India’s urge to transform into a cashless economy is paving way for several new entrants in the payments domain. This rise is also boosting the significant growth of the Non-Banking Financial Institutions (NBFCs) in the urban parts of the country. But digitisation of NBFCs is still a distant dream in terms of rural India, according to Aniruddhe Mukherjee, Principal Secretary, Department of Finance, Government of Madhya Pradesh.
While addressing a crucial session at the recently concluded NBFC100 Tech Summit 2017 in Mumbai, Mukherjee said, “NBFCs are getting a lot of support from the new players such as payments banks, small finance banks etc in the banking industry for running successfully within the urban populace. In addition to this, Micro -Small and Medium Enterprises (MSMEs) are also extending its helping hand in towards this sector.”
With the help of these new entrants, NBFCs are also perking up their digital quotient.
However, the NBFCs will have to pass through a lot of hardships for making up a mark in the rural areas due to the extensive penetration of cooperative banks, he added.
Praising reforms like demonetisation, Mukherjee said, “It is true that demonetisation is boosting the use of digital payments but the surge is limited to urban areas only. Rural India majority of which comprises of farmers still prefers cash transactions.”
“At the ministerial level, we have been pushing Public Sector banks to invest in point of sales (PoS) devices not only in the retail outlet of the urban sector but also in the rural sector. This is the only scenario via which the digital banking can be push through. People in the rural sector look for cash, they are not particularly interested in RTGS, NEFT or any of the scenarios,” he added.
When demonetisation took place there was very limited cash available with the banks. The Reserve Bank of India (RBI) had imposed several restrictions on the cooperative banks as well. During that time, Cooperative banks in the rural areas had very limited amount of cash available to them that used to run out in no time. Farmers would not get the cash. There were several complaints from the farmers for not being able to fetch cash from the banks, despite its availability in the savings account.
In action to this, the Chief Minister of Madhya Pradesh Shivraj Singh Chouhan had called a meeting regarding payments of farmers for procurement on the minimum support price (MSP).
In the meeting, RBI was conveyed about the hassles faced by the farmers and was asked to increase the limit of cash to be made available to the banks for the farmers.
“Right now the mentality of the farmers is definitely not on the lines of digital banking and majority of it is perforce. It is pushed by the Central Government followed by the State Government. It is not really a demand-driven affair,” he said.
After the centre expressed the desire of making India into a cashless economy, the government of Madhya Pradesh too formed a committee on transactions. And they came up with certain recommendations.
“The government of Madhya Pradesh had a circular that all the deposits to the exchequer above Rs 10,000 should not be of cash. It has to be done either via internet banking or any of the other digital modes,” he added.