BAPU to boost financial inclusion

Tags: Policy

Digital payment technology holds the key to growth and development of the economy

As the Jandhan-Aadhaar-Mobile (JAM) trinity chugs along, the Economic Survey has argued that developing banking correspondent and mobile money networks, while in the interim considering models like biometrically authenticated physical uptake or BAPU, can boost financial inclusion.

Regulations governing the remuneration of BCs may need to be reviewed to ensure that commission rates are sufficient to encourage BCs to remain active.

Over the past year, JAM has thickened and spread. Jan Dhan and Aadhaar deepened their coverage at an astonishing rate—respectively creating 2 and 4 million accounts per week—and several mobile money operators were licensed.

“When deciding where next to spread JAM, policymakers should consider first-mile (beneficiary identification), middle-mile (distributor opposition) and last-mile (beneficiary financial inclusion) challenges. Our JAM preparedness index suggests that the main constraint on its spread is the last-mile challenge of getting money from banks into people’s hands, especially in rural areas,” the survey said.

The current government has built on the previous government’s support for the Aadhaar programme: 210 million Aadhaar cards were created in 2015, at an astonishing rate of over 4 million cards per week. A total of 975 million individuals now hold an Aadhaar card – over 75 per cent of the population and nearly 95 per cent of the adult population.

Despite Jan Dhan’s record-breaking feats, basic savings account penetration in most states is still relatively low – 46 per cent on average and above 75 per cent in only two states, Madhya Pradesh and Chhattisgarh.

Having transferred money to peoples’ bank accounts, is the government’s job done? Perhaps in urban areas, where people live near banks, even though financial literacy remains a concern. In rural India, however, there is a serious “last-mile” problem of getting money from banks into household’s hands: only 27 per cent of villages reduce leakages till states are prepared for introduction of JAM is a good and workable idea, says Rishi Gupta, MD & CEO, FINO PayTech.

“Data connectivity and last mile infrastructure are critical to JAM readiness, especially in rural areas, to ensure smooth transactions. For beneficiaries in remote rural areas to receive government payments on time, it is important to have good broadband and mobile connectivity along with a strong business correspondent network. In addition eady done till date, differentiated banks can further improve this last mile connectivity infrastructure. A push from the combination of JAM, BC network and right products can help achieve the desired levels of financial inclusion,” he added.

The Economic Survey puts the topic in the right perspective when it says that despite huge improvements in financial inclusion due to Jan Dhan, JAM preparedness i strong enough. “In that sense, the JAM agenda is currently jammed by the last-mile challenge of getting money from banks into beneficiaries’ hands, especially in rural India. The Centre can invest in last-mile financial inclusion via furthem to utilise the mobile platform to do better transactions like ticket bookings, money transfer and others. Technology would also play a key role in authenticating payment transactions in a more secure way, thereby providing an alternative to the OTP-based transactions,” he added.


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