Solutions that are helping banks reach out to the unbanked customers

 

India is a vast country that is still in its development phase and a large part of India still lives in semi-urban and rural localities. Moreover, many remote areas do not have proper access to crucial features like banking services. People living in these areas found it hard to get loans because their lack of credit history and uncertain income source failed them in the credit underwriting process.

 

But governments, banks, and other institutions have taken the initiative to implement solutions like alternative data for lending that will help to provide these unbanked populations access to banking and other financial services. Here are some of these steps that are being taken.

 

Removal of strict guidelines related to credit and bank accounts

 

Many banks have removed features like the minimum balance compliance, monthly charges for access to various services. They have also introduced schemes like zero balance accounts that are catered specifically to people from remote areas so that they are encouraged to open bank accounts. Governments have also eased restrictions on loans, the credit underwriting process while also introducing low-cost insurance services to secure the future of these unbanked individuals.

 

Introducing online credit and banking services

 

With the widespread reach of the internet and the easy availability of smartphones, banks and financial institutions are now providing all their services through online channels. These can be accessed through the respective banks' mobile applications or websites. Moreover, banks and other financial institutions are not charging any additional money for providing these services. This feature helps many people to open bank accounts remotely, have access to them, apply for loans, and receive the amount after the loan underwriting process, even if they do not have the bank's branch in their surrounding area.

 

Implementation of alternative solutions for credit and loans

 

The use of alternative data for lending also helps banks and other financial institutions to check the creditworthiness of the individuals even if they lack a proper credit history. This gives people the opportunity to get credit and use it during an emergency. Banks and governments have also made it easier for unbanked customers to avail their first loan from these institutions. Apart from simplifying the loan application, credit underwriting process, and easing the eligibility criteria, many schemes help people from remote areas to get loans for personal or work-related purposes.

 

Increase financial and credit literacy among the masses

 

A large population from rural areas, especially the unbanked people, previously had a deep mistrust of governments and banking institutions. This fear made them believe that these parties will run away with their hard-earned money. But a lot of such misconceptions have been cleared due to the financial literacy campaigns run by the government which gives people an idea of the benefits of using banking services. Moreover, as more people learn about the loan underwriting processes and other bank formalities, they are beginning to understand which factors led to them getting rejected previously. It helps them to build up trust among the banks and other financial institutions again.

 

These are some of the solutions that have helped banks and other financial institutions to reach out to the unbanked people and make them a part of the country's growing economy.