Future of Payment Systems in Rural India

In: Social Issues

Submitted By ashishnegi
Words 4047
Pages 17
AGRICULTURAL FINANCE
STAGE II Submission

In the partial fulfillment of AF Project to

Prof. Vaibhav Bhamoriya

Future of Payment Services in Rural Areas

Submitted By
Group 5
Amrita Dokania,
Anjali Neha Lakra,
Ashish Negi,
Bhawna Nirmal,
Veeru Kumar Prajapati

INDIAN INSTITUTE OF MANAGEMENT, AHMEDABAD

Introduction
Payments are indispensable parts of our daily transactions, be it B2B, B2C or C2C, and be it rural areas or urban areas. Payment system of a country should be “safe, secure, efficient and accessible” owing to its vital role in raising the GDP of a nation. Payments being one of the most important parts of the financial system, different channels that accelerate the process efficiently constitute the focus of the system.
Banking industry has witnessed a tremendous growth in the last few decades in terms of volume and the complexities in the banking system. Even if banks have made significant improvements in the recent years for achieving financial viability and profitability there have been concerns regarding reach and serving a huge population of interior areas. There has been a skewed distribution of population i.e. 6000 per bank branch in urban and 24000 in the rural areas. India has approximately 6.4 lakh villages out of which 5 lakh villages are still unbanked because of the operational and structural issues for example viability, long distance, costs etc.

Although rural India comprises of 68% of population, it constitutes only 9% of total deposits and 8% of advances which is extremely low compared to urban area. Reason being behind it can be higher costs of credit at exploitative terms and conditions and operational or structural issues mentioned above.

Though financial institutions have been reluctant to serve Rural India, but the conditions had changed over time due to several factors. Some of these factors include…...

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