While ‘Digital India’ has been a flagship campaign of the Modi government, digital divide caused by poor connectivity is still one of the major roadblocks in using financial services in India. With technology becoming an important enabler to access financial services, certain regions in the country that have poor connectivity are left behind in ensuring access to financial services thereby creating a digital divide, said RBI in its report. The central bank also underlined that the key challenge that needs to be resolved would be improving tele and internet connectivity in the rural hinterland and achieving connectivity across the country.
Pointing out the other challenges in using financial services, the RBI report showed that limited physical infrastructure, limited transport facility, inadequately trained staff, etc, in parts of the rural hinterland and far-flung areas of the Himalayan and North East regions create a barrier to the customer while accessing financial services.
It is also highlighted that there are few players in the financial services market, due to which the competition is limited. Hence, the RBI has suggested having more market players to promote innovation and competition, and to minimise concentration risk in the retail payment system from a financial stability perspective.
For the last mile customer to access the financial services and to curb the mentioned challenges, the Reserve Bank of India has prepared an action plan that includes increasing outreach of banking outlets of various banks, strengthening eco-system for various modes of digital financial services in all the Tier-II to Tier VI centres to create the necessary infrastructure to move towards a less-cash society by March 2022, etc.
Financial inclusion is increasingly being seen as a key driver of economic growth and poverty alleviation throughout the world. Access to formal finance can boost job creation, reduce vulnerability to economic shocks and increase investments in human capital. Without adequate access to formal financial services, individuals and firms need to rely on their limited resources or costly informal sources of finance to meet their financial needs.