Financial Inclusion By Technology- RBI Suggestive

Authored by Vanshika Sharma, Student at Indore Institute of Law


The Indian Banking Sector is facing the problem of Financial Inclusion, as the operating costs of delivering financial inclusion, as well as charges levied on users are key aspects of the financial inclusion process.

The inclusion of Technology in the traditional banking sector is marked to be the most remarkable step to digitalization. Technology has the potential to significantly reduce the cost of delivering banking services, particularly in rural and underbanked areas. Some of these technologies have the potential to accelerate the expansion of financial inclusion.

In light of this, this research design discusses the significant actions done so far by the Reserve Bank and the Government of India to promote financial inclusion for Indian citizens. The Reserve Bank’s efforts to date, the role of Information and Communications Technology (I.C.T.) with a focus on Mobile Banking, and the Unique Identification (U.I.D.) number are all explored in-depth in this design.

Overview: Role of Technology in the Indian Banking Sector

The Indian banking sector envisaged Information Technology (I.T.)  in the mid-1980 when the Reserve Bank of India (R.B.I.) encouraged computerization in banking to improve customer service, bookkeeping, and Management Information Systems (M.I.S.) to boost productivity. The R.B.I. played a leading role in assisting banks in achieving various goals, including MICR-based cheque processing, electronic payment systems such as Real Time Gross Settlement (R.T.G.S.), Electronic Clearing Service (E.C.S.), Electronic Funds Transfer (N.E.F.T.), Cheque Truncation System (C.T.S.), Mobile Banking System, and so on.[1]

Financial Inclusion By Technology

Financial inclusion refers to the provision of financial services to disadvantaged and low-income people at a reasonable cost. It is providing access to financial products to the disadvantaged sections of the society so they don’t leave out with the currently occurring change in the Globe.

Overall, these financial services facilitate a common man as it comprehends infrastructure, access, usage, quality, education, social needs. Developments in the field of I.T. have a strong positive impact on the development of the banking sector and inclusiveness i.e., promoting inclusive economic growth. Technological advancement not only increased the banking sector’s competitive performance by improving back-end administrative procedures but also improved the front-end operations and lowers transaction costs for customers.

FinTech stands for financial technology and refers to financial advancements that are enabled by technology. All significant stakeholders in the financial services value chain, from start-ups to major technologies to established financial institutions are leveraging this technological advantage to create flexible, efficient, and distinctive experiences for end-users.

Technological Developments of Banks

The adoption of Core Banking Solutions (C.B.S.) is a key technological advancement in the banking industry. Where C.B.S. is a branch network that enables consumers to access their accounts and banking services from any branch of the Bank that is part of the C.B.S. network, regardless of where they keep their accounts.

The customer is no longer a Branch customer; he is now a Bank customer.” As a result, C.B.S. is a step toward improving customer convenience by offering anywhere, anytime banking. It is critical to take advantage of this technological innovation in areas other than C.B.S. that may help with not only providing excellent and efficient services to customers but also creates and manage data.

The RBI has made financial inclusion a priority, as banks cannot reach the unbanked without financial inclusion. It is a significant step toward increased savings and balanced growth.

cellular Phone Penetration:

Financial Service Providers are adopting creative means of bringing the unbanked population into the formal economy by utilizing mobile phones, leveraging mobile phone penetration, and mobile phone service.[2] India witnessed a rapid increase in mobile phone adoption, with more than 70% of the population possessing cellular phones.

Their extensive reach offers a low-cost, innovative way to enhance the reach of banking and payment services, particularly among rural mobile subscribers. It has advantages over traditional banking techniques in that it eliminates geographical limitations. Proximity, security, and efficiency are among the other benefits.

RBI’s Approach To Financial Inclusion

Planned and structured Approach:

To handle the twin concerns of demand and supply, they took a methodical and disciplined strategy. They’ve drafted legislation to extend banking services to more than six lakh villages while creating a conducive atmosphere for banks to do so.

The idea is to pursue Financial Inclusion as a mission through a variety of techniques, including regulatory easing, new product development, and supportive measures to achieve long-term and scalable financial inclusion. Under the G-20 umbrella, financial inclusion is at the forefront of international policy debate.

Although disadvantaged people have no proper access to financial services, they are forced to pay four times the amount we do since they are not connected to the formal financial system and have to rely on untrustworthy informal sector suppliers.

Since the last decade, the R.B.I. has intervened in macro policies to remedy these inequities by:

  1. Branch Expansion

Domestic commercial banks, both public and private, have been directed to establish Board-approved Financial Inclusion Plans (F.I.P.) and implement them over the following three years in order to enhance banking penetration and financial inclusion. The R.B.I. received the documents to make F.I.P.s an intrinsic part of their corporate objectives, and banks were recommended to design them following their business strategy and comparative advantage.[3] These plans contain self-imposed goals for opening several rural brick and mortar branches, as well as various business correspondents (B.C.). The coverage of unbanked villages with populations greater than 2000, as well as other unbanked villages with populations less than 2000, was covered either by branches, or B.C.s, or other modalities. No-frill accounts were opened, and Kisan Credit Card and General Credit Cards were issued, and other specialized items were formed to serve the financially disadvantaged.[4]

The Reserve Bank is actively monitoring the implementation of these plans.

  1. Relaxed KYC requirements

Know Your Customer (K.Y.C.) procedures have been simplified to the point where modest in the presence of a bank, accounts can be opened with self-certification personnel, allowing for easier access to bank accounts. Furthermore, R.B.I. approved the use of Aadhaar, the unique identification number issued by U.I.D.A.I., the Government of India, as one of the documents that should be used to complete the K.Y.C. requirements for opening a bank account. We recently permitted banks to provide e-KYC services based on Aadhaar in September 2013, clearing the path for everyone to create an account.[5]

Way Forward


With the adoption of new branchless delivery channels by banks, banks must revamp their structure for conducting banking activities, taking into account their competitive and comparative advantage, in order to develop strategy and a business case.[6] Based on its business plan, each bank should create a framework that will help it expand its financial inclusion activities.


  • Business models should be built to be self-sustaining in the beginning and profitable in the long run, within the penny economy, there is a constant focus on affordability for the poorer person trading where profit margins have emerged through consistent revenue streams.
  • Banks must think and behave differently, as well as become more flexible, in order to address even the most basic needs of the rural population. By offering a varied range of deposits, credit, and other goods and services, banks can migrate from a cost-cantered to a revenue-generating strategy. Products and services should be developed to satisfy the needs of persons who live in rural areas that are not served by banks.

Business Correspondent Model-

When it comes to applying the B.C. model, there are numerous obstacles to overcome. The B.C. model’s long-term viability and scalability are critical. More new products will need to be launched to benefit both banks and rural residents while making the BC model more feasible.

Direct Benefit Transfers-

The Direct Benefits Transfer (DBT) initiative, which was introduced as a game-changer in 2013, doesn’t go as planned. With the new administration, poised to move quickly this policy brief is helpful in this regard examines, lessons learned both at home and overseas to distill the critical inputs needed to get the program off to a good start. The primary goal was to streamline the Direct Benefits Transfer program so that it may operate more efficiently through electronic channels, such as the interoperable RuPay Debit card. Instead of leaving specific plans to be implemented by line ministries, de-duplication and seeding of bank accounts under one agency should be expedited by the government.

Financial Literacy and Education

They’ve taken an integrated approach to financial inclusion, in which supply-side measures are well backed by demand-side activities. In this direction, banks must increase financial literacy, by awareness campaigns to help individuals realize the advantages of banking. Because B.C.s generally provide the last mile connect with consumers, banks must take the initiative to teach them on a regular basis.


The whole accentuation of the Government, R.B.I., and banks is to open more accounts. In any case, simply opening the account won’t help to facilitate the reason for financial consideration. Individuals working in the chaotic areas who regularly bargain through brokers and fall into traps of private cash banks should be focused to incorporate them under monetary consideration.

There is a need that the installment for social plans ought to be done through account installment so that issue of cash pilferage will be stopped. Financial Inclusion requires steady endeavors which will include some significant pitfalls, as banks benefit from making associations, the Government should make a budgetary arrangement for the cost and repay banks likewise.

The fundamental justification for moderate incorporation by banks is the shortfall of delivery model and items intended to fulfill the low pay families. The arrangement of straightforward, little, moderate items will serve to bring the low pay families into the formal monetary area. Banks have constraints to reach straightforwardly to the low pay shoppers. The use of innovation and economies of scale will reduce the cost of exchange for banks in any case, and it will be a win-win situation for both banks and clients.


[1] Sanjeev Kumar Gupta, Financial Inclusion – IT as an enabler, Vol. 32 No. 2, Monsoon 2011,

[2] Role of Technology in Financial Inclusion, CFO India,

[3] Dr. Deepali Pant Joshi, Financial Intermediation for All- Economic Growth with Equity, Reserve Bank of India, (Sept 2, 2014),

[4] Ibid.

[5] Dr. Deepali Pant Joshi, Financial Intermediation for All- Economic Growth with Equity, Reserve Bank of India, (Sept 2, 2014),

[6] Ibid. 

Edited By: Rishav Ray

*Disclaimer: The content of this article is intended to provide a piece of general information. The views are expressed by the Author solely and BFTLR may or may not subscribe to the views of the Author.

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