Banking the Unbanked In India

India's biggest challenge has been to empower its citizens with financial inclusion by providing banking to its unbanked population to Banking.

The government's initiative of opening 15 million accounts in one day sets the tone to make sure that every adult citizen has a bank account in India. 

Critics say it cannot be done, but we know from history that carpet bombing is the best way to overcome a challenge.

The Indians have set out to a economic transformation in their country, by empowering its unbanked citizens the menace of cash in the system can be overcome thus improving the GDP of India. It is estimated that the cash economy in India is bigger than the legal economy in India, the cash in this system is known as black money in India and has strong parallel network for banking in cash.

If you use a credit or debit card with an Indian merchant he will charge you about 2% to 3% extra as the transaction fee for using the card, this encourages customers to pay in cash and benefits the merchant who prefers the cash economy since he saves on taxes.

A laudable effort is to provide mobile banking to the unbanked population, again the skeptics will say this cannot be done, but with fiber connectivity to the Taluk/Teshsil (http://en.wikipedia.org/wiki/Tehsil) in  India broadband connectivity will not be a challenge.

Mobile banking leapfrogs Indians from the 100+ years brick and mortar banking to digital banking, thus the Indians will be on par with developed countries. This will also save money for banks in building brick and mortar banks and they will drive their banking through Business Correspondents encouraging entrepreneurs and creating employment for many Indians.

The proposal to introduce Braille currency in India is laudable for one it empowers the visually impaired Indians and secondly in a phased manner will suck out the illegal cash in the system thus substantially increasing the GDP of the country.

If Indians can be banked we will have a resurgent and taxpaying India and government doles will reach the underprivileged beneficiaries directly through their Bank accounts. 

We need to remember that the most developed economy in the world USA has still 88 million who still do not have a bank and rely on loan sharks and money lenders and rely on Cash and prepaid cards. (http://www.forbes.com/sites/darden/2014/06/05/fighting-financial-exclusion-how-to-serve-88-million-americans-who-have-no-bank/) 

The poor Indians will be freed from the clutch of money lenders and loan sharks with an overdraft of Rs.5000 being provided by the Government with their bank accounts alongwith life insurance and accident insurance.  These amounts are paltry compared to the leakage in the system where the beneficiaries may never receive the government dole due to them which is delivered by Cash.

The Indian Government has set a target that every Indian must have a Bank Account before India's Republic Day on January 26, 2015; critics will tell us that there cannot be 100% coverage but even if 90% of the Indian population use Banks it will transform the Indian economy and eradicate cash in the Economy.
Empowering the poor and unbanked is the right step in any inclusion program of the poor and disadvantaged in any society and it will transform India into an economic powerhouse.

Mobile Technology will be the main driver and there are enough success stories in India and other developing countries which have shown financial inclusion is best achieved using digital delivery which makes banking cost effective, secure and efficient.

India needs to learn from Latin America for technology delivery and from South Korea for providing bandwidth to its citizens.  A tango of banking and  technology (mobility and bandwidth) will go a long way in transforming the lives of India's citizens. 

The critics told us that the SITE program for Television would never be useful to Indians when it was launched in India in 1975, today Indians have the luxury to choose from more than 500+ television channels.  

(http://en.wikipedia.org/wiki/Satellite_Instructional_Television_Experiment)

We need to ignore the critics and build a cashless economy in India, with a proud and resilient banked population of Indians and spur exponential growth in the Indian economy.

Indians should look forward to the day when all they will need is a mobile phone and they can discard their wallets that hold cash and plastic cards today!