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Rural Banking Scenario in India and the Opportunity for Commercial Banks
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This study examines the present state of banking services and the potential demand for such services in the rural areas of India. It analyses the emerging favourable opportunities that can motivate commercial banks to open rural banking centres. The study also gives an account of the various innovative banking models that can be implemented with the help of electronic devices, and with the active participation of local individuals. These models in contrast to the traditional brick and mortar model, have the potential to not only reduce the operating costs of the banks but also make available, the banking services and products at the doorstep of rural masses. Majority of people in India live in rural areas. However, rural population have limited access to formal banking services and products because there is no significant development of banking infrastructure in these areas. They face financial exclusion and hence have no other choice but to depend on informal credit sources. However, increase in rural employment opportunities, rise in the rural middle class population and the penetration of wireless telecommunication facility have opened up a vast market potential that can be utilised by the commercial banks to extend their services and products to the unbanked rural areas. Banks can develop innovative banking models by taking advantage of Information and Communication Technology (ICT) and by involving rural masses in the capacity of Business Correspondents (BCs) and Self-Help Groups (SHGs). These models would not only promote the goal of financial inclusion in a big way but also help in channelling the savings from rural areas towards the mainstream economy.
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