Despite making rapid strides in digital transactions and expansion of universal banking services to the last mile, there are still significant hurdles in making the full range of financial services available to all sections of the population, especially those in low income groups and senior citizens.
That’s according to a report ‘Financial Inclusion Challenges’ released by IIT Madras Research Park (IITMRP) and IITM Incubation Cell. The report, released on Tuesday, was aimed at highlighting the gaps in financial inclusion despite the transformation in the financial services sector over the last decade.
The report said over the last decade, financial services in India had undergone significant transformation driven by technology enablers and supported by the government and regulators such as RBI. While Jan-Dhan Yojana has increased the banking penetration with over 44.5 crore new accounts created since 2015, the Unified Payments Interface (UPI) had a meteoric rise in adoption with monthly transaction value jumping from ₹0.38 crore in July 2016 to ₹8.27-lakh crore in February 2022.
However, the report added that ‘financially excluded groups’ including low-income groups and elderly, have faced challenges in accessing the full range of products and services from formal financial services.
“Despite our achievements in financial services sector, a large section of the Indian society is still struggling with fundamental financial inequities,” Prof Ashok Jhunjhunwala, President, IIT Madras Research Park, IITM Incubation Cell and IITM’s Rural Technology and Business Incubator (RTBI).
Some of the key highlights and recommendations of the report include easier cash in cash out (CICO) access by allowing individuals like kirana store owners, tradesmen etc to function as business correspondents (BCs) to reach the end customer. It also suggested reevaluation of banking charges for digital transactions like exceeding the free number of transaction limit, insufficient balance, ECS bounce, SMS updates etc.
The report highlighted that know your customer (KYC) process and need for PAN, OTP or biometric verification have made it cumbersome for low-income groups and called for replacement of in-person KYC and (live-video KYC) to be replaced by non-live (non-human) option with encrypted liveliness checks built in.
The report was launched by Gopal Srinivasan, CMD, TVS Capital Funds; S Mahalingam, Ex-CFO, Tata Consultancy Services; Prof V Kamakoti, Director, IIT Madras, along with Jhunjhunwala.
Speaking after the report launch, Srinivasan said India has the largest pubic digital infrastructure starting with Jan Dhan Yojana, Aadhaar and Mobile number (JAM), UPI, Goods and Services Tax (GST), e-Pass, FASTags and Open Network for Digital Commerce (ONDC).
“But, it is really stunning to note that ₹60 is charged for a ₹100 deposit, ₹150 is charged for the fifth ATM transaction and ₹23.60 for an attempted ATM withdrawal etc,” Srinivasan said highlighting some of the report findings. In his address, Mahalingam said India is really in a position to take major leadership in infusing technology in the areas of financial inclusion.