While the world is grappling with its set of challenges, India has continued to face headwinds due to subdued private consumption and liquidity crisis which has gotten severe with the continued economic slowdown and the COVID-19 outbreak. The lockdown has had a profound impact on the lives of millions of vulnerable people. Yet, India has demonstrated how it rises to challenges and uncovers opportunities therein. Instead of succumbing to these unprecedented times, India aims to resurge the economy by becoming a self-reliant,
Aatmanirbhar Bharat. The idea is not to cut off from the rest of the world, but instead to adopt an integrated approach to empower its citizens who are at the receiving end of this crisis, who have a dream but do not have the means to turn their aspiration into reality. This kind of self-reliance is only possible if we can reach out to every single individual in every section of the society.
An idea is only as good as its execution. The ability to get on and do it, is what sets changemakers apart from the rest. Over the years, the government has made several strides, the Pradhan Mantri Jan Dhan Yojana (PMJDY), is said to be one of the biggest financial inclusion initiatives in the world. The scheme ensures access to a range of financial services like availability of basic savings bank account, access to need based credit, remittances facility, insurance, and pension. Sukanya SamriddhiYojna, Rashtriya SwasthyaBima Yojana (RSBY), Prashan Mantri Mudra Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Atal Pension Yojana, Stand Up India scheme are few of the initiatives that have given an impetus to this vision. With technology at the helm of these initiatives, the government made sure it provided the necessary digital infrastructure to drive this change in the form of Aadhar enabled payment scheme (AePS), PAYGOV India, Bharat Interface for Money (BHIM), Bharat Bills Payment Interface (BBPS), Immediate Payment Service (IMPS), BHIM Aadhaar to name a few.
The government has taken several measures in the context of COVID- 19 to ease the stress of the financial sector by injecting funds into the system. These measures have ensured unhindered credit outflow from financial institutions. But to set the vision in motion, financial institutions need to be driven by the cardinal purpose of delivering financial inclusion that ignites transformative changes and improves the situation for the financially excluded households at the bottom of the pyramid who are often beyond the reach of the ambit of mainstream financial providers.
By moving the needle beyond traditional methods of consumer finance and microcredit, banks and NBFCs can provide solutions to the vast underserved populations across the length and breadth of India and help societies towards attainable financial inclusion. Companies are now harnessing technology to reinvent traditional business models and offer faster, cheaper, and convenient financial products and services. The combination of IT and mobile technology combined with IT enabled services has emerged as a viable solution for financial inclusion with the lack of physical presence of these institutions and stringent social distancing norms in place.
Here are few initiatives undertaken by institutions, that will go a long way in spearheading financial inclusion in the post COVID-19 world and in making the country an Aatmanirbhar Bharat
Digital Lending
Earlier most of the loan disbursement and collections of microfinance loans was done on a cash basis at the branches. With the fear of contraction and stringent lockdown measures, branch operations were severely impacted. With mobile banking platforms and real-time data, some established digital lenders quickly responded to the liquidity needs of individuals as well as SMEs affected by COVID-19 related lockdowns and containment measures. The user friendly and scalable platforms have helped in ensuring continued access to financial services, by maintaining credit flows to households and businesses while keeping people safe. Digitization of loan application processes has enabled borrowers to apply for loans remotely, which is going to prove to be a key driver in the post pandemic world.
Every coin has two sides to it. While there are numerous benefits of digitalization, there also lies a risk associated with the same. Unauthorized dubious online platforms often get away by charging unaware customers an exorbitant rate of interest, later using unfair tactics to recover the loan amount. One should avoid sharing KYC documents to predatory lenders and refuse to sign any agreement of loan with an entity who is not registered with the RBI. The onus lies on the financial community to encourage financial literacy to help the end consumer make informed choices. An Aatmanirbhar Bharat can only be built with a well informed and responsible approach.
Adoption of New Age Technologies
With the growing economic impact of COVID-19, there will be an increase in the need for affordable and personalized financial assistance as well as an upward spiral of bad loans. The nature of risk is no longer estimated by just the credit history. While tradition risk profiling predicts the likelihood of repayment on the loan based on past track record, the financials of the borrower combined with the nature of the industry that the borrower operates in is very important in the present scenario. Psychometric personality test can shed light on hidden personality and behavioral traits including value and belief system of the borrower. Artificial intelligence (AI), machine learning (ML), and big data analytics has made it possible for fintech lenders to collect and analyze the data to carry out a more comprehensive and accurate credit risk profiling. With the introduction of initiatives like video KYC, Aadhar-based KYC, account aggregators, lenders can easily access customer data, with their consent, and ensure better due diligence. It helps to understand potential credit risks and make faster credit decisions, even in the absence of traditional credit history. Data can also be used to offer more customized credit solutions best suited to the borrower’s needs.
Digital Payment
Digital payment is the most common instrument of financial inclusion and has witnessed a rise in the past few months due to COVID-19 with UPI growing by leaps and bounds. UPI – a real-time unified payment interface developed by the National Payments Corporation of India (NPCI) that facilitates inter-bank transactions has made digital transactions easy and instantaneous. It helps users to transfer, receive, and save money on payments bank platforms, which are simplified banks designed to reach customers via mobile phones using a virtual ID. With fear of contraction plaguing the minds of citizens, India has embraced the digital wave exponentially. Google Pay, BHIM, Paytm, PhonePe has been ruling the market with their on the go fast and reliable services.
Digital Financial Literacy Workshop
With technology evolving by leaps and bounds, it is imperative for financial institution to not just make it available, but also hand hold individuals and SMEs by training them to use the platform effectively to their advantage. The government’s DigiDhan Mela’s across the country aims to handhold users in downloading, installing and using various digital payment systems for carrying out digital transactions.
With digital platforms and applications taking precedence now more than ever, even financial institutions across India are organizing financial literacy workshops which are further fueling the widespread adoption. IT enabled kiosks, village screenings, financial counselling sessions, skill development workshops are few means of empowering and enhancing the lives of India’s hinterland.
Thus, with technology and connectivity taking centerstage, the robust digital finance ecosystem is transforming India into an Aatmanirbhar Bharat by being drivers and enablers of financial inclusion.
The blog has been authored by HP Singh, Chairman & MD, Satin Creditcare Network Limited
DISCLAIMER: The views expressed are solely of the author and ETBFSI.com does not necessarily subscribe to it. ETBFSI.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.
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