Where the unique demographic dynamics in India come
as praise for consumer driven India, the absence of financial access to a
larger population puts its viability on a question mark. Though the government
and RBI have been continuously putting efforts to bring the rural disconnect
under the main stream, the gap is still very wide.
In the absence of financial access, the rural populations
have no choice but lure for Gold and Land which come handy in the time of
distress. Though the government complains of high gold import as one of the
main reasons of inflated Current Account Deficit in recent times, they have not
provided the solutions to bridge the gap; instead they imposed high custom duty
on gold which they hope will suppress the demand for gold. In my view, the
demand may diminish temporarily; however, in the long run, these factors would
be ignored. In rural areas, people buy gold for protecting themselves against
the inflation and a hedge against the local economic downturns. Similar is the
case with Land which is finding obsession with many people, thanks to
increasing wings of industry and their focus in rural India. Also, as the daily
wage earners don’t find any wage opportunities beyond 45, they find the piece
of land as the only asset which can come handy in all circumstances.
So, should India sit and watch the apathy? The recent
talks of new bank licenses for few serious private players have been on the
roof provided what business plans they submit to RBI. Few known players whom
the market have been boasting as serious contenders for bank licenses may find
themselves at advantage as they would work under the full bank parameters. But the
question arises whether the mere new banking licenses with a promise to spread
their wings in rural areas are going to help in bridging the wide rural gap. It
may or may not; at least the history says no. In the last banking licenses
distribution where Yes Bank, Kotak Bank and others came into existence, they created
niche in all activities other than rural banking.
So, is there any ready institution which is
already connected to a wider rural population? Yes, to a certain extent, the
recent and newly mushroomed Micro Finance Institutions (MFIs) have tried
reaching and connecting to the ground but failed to make their footprints as
the industry got commercialized. While a lot of names have been flourishing in
the street, one established organization where every Indian have the faith and
transacted at least once in their life time and will have the connect in future
too is India Post, famously known as
Post
Office or Daak Ghar. With a mammoth distribution network i.e. 155,500
offices, a majority of them in rural and semi-urban areas, India Post should be
an obvious choice which everyone is ignoring. So far, India Post has been
providing para-banking services like accepting time and demand deposits, saving
accounts and other financial services. So, virtually, it operates as a bank
except granting loans.
RBI must ponder over the obvious choice of
making India Post as India Post Bank
apart from other names. India will not give up their obsession of Land and Gold
unless the financial access and simple financial products reach to the rural
India. Also the time will say how much contribution the Direct Cash Transfer
(DCT) and National Food Security Bill (NFSB) will make. Will they act as
political stunts to attract votes given the general election is due in 2014.
Long Live India!
