The easy accessibility of digital banking services has strengthened India’s initiatives to bridge the economic gap between rural and urban areas. Multiple initiatives from the Government of India, Banks, NBFCs, and Fintech players to promote digital transactions and online capabilities for financial services have come a long way. With the benefits of convenience, speed, and security, the impact of digital banking in rural India has helped in expanding financial inclusion and supporting economic growth for the underserved population.
In the past, a common issue in many rural areas was the difficulty in obtaining financial services. The challenges included distance, a lack of transportation, and the cost of accessing banking services. However, the advent of online banking has increased access to financial services for people who live in rural areas.
The following section discusses the various ways that digital banking benefits the rural population.
Access to Banking Services
One of the key ways online banking helps the rural population is by facilitating greater access to banking services. Since bank branches are few in rural areas, visiting them is a significant challenge, as people living in these areas often have to travel long distances to access banking services. Online banking, on the other hand, has enabled people living in rural areas to access their bank accounts from the convenience of their homes or places of business. They have the ability to conduct transactions like bill payment, money transfers, deposit account creation, checking account balances, and more. This makes it much easier for them to manage their finances without having to travel long distances.
Another significant advantage of digital banking is cost savings. For people living in rural areas, the cost of accessing banking services can be very high. This is because they may have to spend money on transportation to visit bank branches or ATMs. However, digital banking in rural India has allowed people to access their bank accounts through computers or smartphones, which lowers the cost of using banking services.
Increased Financial Inclusion
Digital banking is also helping to increase financial inclusion in rural areas. Many people living in rural areas do not have access to banking services due to a lack of bank branches. Online banking makes it possible for the underbanked and unbanked rural population to access financial services and benefit from them from any location, thereby increasing financial inclusion. People living in rural areas can now open bank accounts, access loans, and carry out other financial transactions that were previously unavailable to them. The Indian government’s efforts to promote greater inclusion, which culminated in the announcement of 75 Digital Banking Units (DBUs) in October 2022, further facilitated this shift.
Ease of Use
Online banking is particularly important for people living in rural areas who may not be familiar with banking processes or may not be as financially literate. The objective of digital banking is to make processes simple and user-friendly, with tutorials and videos explaining how to carry out transactions. The rural population can easily learn how to use online banking platforms, making it easier to manage their finances.
Digital banking platforms are also very secure, which is particularly important for people living in rural areas. The risk of theft is much higher in rural areas, and people may be reluctant to carry large sums of money with them when visiting bank branches. With online banking, people can carry out transactions securely without having to carry large sums of money. Digital banking platforms use encryption and other security measures to protect user information and prevent fraud, which gives people living in rural areas peace of mind when carrying out financial transactions.
The indispensable digital route to banking in rural India
Currently, the use of digital banking platforms is rising as more people in rural areas have access to smartphones and computers, which is impacting their economic and living conditions. Innovative technologies such as assisted banking services and the simplification of banking processes through the effective deployment of AI, ML, and predictive analytics are already making massive inroads in rural India. Organizations like Credgenics are making several efforts to provide safe, secure, and convenient banking and digital payment services in these geographies, making loan collections much easier. These initiatives are made possible by cutting-edge technologies that are well suited to the needs and sensibilities of the rural population, such as voice-enabled payments and assisted payments.
- What is the impact of digital banking in rural India?
Digital banking provides a safer space for the rural population to bank. Greater financial inclusion can be accomplished by creating wider access to banking services. It also increases cashless transactions, minimizing the possibility of cash-based crimes.
2. What is the role of digital banking in the rural development of India?
By making the rural population bankable and giving them the resources they need for business and other economic activities, digital banking increases small businesses’ access to credit. The ability to improve one’s financial literacy and acquire money management skills is another benefit of online banking platforms.
3. What are the challenges faced in rural banking?
The main barriers to increasing the use of banking services in rural areas are a lack of trained staff, inadequate funding, and intense political interference. It is also more challenging to enable a change in mindset when it comes to adopting digital banking channels because people are inherently resistant to change of any kind.