Narendra Modi launches ‘Bank Accounts for All’
This will have huge impact on how Banks in India manage their brands in future. We have seen a trend towards the banks driving opportunities in urban centres, with the launch of high-tech branches, flashy advertising campaigns and glitzy endorsements. Whilst this remains a continued challenge, with 40% of the massive population set to reside in Urban centers by 2020, 60% of the population will not.
Banks will need to be smart with how they manage their brand to effectively communicate their message
Currently, nearly 40% of Indians have little access to financial services and are often at the mercy of moneylenders who charge very high rates of interest. This initiative could help to change that. However, a word of caution needs to be heard, Banks have the added challenge of scale, distance, cultural differences and illiteracy to manage in rural areas. Commercially, there is money to be made at the ‘bottom of the pyramid’, however the Banks that win will be the smart ones who keep costs to a minimum, use technology and simplify their services so they become meaningful to every customer.
In his launch address, Mr. Modi told state and private banks to support the plan, although doing so presents challenges for the Banks in rural India, where taking banking to the poor, who may have no identity papers.
Mr Modi's government aims to provide bank accounts to 75 million households by 2018, and to have two account-holders per household.
Officially launching the project on Thursday, Mr Modi said it would give the poor "renewed strength to fight poverty". "When a bank account is opened, it's a step towards joining the economic mainstream."
Under the banking scheme, account holders would receive a debit card and accident insurance cover of up to 100,000 rupees ($1,654; £996). They would also get an overdraft facility of up to 5,000 rupees.
Mr Modi announced the programme in his first Independence Day speech on 15 August after sweeping to power with a landslide victory in general elections in May.
"There are millions of families who have mobile phones but no bank accounts. We have to change this scenario," he told the nation.
He said there was an "urgency to this exercise as all other development activities are hindered by this single disability".
Tens of thousands of Indians have filed applications to open accounts since the 15 August speech, the Associated Press reports.
Correspondents say increased financial inclusion will help the government pay welfare benefits directly into bank accounts and cut corruption.
Data provided by the World Bank shows that just 4% of Indians receive government payments through bank accounts.