25 million large banking opportunity in India

NOIDA, India - July 24, 2013 - PRLog -- About 25.4 million households in Indian urban towns have no access to banking services while more than one third of these households fall under cluster-I level towns. There are more than 1600 towns which have less than 50% of the households without any access to formal banking network, a report released under ‘Rural and Urban Insight Series 2013 (http://www.kapsole.com/rural-market-in-india-2012/)” has stated. Some of these towns in the cluster-I category (denoting large size towns with more than one lakh households)include Tiruppur, Firozabad, Bhiwandi, Nizampur, Bellary and Loni. The report also suggests that the rate of assets ownership in these towns suggest strong economic potential which banking sector can explore.

Recently, companies and financial institutions which have applied for new bank license have faced mandatory guideline by Reserve Bank of India to have a minimum of 25% of branches in unbanked rural areas with a population of less than 10,000. The report states that there is a huge market opportunity of 0.67 million urban and 0.12million rural unbankedhouseholds for these industry players.

According to a report released under the “Rural and Urban Insight Series 2013”, there are more than 2,600 towns and 270 rural blocks with population less than 10,000 in India. Of these, 740 towns and 174 rural blocks have less than half of the households accessing banking services. The market knowledge product produced by Vijya Research and Advisory has identified such towns and rural blocks along with their market potential in terms of asset penetration, standard of living and availability of basic facilities.

The report says that even if RBI norms has mandated presence in unbanked and rural areas, the new banks can strategically locate themselves in areas with better economic profile. Rural and Urban Insight Series lays details of each town and block’s population, access to banking services and its economic status along with demographic profile.

There are numerous areas where despite low banking penetration rate, economic potential is very high. Such areas should be targeted by NBFCs, financial institutions and industrial houses which would like to tap the potential of financial market of India. Opening up of new bank branches in these potential areas will provide further boost to their local economies and empower the population with access to formal banking channels.