The National Pension Scheme (NPS), was conceived in 2009 to help India’s 400 million informal sector workers without pension benefits to voluntarily accumulate micro-savings for their old age. But with only only 5 million non-salaried individuals electing to open NPS accounts, the scheme is yet to take off.
Thanks to PM Jan Dhan Yojana, 50 crore bank accounts have been opened in recent years, out of which 67 per cent of them are from rural/semi-urban areas.
The number of smartphone users doubled in rural India during the pandemic. In fact, a survey brought out by Sambodhipanels and pinBox Solutions revealed that 153 million rural earners can be reached through their email ID, while 203 million can be reached via WhatsApp.
So if the infrastructure exists, why are the NPS enrolments still so low?
In the absence of a welfare system for pension, most rural Indians look to their children to provide financial support in their old age, which is no longer a stable solution due to the changing traditional family support system.
Under the Old Pension Scheme, government employees in both urban and rural areas were given a certain percentage of their income after their retirement on a monthly basis. With NPS, people from both rural and urban areas and those working in the informal and formal sectors have the option to take charge of their future and plan for their old age, depending on their needs and contexts, thereby giving them agency over their lives.
However, the penetration of NPS services differs across geographies. The general opinion is that the adoption of NPS is lower because of a lack of financial knowledge amongst rural masses. They are also reliant, to an extent, on subsidies provided by the government.
For example, the Atal Vayo Abhyudaya Yojana (AVYAY) provides senior citizens support with financial security, food, and health care. But for sustainability of support building people’s retirement funds can prove to be more beneficial in the long run.
Additionally, reaching last-mile communities is no longer a problem. Currently, there are 1,54,000 post offices spread across the country, making it the largest postal network in the world. As per the Reserve Bank of India’s FY22 annual report, bank correspondents that bring banking services to last-mile communities have increased to 18.44 lakh in 2021.
So, digital connectivity and banking services, the two most crucial pillars to opt for financial services today, are available in rural areas. Acquisition costs are as low as they can be with this infrastructure in place. The financial sector has more reaching out to do in rural India, now that acquisition costs are low and ticket size is high.
Context-driven products need to be developed and delivered efficiently to people. These products need to reach the target audience at minimal costs.
Establishing public-private partnerships to create minimal-cost, easy-to-access pension plans can help people and promote financial literacy.
Multiple networks, as mentioned before, including the postal service and the banking correspondents, can be leveraged to reach the masses and become sellers of suitable financial products.
Collaborating with grassroots organizations can also help gather a force of collectors that can become service providers with adequate training and tools.
The writer is the Team Lead, Data Intelligence Unit (DIU), Transforming Rural India at Sambodhi Research & Communications