India is a country with largest banking network in the world. Yet in a population of around 118 crore, we have just 15 crore saving accounts. In the largest banking system the rural area is still deprived of banking facilities.
In recent past rural area was never in the target list of the banks. The banks always assumed rural banking as non- lucrative sector . But the rural areas in India have a lot of potential that can help banks to grow, if the banks are able to tap it in an efficient way.
India has a total banking network of 79,000 branches , out of which only 31,000 are in rural area . In order to meaningfully tap the rural banking opportunity, we need to find solutions to three important challenges namely (1) infrastructure set-up costs, (2) operating costs and (3) risk mitigation strategies. However, the conventional banking approach has so far failed to address these challenges, and therefore, we need to adopt the ‘frugal innovations’ approach to develop a scalable and sustainable business model.
It is a very different management approach that works from the bottom of the pyramid , it vastly differs from the approach that the banks in India uses presently. The business correspondent modal proposed by RBI is also very effective to achieve Financial Inclusion. Through these techniques the banks could cover remote areas very easily.
The easy accessibility of the banks in any form to the rural area would definitely check the exploitation of poor farmers in the villages. Such practices will ultimately help the country to develop from the grass root level as then all the Government schemes would reach the rural population directly and they will be able to make the most of it.