By Rajiv Sabharwal
Financial inclusion is undoubtedly one of the most critical drivers of economic progress, and is essential for our country to develop into a burgeoning economy. The government is creating a robust ecosystem to cater to the under-served. Key initiatives such as the Jan Dhan Yojana, Pradhan Mantri Mudra Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana, and Atal Pension Yojana have enabled the masses to have bank accounts, get insurance protection, pensions and loans. Also, simplification of procedures for acquiring PAN, unique identification (Aadhaar), uncomplicated tax procedures through GST along with Digital India have contributed significantly to the country’s financial inclusion objective. Financial institutions, including NBFCs, are also taking the mission forward by addressing some of the key challenges related to financial services for the under-banked and under-served populations.
Technology has enabled NBFCs to reinvent their business model. The NBFC sector has been at the forefront of digitisation and widespread adoption of technology in the financial services industry. Both big and small NBFCs have digitalised their processes, business functions, the lending cycle and built dynamic underwriting models. NBFCs are agile and deliver with speed and efficiency by leveraging digital tools and platforms. This, in turn, has enabled NBFCs to expand their reach and offer their services to the unbanked population with the help of tools such as eKYC, e-signature, Aadhaar-based verification. Further, regional language Chatbots and Voicebots, RPA, cloud computing, AI and ML are helping businesses to build a deeper connect with customers and speed up processes that can enhance the overall customer journey. NBFCs are also leveraging India’s growing smartphone and internet penetration by offering mobile-based financial services platforms in vernacular languages. These vernacular platforms have safe delivery systems that are designed to serve the under-served segments across different regions.
India’s population is large and diverse; keeping the product-design simple and tailoring it to match the complex needs of a low-income individual or family promotes financial inclusion. For example, by creating simple and user-friendly mobile applications, NBFCs are enabling rural population to avail loans in a few minutes and in a hassle-free manner. Also, micro-savings led products help people to invest such that they can have financial liquidity and security. Over the years, NBFCs have invested in indigenous distribution networks and products to make finance easily accessible to the country’s most remote locations.
The rapid use of all forms of technology is helping NBFCs create financial literacy programmes. While technology is crucial in accelerating financial inclusion in India, transparency is important to build trust. The teams that work hard to create financial awareness initiatives, engage with individuals, and earn their trust, are responsible for the last-mile connection that makes financial solutions viable. These teams gain insights on the challenges people face and the opportunities that can be created. Insights and data analytical tools are then applied to create specialised products to ensure development in the region. Also, education and the right access to financial solutions enable the vulnerable section to steer away from unscrupulous debt traps. Financial awareness programmes are designed to address different needs—to enable traders and manufacturers to understand the importance of a credit score or how a pension plan works. These education sessions are delivered across online platforms or in-person classroom formats. A tie-up with local community bodies boosts the efficacy of these.
Currently, there are close to 10,000 NBFCs spread across the country, with nearly 25% of the assets of the banking industry. However, financial inclusion needs to be a collaborative effort and, therefore, NBFCs partner with emerging fintech companies to create further efficiencies and build smarter products and services. Collaboration with fintechs will help NBFCs deepen their market penetration and increase their bottom line. This is evident with the growing interest between players from both segments to offer quick and inexpensive financing solutions. Also, there are collaborative efforts to support up-skilling and re-skilling programmes. The Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA) programme partners with tech companies to achieve inclusive education, create employment opportunities and helps bridge the digital divide.
Fintechs are also assisting NBFCs in connecting with loan-seekers from various backgrounds through operational automation and fraud detection tools. A big beneficiary are the MSMEs. MSMEs are the growth-accelerators of our economy, instrumental for employment generation, and are also well-connected with the rural economy as more than half of the MSMEs operate in rural India. The collaboration between NBFCs and fintechs has enabled growth in the MSME lending space by making credit affordable . Digital financial inclusion will continue to evolve in India and we will contribute to the country’s growth journey. A technology-led innovative financial ecosystem will boost inclusive growth, decrease income inequality and will empower people to be economically able and strong.
The author is Managing director & CEO, Tata Capital Limited