought about the chai- wallah (tea shop owner) or that kaka who is working day and night to support his family back in village? Unfortunately, in this race for economic progress we have neglected them.Quite astonishingly a study reveals that even the most developed country in the world, USA, has a population struggling for one square meal a day!!!

The governments of the developed as well as developing countries have come up with strategies for achieving inclusive growth. The main focus is on financial inclusion. For instance, the US example of Community Reinvestment Act and making it a statutory right to have bank account in France and so on.

Financial inclusion is delivery of banking services at an affordable cost to the vast sections of disadvantaged and low income groups with high transparency. Our India is also plying hard towards this goal. The Reserve Bank of India (RBI) has asked the banks to move from “class banking to mass banking”. Some of the nationalized banks like SBI have already come ahead with this. The strategies include opening up of more rural branches, availing basic no frills account, relaxing the norms for opening of accounts and then providing financial support both monetary and advisory.

The main reason for this financial exclusion is the bank’s reluctance to explore rural market because of the less competitive advantage. When all the firms are working towards global existence, it was less advantageous to invest in low margin areas. Second was the ignorance of masses about the benefits of the banking facilities and third, the long procedures and red tapism which forced the rural masses to depend on cut throat money lenders.

To handle this, bank have to come forward with strategies to extend credit facilities and increase the awareness among the rural masses. This can be done by conducting fairs, through concepts like e-choupal, through post offices. As most of the transactions are depositing and withdrawing, the transaction cost can be reduced by introducing ATM with vernacular instructions. The banks could join hands with micro finance institutions and NGO’s because that would reduce the cost of putting up branches and increase the awareness levels. In this way, it could also me a profitable business for banks.

Now the question is will these strategies of financial inclusion work under this slowing economy and liquidity crunch??? Hoping the best for India…