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CHENNAI: The banking industry is gearing itself to tap the huge household savings as well as huge business opportunity under the financial inclusion programme though there are challenges involved in providing services to no-frill account holders in unbanked areas in rural and urban areas.

Speaking at a conclave on ” fueling India’s growth- inclusive banking for inclusive growth” organised by Times group in Chennai on Friday, a galaxy of bankers felt the banks could use ICT technology to provide a gamut of services to the masses who are outside the formal banking system. They could think of alternate means to make good the losses expected in maintaining such accounts.

Chief Guest, K R Ananda, regional director, RBI regretted that even after 63 years of Independence, still 34 to 35% of the population are outside the fold of formal banking system. More than six lakh villages have no access to formal banking channels. Despite the country achieving a high rate of growth, poverty levels have not come down with 37.2% of the population living below the poverty line.

RBI is pushing banks to follow business correspondence model for the outreach programme. It is closely monitoring the implementation of financial inclusion programme by the banks. In Tamil Nadu, it is to cover 4600 villages each having a population of 2000, he said and hoped the State will take lead to make it a success.

SBI Chief General Manager, Chennai circle, J Chandrasekaran referring to the enormity of challenge said by 2015, 65% of the deprived households in rural and urban areas have to be financially ‘included’ from the current 20%. This would call for providing bank accounts to six crore households and doubling credit delivery to Rs 2.2 lakh crore.

All the same, he referred to the expected surge in household savings from the current Rs 35,000 crore to Rs 2, 50,000 crore by 2015 which will provide a huge opportunity for banks

SBI has outreached one lakh villages with plans to cover another one lakh in the next five years. With banks not allowed to levy charges, they will have to bear loss for maintaining accounts. They have to adopt technology enabled business correspondence model besides using mobile and Kiosks to cut losses and selling multi products.

Indian Bank CMD, T M Bhasin spoke on the challenges faced by the bank in opening the first branch at Dharavi, Asia’s biggest slum area having a population of 10 lakh. With no access to KYC it had to work backward to get the details from south Tamil Nadu. After three years, the branch has opened 30,000 no frill accounts and is doing a business of Rs 60 crore. The bank will open its second branch with additional onsite\offsite ATMs.

IOB ED, Nupur Mitra said the real challenge for banks is bridging the big urban-rural divide. More than opening accounts and offering services in unbanked centres, the banks have to create confidence and comfort level for people for coming to the banks. Financial literacy is also required to bridge the divide. The banks should take cue from FMCG firms which are able to reach their products to villages.