From being completely out of the ambit of mainstream banking, the country’s rural areas now have a shot at personal and commercial banking, thus improving their economic status to a large extent.

Mahatma Gandhi was right when he said that India’s riches were concentrated in its villages. He was not referring to the mineral resources or lush natural beauty of the villages – he was referring to the dense concentration of most the country’s population in these areas. He wished for villages to be developed enough to become self-reliant centres of education, employment and societal development. If the villages did not develop, he believed, India would lose its essence to the forces of industrialisation and urbanisation.[1] Banking touches upon sustainability development goals, for achieving financial inclusion in an emerging economy like India.

For many decades after the country gained independence in 1947, India’s villages did not get the kind of Governmental support that they needed. Most development policies and initiatives were aimed at the uplifting the country’s urban centres. Soon, four major metros in the country – Delhi, Bombay (now Mumbai), Madras (now Chennai) and Calcutta (now Kolkata) began to see a steady influx of migrants from the villages – the big cities had potential for further development, and hence, a concentration of several job opportunities.[2]

Slowly, as the big metros became saturated with development, peripheral urban centres on the fringes of the metros began to develop. This trend gave birth to such Tier I cities as Pune, Bhubaneshwar, Patna and Gurgaon (now Gurugram), to name just a few. Migration then diverted itself to these cities, even as other smaller cities and towns began their phase of development. Today, they are big centres of commercial development and are attracting a fair amount of FDI as well.[3]

However, one factor remained constant – that of migration of large populations from the countryside to the cities.[4] Bereft of any opportunities in their villages, people were forced to make these cities their second homes, returning home just once a year to tend to their families that they had left behind. The villages remained poor even as some families sporadically struck it rich owing to a family member earning a lot of money in the cities.

A lack of development in the villages was characterised by such factors as no roads, no electricity, few water sources, next to no institutions of learning, rudimentary sanitation facilities and myriad other problems. Most importantly, most villagers did not have bank accounts and chose to keep their cash at home – what else could they do, since the closest banks were located in the cities several kilometres away, and a visit to the bank resulted in an entire day spent travelling to and from the bank, with a day’s wages lost?

A change in economic framework

In the last two decades, however, the country has seen active development in many villages in India. While many of these are Government-sponsored initiatives, several are also NGO- and corporate-sponsored endeavours. A key function to emerge out of these initiatives was an increase in monetary access to one’s money through the rise of cooperative banking and money lenders.

However, it is only recently that mainstream urban banks have turned their attention to rural banking.[5] Premier banking institutions such as IDFC Bank have in fact, taken the lead in transforming the face of India’s villages with its ambitious Bharat Banking programme. Bharat Banking aims at increasing banking penetration and services into the rural heartlands of India, bringing these areas into the ambit of mainstream banking services that are tailored to their unique personal and business requirements.

How Bharat Banking is transforming rural India

Bharat Banking encompasses a range of rural banking services that help rural populations manage both their personal finances and also get access to funding to run their commercial endeavours. Thanks to these varied banking services, the rural areas are able to start businesses, community upliftment programmes, property acquisition, commercial expansion and even getting ready cash from their personal savings bank accounts – all of these were services hitherto unavailable to rural areas, but are now a reality with targeted rural banking programmes.

In a nutshell, IDFC Bank runs the following rural banking initiatives under the Bharat Banking umbrella:

Land or property purchase: To help rural populations get finance to purchase land or property, both for residential or commercial purposes.

Business banking: The hitherto untapped commercial enterprise of the rural hinterlands is now being tapped by rural banking initiatives that make it possible for villagers to start home-based businesses, community development programmes, buy commercial office space, get SME loans and even open current accounts for their businesses, among other initiatives.

Personal banking: The problem of not getting access to cash, or indeed of not having a savings account to one’s name, is eliminated completely by Bharat Banking – rural customers can now easily open accounts, get cash via doorstep banking services serviced by micro ATMs, and also invest their savings in fixed deposits. They can also get their own debit cards and go cashless wherever possible.

Financial support for women:Women form the backbone of any society, and a financially independent woman can effect a positive change in her surroundings as well. Today, rural banking empowers women in the villages to open their own savings accounts, get personal loans[6] and training on financial management of the home, as also customised financial solutions for those women looking to start their own commercial enterprises.

However concerns of fraud in online banking, along with perceptions surrounding risk of online transactions often forces users to avoid online banking in India. This problem is escalated for rural population and aged population of the country, which collectively exceeds 65% of the over 140 Crore (1.4 billion) population of India.







By Chakraborty

Dr Chakrabarty is the Chief Innovation Officer of IntuiComp TeraScience. Earlier she was Assistant Professor of Delhi University, a QS ranked university in India. Before that she has held research positions in IIT Mumbai, IIT Chennai and IISc Bangalore. She holds 2 patents and over 20 research publications in her name which are highly cited. Her area of research is in smart technologies, integrated devices and communications. She also has a penchant for blogging and is an editor of Business Fundas.