Basic banking services are widely available in urban and semi-urban areas. However in rural areas, basic banking services are not available. Most of the rural population does not have bank account due to various reasons. To provide basic banking services in rural area the Reserve Bank of India (RBI) has initiated the Financial Inclusion program to bring the majority of the population under the banking system. Financial inclusion means the provision of affordable financial services, access to payments and remittance facilities, savings, loans and insurance services by the formal financial system. The first step is to open no-frill saving accounts and then offer other products using Information and Communication Technology.
Banking services in rural areas is a challenge where there are no branches, inconsistent power supply, and lack of communication links such as telephones or internet. The new approach enables banks to provide basic banking services in remote regions. RBI has come up with solution that enables customer’s intermediate banking facilities through ‘Business Correspondents’ who act as agents on behalf of the banks. Business correspondents are appointed by the banks and have the authority to accept deposits or make cash payments on behalf of the bank at designated village.
The experience of existing cash management is a problem in rural areas. To reduce down cash management risk and expenses; the solution was sought whereby the cash that is available in the villages could be circulated and kept within the region. Instead of opening full-fledge branch in rural area, it was proposed that with the help of modern information technology and managerial capabilities of business correspondents; banking functionalities could be extended to rural areas. It is proved that information technology solutions helped banks to reduce per transaction cost. An ICT-based solution has been attempted by banks to provide services such as deposits, withdrawals and funds transfer.
In urban areas the basic critical success factor of the card payment system is its inter-operability. To enjoy the same level of “Anywhere Anytime” facilities, government came out with “Aadhar Based Payment System” (AEPS) and RuPay Card based system. To address the KYC issue, government also introduced Aadhar based eKYC which helps Indian citizens to open a bank account without submitting any document.