Digital Banking Penetration in Rural Areas: Challenges and Way Forward

Abstract

Rural India has a huge impact on the country's economic development. 870 million people live in India's rural areas, which account for 66 percent of the country's population. With the changing nature of ICT penetration, rural people will account for half of all internet users in India by 2020. It is vital to implement digital efforts in rural areas and to improve the digital payment model's trends. Given the advantages of increased transaction transparency, it is critical that the shift to digital payments be accelerated. The Reserve Bank of India has been encouraging the banking sector to expand its network by opening new brick-and-mortar branches, expanding the scope of business correspondents, and installing new ATMs/WLAs at every tier. The government has previously implemented many initiatives such as no-frills zero balance Jan Dhan accounts, DBT programmes, issuance of RuPay cards, issuance of Kisan Credit Cards, Aadhaar-enabled programmes, and unified payment interface throughout the last decade. Because of their financial exclusivity, India's rural population remains far off from the mainstream of digitization banking transactions. Many policy efforts have been implemented by governments to incorporate low-income rural residents. The pilot survey undertaken within the purview of EXPANDING AND DEEPENING DIGITAL PAYMENTS SYSTEM has shown positive impact in the district identified for Gujarat with increase in the usage of Mobile banking, POS Terminals, Debit/Rupay Cards and net banking. Such initiatives when implemented aggressively could increase the penetration of banking and its digital products in the unbanked rural areas of the country that face numerous challenges in terms of awareness, literacy, level of income, infrastructure etc.