RBI governor asks banks to use rural-oriented tech

Arguing for enhanced use of rural-oriented technology, Reserve Bank of India governor Y V Reddy said banks would be able to provide value-added services to rural customers and further expand its outreach in a sustainable manner.

"The issue of financial exclusion has been gaining attention even in the developed world today. Though the issues in India are different from those in other countries, it only shows that the efforts on financial inclusion need the utmost attention here as well," Reddy said while delivering a lecture on the use of technology in financial sector here on Saturday.

The RBI governor suggested that the banks consider the feasibility of using smart cards for 'no frills accounts' so as to help increase the coverage of banking services and at the same time facilitate garnering of the much-needed low-cost deposits.

While mentioning the successful models adopted in South Africa and Philippines in this regard, Reddy said that RBI along with the Institute for Development and Research in Banking Technology (IDRBT) was working on the use of multi-application smart card systems which can operate a bank account and also function as a storehouse of electronic cash as well as a data repository for essential information relating to the card-holder.

"Over the years, the role of the RBI is changing consequent upon the increased levels of maturity of the markets and the financial system as a whole. The role of the bank would be, in future, one of a catalyst in the process of change as detailed in the financial sector technology vision document. The need for shared efforts aimed at setting up world-class IT systems will gain great significance," Reddy said while calling upon banks to make use of the National Financial Switch, set up by RBI as a first step in this direction.

The RBI governor also said that steps were now being taken for the establishment of electronic linkage amongst the 3,022 state treasuries besides agency banks, finance departments of the state governments, office of accountant general and the RBI.

According to him, this will help in speedier accounting of receipts and payments for the state government departments apart from serving as a road map for achieving end-to-end connectivity amongst various accounting agencies involved.