Financial inclusion in

rural India
Banking and ATM sector in India

January 2020
Content
Foreword 3
Global perspectives 5
Financial inclusion in India 12
Banking in India 24
Modes of payment across India 27
Branch banking and BCs 32
ATMs and WLAs across India 39
Case studies 48
Vakrangee Ltd. 49
BTI Payment Private Limited 54
Fino 56
Acknowledgements 58

Disclaimer
This document captures data based on the information available in the public domain and public announcements Grant
Thornton India LLP does not take any responsibility for the information, any errors or any decision by the reader based on
this information. This document should not be relied upon as a substitute for detailed advice and hence, we do not accept
responsibility for any loss as a result of relying on the material contained herein.

Further, our analysis of the data values is based on publicly available information and appropriate assumptions (wherever
necessary). Hence, if different assumptions were to be applied, the outcomes and results would be different.

Please note that in certain areas, Grant Thornton has also provided additional data sourced directly from companies for the
purpose of analysis. Grant Thornton has clearly highlighted these as company data. Grant Thornton has not undertaken any
audit/diligence to verify or validate these data points. The same has been used in good faith and the readers are advised to
conduct their own independent research before relying on any statement of this report.

Grant Thornton India LLP

02 | Financial Inclusion in Rural India: Banking and ATM sector in India

Foreword

India has focused on exploring

cost-effective and sustainable
delivery mechanisms to reach
out to remote locations.
Rahul Kapur Ravinder Reddy

India is the 7th largest economy globally and one of the services to all sections of the society is important. Access to
leading countries demonstrating high economic year-on-year financial services opens doors for families, allowing them to
growth. Unlike China, India’s economic growth has been driven smoothen out consumption and invest in their future through
by domestic consumption. Rural India has a crucial role to education and health.
play as two-third of the population resides in villages and small
towns. There are many success stories across the globe that we can
learn from before devising the right approach to financial
The slowdown experienced in India in 2008–09 on account of inclusion. For example, in Asia, countries like China, India and
the IT, real estate, financial services and automobile industries Indonesia are pursuing paths that have rapidly brought millions
was primarily an urban phenomenon. The picture is very into the financial mainstream.
different in the villages and small towns, as they are less
impacted by the global turbulence. Over the last decade, the acceleration of financial inclusion in
India was largely due to political will along with high-impact
2009 onwards, several factors have led to an increase in government initiatives like Pradhan Mantri Jan Dhan Yojana
rural purchasing power. Technologies such as internet, mobile (PMJDY), Direct Benefit Transfer (DBT) and issue of RuPay
phones and satellite TV have made rural consumers very well- cards, among others. The government has followed a three-
connected and aware. They are able to keep abreast of the step approach to achieve its goal of financial inclusion. First, it
choices available to them and families. In fact, their aspirations has provided universal access to banking facilities by opening
are not any different from those of urban consumers. While ‘no frill’s accounts for the masses. Second, it has brought and
urban markets are saturated and competitive, rural markets retained people in the financial system through initiatives like
offer an opportunity for expansion and sustainable growth. digital payments and promoting the use of RuPay cards. Third,
it has focused on creating the necessary infrastructure by
Grant Thornton will be releasing a series of sector-focused increasing the reach and accessibility of financial services.
insights into how the government and companies are Through its conducive policies, the government is promoting
developing an inclusive strategy to embrace both urban and banking correspondents, white label ATMs (WLAs) and digital
rural consumers. payments. As a result, a new generation of financial services
accessed through mobile phones and the internet has emerged
Financial inclusion is the key to bridging the social divide and
in the country.
achieving a well-distributed, robust and sustainable economic
growth. Global trends have shown that in order to achieve The government schemes have witnessed tremendous success
inclusive development and growth, extension of financial

Financial inclusion in rural India: Banking and ATM sector in India | 03

over the years, with 35.27 million accounts opened under the This report focuses on the what financial inclusion means for
PMJDY. Approximately 80% of the PMJDY accounts have a India and the reach of the banking and ATM sector across
linked RuPay debit card. RuPay card’s market share increased the country and highlights the contributions of non-banking
from 0.6% in 2013 to over 50% in 2018, making it the largest companies towards the goal of financial inclusion.
payment card network in the country. DBTs have accounted for
fund transfers of over INR 9 lakh crore fund transfers so far.
Rahul Kapur Ravinder Reddy
In its financial inclusion drive, the government is also Partner Partner
supported by the private sector players. Companies such as Grant Thornton India LLP Grant Thornton India LLP
Vakrangee Ltd., BTI payments, FINO, etc., have delivered service
innovations by substantially strengthening their business
models. By providing many banking and ATM services through
a technology-driven platform, they have managed to boost
rural entrepreneurship, increase the level of financial literacy
and leverage their presence by becoming an integral part of
the supply chain for e-commerce and other companies waiting
to tap into the rural market.

04 | Financial inclusion in rural India: Banking and ATM sector in India

Global perspective

Financial Inclusion in Rural India: Banking and ATM sector in India | 05

Financial inclusion drives
development
Affordable and appropriate access to financial services is increasingly being
recognised world over as a key driver of economic growth, poverty alleviation and
prosperity. Access to formal finance can boost job creation, reduce vulnerability
to economic shocks and increase investments in human capital. At a macro-level,
greater financial inclusion can support sustainable and inclusive socio-economic
growth for all.

Key for development Continued growth in account

Financial inclusion is a key enabler in reducing poverty and ownership
boosting prosperity. Access to basic financial services enables
the less fortunate and more vulnerable in the society to step out However, despite a rise in financial inclusion, gaps remain.
of the vicious cycle of poverty and empower themselves and Globally, 69% of adults - 3.8 billion people - have an account
their families. Driving financial inclusion helps to collectively at a bank or with a mobile money provider, a crucial step
develop entire communities and achieve overall inclusive in escaping poverty. This is up from 62% in 2014 and just
economic growth. 51% in 2011. Since 2011, 1.2 billion adults have obtained an
account, and the period from 2014 to 2017 saw 515 million
Financial inclusion means that individuals and businesses adults opening an account, according to the Global Findex
have access to useful and affordable financial products and Database. However, while some economies have witnessed
services such as transactions, payments, savings, credit and a surge in account ownerships, progress has been slower
insurance that meet their needs and are delivered responsibly elsewhere, often held back by large disparities between men
and sustainably. Access to a transaction account is the first and women and between the rich and the poor.
step towards broader financial inclusion since a transaction
account allows people to store and send money and receive As of 2017, 94% of adults in ‘high-income’ economies and 63%
payments. A transaction account serves as a gateway to other in developing economies had an account. However, even in the
financial services, which is why ensuring that people worldwide developing world, disparities in financial inclusion are stark.
can have access to a transaction account is the focus of the In countries such as Brazil, China, Malaysia and South Africa,
World Bank Group’s Universal Financial Access 2020 initiative. the percentage of account ownership has remained largely
unchanged since 2014. On the other hand, in India, the share
Access to formal financial products and services facilitates a of adults with an account has more than doubled since 2011 to
prudent lifestyle, assisting families and businesses to plan their 80%, largely due to the government policy launched in 2014 to
long-term goals and explore opportunities that would otherwise boost account ownership amongst unbanked adults and enroll
be inaccessible. As account holders, individuals are more a greater share of the population in formal banking services.
likely to consume other financial services, such as credit and
insurance, to invest in healthcare or education, start or expand
a business, manage risks and weather ‘financial shocks’, which
subsequently improves the overall quality of their lives.

06 | Financial inclusion in rural India: Banking and ATM sector in India

Globally, 69% of adults had an account in 2017, up from 62% in 2014 and 51% in 2011

Adults with an account (%)

No Data 90-100% 65-89% 40-64% 20-39% 0-19%

Source: “The Global Findex database, 2017”, The World Bank

According to The Economist Intelligence Unit’s 2019 Global Microscope on Financial

Inclusion report, “The overall environment for financial inclusion has improved
globally with India, Colombia, Peru, Uruguay and Mexico having the most
favourable conditions for inclusive finance.”

How financial inclusion helps in development

Reduce inequality in Empower Invest in healthcare

society people and education

Drive economic Manage financial Plan long-term

growth risks goals

Financial inclusion in rural India: Banking and ATM sector in India | 07

Financial inclusion and
economic development:
A regional overview
The correlation between financial inclusion and economic development can be
highlighted by further analysing the GDP per capita and banking population in
developed and developing countries. The World Bank estimates that the average
banked population in low-income economies stand at 32.6% and the average
banked population in high-income economies is 90.5%, but the GDP per capita
for low-income economies is less than 2% of the GDP per capita of high-income
economies. Even a percentage improvement in financial inclusion can result in
exponential growth when it comes to economic development.

Top 10 developed GDP 2017 GDP per Account Top 10 developing GDP 2017 GDP per Account
economies (USD billion) capita (age: 15+) economies (USD billion) capita (age: 15+)
(USD) 2017 (USD) 2017
United States 19,485 59,928 93.10% China 12,143 8,759 80.20%
Japan 4,860 38,332 98.20% India 2,652 1,981 79.90%
Germany 3,657 44,240 99.10% Brazil 2,054 9,881 70.00%
United Kingdom 2,666 40,361 96.40% Russian Federation 1,579 10,751 75.80%
France 2,586 38,679 94.00% Mexico 1,158 9,278 36.90%
Italy 1,957 32,327 93.80% Indonesia 1,015 3,837 48.90%
Canada 1,647 45,070 99.70% Turkey 853 10,514 68.60%
Korea, Rep. 1,531 29,743 94.90% Argentina 643 14,592 48.70%
Australia 1,330 54,067 99.50% Thailand 455 6,578 81.60%
Spain 1,309 28,101 93.80% Iran 454 5,628 94.00%

Country category Number of Average GDP per capita Average population with accounts
countries (USD) (age: 15+)
High income 45 36,811 90.50%
Upper middle income 41 6939 59.80%
Lower middle income 33 2,199 42.20%
Low income 23 629 32.60%

Source: World Bank and GT analysis

08 | Financial inclusion in rural India: Banking and ATM sector in India

Across the globe, economies have adopted various South Asia: The overall share of adults with an account rose
approaches to improve financial inclusion. Here are some by 23 percentage points to 70% in 2017. The progress was
examples: majorly driven by India, where a government policy to increase
financial inclusion through biometric identification pushed the
Sub-Saharan Africa: In this region, mobile money has driven share of adults with an account up to 80%. In economies like
financial inclusion. While the share of adults with a financial Bangladesh, the share with an account rose by 10 percentage
institution account has remained flat, the share with a mobile points, whereas the overall regional account ownership
money account has almost doubled, to 21%. excluding India rose by 12%.
East Asia and the Pacific: The use of digital financial Middle East and North Africa: The regions offers strong
transactions has grown even as account ownership has opportunities to increase financial inclusion, particularly
stagnated. Today, 71% of adults have an account, a slight among women. Today, 52% of men and 35% of women
increase from 2014. An exception is Indonesia, where the have an account, the largest gender gap in any region. Up
share of people with an account rose by 13% to 49%. Digital to 20 million unbanked adults in the region send or receive
financial transactions have accelerated especially in China, domestic remittances using cash or an over-the-counter service,
where the share of account owners using the internet to pay including 7 million in the Arab Republic of Egypt.
bills or buy products has more than doubled to 57%.
Latin America and the Caribbean: Wide access to digital
Europe and Central Asia: The regions registered a rise in technology could enable rapid growth in financial technology
account ownership from 58% of adults in 2014 to 65% in 2017. use: 55% of adults own a mobile phone and have access to the
Digital government payments of wages, pensions and social internet - 15 percentage points more than the developing world
benefits helped drive the increase. Among those with average. Since 2014, the share of adults making or receiving
an account, 17% opened their first one to receive digital payments has risen by about 8% in economies such as
government payments. Bolivia, Brazil, Colombia, Haiti and Peru.

Source: “The Global Findex database, 2017”, World Bank

Financial inclusion in rural India: Banking and ATM sector in India | 09

Who remains unbanked,
and why
Large progress has been made towards financial inclusion Income: As per the Global Findex Report, a quarter of
resulting in 69% of adults having bank accounts today. unbanked adults reside in the poorest 20% of households
However, globally, 1.7 billion adults lack an account, and 46% within any economy. Even in economies where account
of this unbanked adult population resides in seven economies ownership has expanded to two-thirds or more of adults, poor
– China, India, Pakistan, Indonesia, Nigeria, Bangladesh adults occupy a greater share among the unbanked.
and Mexico.
Age: Unbanked adults are also disproportionately young.
Women are overrepresented among the world’s unbanked Globally, 30% of unbanked adults are between 15 and 24
with about 980 million still without an account, i.e., 56% of all years of age. In economies where the share of unbanked adults
unbanked adults globally. is relatively small, the unbanked population is even younger. For
example, in India, Brazil and Kenya, about four in 10 unbanked
Representation of the unbanked adults are in the 15-24 age group.
population Education: Unbanked adults also tend to have a sparse
Gender: Women from poor households in rural areas or those educational background. Globally, 62% of the unbanked
out of the workforce represent about half of the unbanked have a bare minimum primary education or less, compared
adult population. The gender gap in account ownership with approximately half of the overall adults in developing
remains stuck at 9 percentage points in developing countries, economies. Moreover, worldwide, only 38% of the unbanked
hindering women from being able to effectively control their have completed high school or post secondary education.
financial lives.

Globally, 1.7 billion adults lacked an account in 2017 from 2 billion in 2014

Adults without an account

200 mn 100 mn 10 mn 1 mn

Source: “The Global Findex database, 2017”, World Bank

10 | Financial inclusion in rural India: Banking and ATM sector in India

Why people remain unbanked Cost is another prominent barrier towards financial inclusion
in developing countries. Bank charges are often not disclosed
In 2017, one of the major barriers to financial inclusion around upfront, thus also resulting in low confidence among users on
the world was insufficient/lack of money. Globally, nearly two- account of hidden charges.
thirds of adults have too little money to use an account at a
financial institution. Lack of infrastructure in rural and semi-urban centres is
a hindrance to both consumers and financial institutions.
According to the Global Findex Report 2017, 30% of the Lack of infrastructure can simply mean distance to a formal
unbanked adults said they did not need access to an banking outlet. As per the Global Findex database, 22% of
account and hence did not have one. This also highlights adults without an account acknowledged distance (financial
the significance and moreover the lack of financial literacy institutions are too far away) as a reason for being unbanked.
among people. Individuals who are not aware of the benefits of
enrolling themselves in the formal banking system or for whom
the financial products and services offered are not accessible
or affordable do not consider this as a priority in their day-to-
day lives.

India and China represent about a quarter of the global unbanked adult population.
According to the Global Findex database 2017, India is ranked 50th with 80% of its
population banked, an exponential rise since 2014, which can largely be attributed
to the government schemes for financial inclusion. However, in the Indian context,
it also means nearly 191 million people (over 15 years of age) still do not have a
bank account and 56% of these are women - second only to China, which has an
unbanked population of over 224 million.

Financial inclusion in rural India: Banking and ATM sector in India | 11

Financial
inclusion in
India

12 | Financial Inclusion in Rural India: Banking and ATM sector in India

Bank the unbanked

Considering that financial inclusion is one of the most critical indicators of

development and well-being for an economy, India has taken a significant leap
through PMJDY in its effort to ‘bank the unbanked’ population.

Overview
India has a population of over 1.3 billion spread across 29 Snapshot of financial inclusion in India
states and 9 union territories, comprising around 600,000 100%
villages and 640 districts. Over 850 million or 65% of 80%
population lives in rural India. A large portion of this population 80%
62%
are excluded from the easy access to financial services. 51%
60% 69%
Accessibility of financial services at affordable prices is a key
driver for improving financial inclusion in the country. 40% 53%
35%
The larger aim of financial inclusion is to provide deeper 20%
penetration of banking services across the country, including 0%
privileged and disadvantaged people, at affordable terms and 2011 2014 2017
conditions. With similar focus, the RBI has been continuously
stimulating the banking sector to extend the banking network World India
by setting up of new brick-and-mortar branches, widening Source: World Bank and GT analysis
the scope of business correspondents and installing new
ATMs/WLAs in every tier. Over a decade, various measures According to the World Bank, in 2017 over 80% of Indians
like opening of no-frills zero balance Jan Dhan accounts, DBT (aged 15+ years) had account ownership at a financial
schemes, issuance of RuPay cards, issuance of Kisan Credit institution or with a mobile-money service provider, a massive
Cards, Aadhaar-enabled schemes and unified payment increase from 35% in 2011.
interface have already been implemented by the government.
Account ownership in Indian men increased from over 62% in
2014 to 83% in 2017. In females, the jump was from 43% in
2014 to over 76% in 2017.

Financial inclusion in rural India: Banking and ATM sector in India | 13

Financial inclusion vs GDP per capita in India
Growth of the banked population compared to GDP per capita Growth of banked population
was quite significant in 2017 and financial inclusion was 80% 100% 2500.0
of the banked population. 80%
80% 2000.0
60% 1500.0
40% 53% 1000.0
20% 35% 500.0
0% 2011 2014 2017 0.0
GDP per capita (USD) India
Source: World Bank and GT Analytics

Key challenges for India

3
2 Financial literacy

1 Retention

Access

Vast geographical base and large population make India unreasonably difficult for banks and other financial institution to reach
out to every individual. Thus, there are three major challenges: First, to provide access to basic banking services. Second, to retain
every individual in the financial system by making them an active user by participating in transactions regularly. Third, Lack of
financial literacy: A large number of people in India are unaware of the significance of different financial products and services.
Financial knowledge helps individuals become self-sufficient so that they can achieve financial stability. On the other hand, lack
of basic financial knowledge results in poor investments and financial decisions.

14 | Financial inclusion in rural India: Banking and ATM sector in India

Factors affecting access to financial services
Access to financial services has been recognised as an branch and financial services at their nearest location.
important aspect of development, and more emphasis is • Rising unemployment and low wages: Financial
generally given to extending financial services to low-income prominence of people always plays a pivotal role in
households. Some of the factors affecting access to financial accessing available financial services. In India, not many
service are as follows: consider using financial services due to low levels of income
and unemployment
• Place of living: Most commercial banks operate only in • Service charges: High bank charges not only discourage
urban commercial areas and these banks set-up their the people but also create lack of trust among people using
branches in profitable areas. Hence, people living in rural banking and financial services.
areas find it difficult to access financial services.
• Lack of infrastructure in rural and semi-urban areas: While 80% of the Indian population may have bank accounts,
Distance or access to a formal banking outlet is a major almost 45% of such accounts still remain inactive due to a
roadblock to both consumers and financial institutions. On combination of these factors. Thus, concrete steps are required
the one hand, financial institutions face challenges such as to be undertaken to make financial services accessible and
access to proper internet, electricity and other facilities. On affordable in a safe and transparent manner.
the other hand, they also find standalone bank branches as
a non-viable option due to high costs and other factors. The
consumers, as a result, do not have access to proper bank

Financial institutions for inclusion

In India, financial institutions are the robust pillars of progress, • Scheduled commercial banks
economic growth and development of the economy. Financial • Regional rural banks
inclusion has been implemented through multiple institutes • Payment banks
across India such as: • Micro-finance institutions
• Business correspondents (Bank Mitra)
• Small finance banks

Financial inclusion in rural India: Banking and ATM sector in India | 15

From where it began
Over a decade, the acceleration of financial inclusion in India was largely due to
the well-planned programmes, backed by political will, along with high-impact
government initiatives like PMJDY, DBT, RuPay cards and a proactive central bank.

Timeline Post 2015

2011 to 2014 Following the major success of PMJDY

in 2014, Phase II of the PMJDY was
2005 to 2010 introduced in 2015 to promote
In 2011, the Swabhimaan Scheme
financial inclusion. Later, 2015 also
was launched by the government
In 2005, the RBI advised banks to witnessed the introduction of payment
which covered more than 74,000
provide no-frills accounts for low-income bank and small finance bank licences
villages with a population of over 2000
people to have a savings account and by the RBI to broaden the reach
with banking services. As a result, the
expand banking to the larger section of payment and financial services
number of bank accounts increased
of populations. Later in 2006, banks to small businesses, low-income
by around 100 million during 2011-13.
were permitted to use NGOs, MFIs and households, small and marginal
It was during this period that Aadhaar
SHGs as business correspondents (BCs) farmers, etc.
enabled payment system (AePs) was
and business facilitator (BFs) to extend launched. Later in 2011, to promote Towards the end of 2016, India went
banking services. financial inclusion, the RBI permitted under the process of demonetisation.
non-bank entities incorporated in It was aimed at curbing black money,
It was in 2008-09 when National India to open WLAs.
Automated Clearing House (NACH) and reducing tax evasion and making
National Financial Switch (NFS) were India a cashless economy, thus
Later in 2012, RuPay cards were
launched by the National Payment promoting digital economy. Later
introduced by NPCI as a domestic
Corporation of India (NPCI) to make Bharat Interface for Money (BHIM),
payment network.
retail payments seamless. Later, 2009 a payment app, was launched by
witnessed guidelines for Prepaid The DBT scheme was launched in NPCI to enable fast, secure, reliable
Payment Instruments (PPIs) including 2013 for simpler and faster flow of cashless payments through mobile
mobile wallets being laid by the RBI. information/funds. It aims to provide phones.
transparency and terminate pilferage
2010: Unique Identification Development In 2019, the RBI eased the guidelines
from distribution of funds by the
Authority of India (UIDAI) based Aadhaar for WLAs, allowing companies that
government of India.
project was initiated to provide identity manage WLAs to source cash directly
infrastructure for financial inclusion. It was in 2014 that the remarkable from the central bank, offer deposit
Later in 2010, the RBI allowed for-profit revolutionising PMJDY was introduced services and non-bank services like bill
companies to act as BCs and NPCI with an aim of linking every household payments, and advertise even non-
introduced IMPS for enabling 24x7 with banking facilities. financial products in their premises.
electronic funds transfer. This gave them more opportunities to
become sustainable.

Government’s approach

1. Till 2015, the larger aim was to 2. The second phase was about maintaining 3. Currently, the third phase is
provide a unique identity under the and increasing the financial inclusion by being implemented, where the RBI
Aadhaar project and universal access covering more people under the singular is focusing on increasing the reach
to banking facilities, basic banking financial system and retaining the through optimising the number of bank
accounts for savings and remittance, existing ones by keeping them involved in branches, BCs, micro ATMs, WLAs and
and RuPay debit card with an in- transactions through initiatives like DBT, digital payments (to promote cashless
built accident insurance cover of INR digital payments and using RuPay cards economy).
100,000, through the PMJDY.

16 | Financial inclusion in rural India: Banking and ATM sector in India

Implementation and
support of infrastructure

Digital pipeline Promotion of cashless and

In 2015, a digital pipeline was created for the implementation digital payment systems
of PMJDY. The pipeline involved linking of Jan Dhan accounts
with mobile numbers and Aadhaar cards or Jan Dhan Aadhaar Post demonetisation in 2016, over 20 million zero-balance
Mobile (JAM). This infrastructure pipeline acts as an essential savings accounts were opened under PMJDY, while the
backbone for DBT flows, adoption of social security/pension number of taxpayers increased by over 30%. For the growth
schemes, facilitating credit flows and promoting cashless of businesses and activities in rural areas, expansion of banks
and digital payments through the use of RuPay cards. This and banking services have become a necessity. Since opening
accelerated the pace of attaining the goal of a secured, more bank branches is costly endeavour, the government
insured, digitalised and financially empowered society. has realised the need for alternative banking formats, such
as digital financial services, low cost micro ATMs and white
• Saving deposits • DBT label ATMs, and BCs to cater to this rising demand. Hence,
• Pension products • Withdrawals post demonetisation, there is considerable push from both
• MUDRA loans government and private sector to utilise such alternative
banking channels, especially in the rural and semi urban areas.

Another key government initiative which emerged post

demonetisation was making India a cashless economy.
JAM infrastructure
To take this forward, the government of India along with
• Accessibility • Digital economy
financial institutions has helped create the following digital
• Ease of banking • Financial literacy
infrastructure:

• Unified Payment Interface (UPI)

• Unstructured Supplementary Service Data (USSD)
• Secured • Financially included • Immediate Payment Service (IMPS)
• Insured society • National Electronic Funds Transfer (NEFT)
• Digitalised
• Aadhaar Pay and BHIM
• Debit cards and credit cards

Financial inclusion in rural India: Banking and ATM sector in India | 17

Technology infrastructure National Strategy for Financial
It took over a decade to strategically create the technology Inclusion for India 2019-24
infrastructure across India in a structured and well-planned
manner. The main aim of the technology infrastructure was to While financial inclusion has expanded greatly, and digital
overcome the challenge of empowering people with data so financial services are being vigorously promoted by the
that they can leverage it without compromising on privacy and government of India, there is still a long way to go. In 2019,
to increase the benefits of financial inclusion in India. to achieve this objective, the National Strategy for Financial
Inclusion for India 2019-24 was prepared by the RBI along with
Our technology infrastructure primarily focuses on: the Financial Inclusion Advisory Committee (FIAC) based on
• Giving a unique identity (through Aadhaar, eKYC and eSign) the inputs and suggestions from the government of India and
• Faster and low cost payments (with UPI and AePs) financial sector regulators like:
• Data sharing and security (through DigiLocker)
• Securities and Exchange Board of India (SEBI)
Identity
• Insurance Regulatory and Development Authority of India
Payment Data security
(IRDAI)
2009 Aadhaar • Pension Fund Regulatory and Development Authority
(PFRDA)
2010 IMPS

Aadhaar
2012 payment bridge
Under this strategy, the government is looking to make formal
2013 eKYC financial services available, accessible and affordable to all
the citizens of India in a safe and transparent manner. The
2014 AePs DigiLocker
government has also revamped the Lead Bank Scheme (LBS),
2018 where one bank in each district is assigned a leadership
2015 eSign
role and acts as a consortium leader to coordinate the efforts
2017 UPI of the banks in that district.

18 | Financial inclusion in rural India: Banking and ATM sector in India

Cash in cash out (CICO)
network

Overview Advantage
In India, shifting from cash to digital modes of transaction is The CICO network will provide the essential infrastructure
an enormous task. For the society to change and transition where users will be more comfortable relying on digital
to a less-cash society, people will have to reduce their cash transactions and carrying less cash if they are aware that they
holdings. This is only possible if they are confident of being can draw cash when necessary.
able to do transactions digitally and have a safety net of a
robust CICO network. With banks already cutting down on their ATM deployment due
to lack of feasibility, a model such as CICO will help support
Over the years, with the growth in government initiatives such ATM machines and BCs as the primary source of cash in semi-
as DBT, UPI and others where digital credits are made directly urban and rural centres without dampening the strong pursuit
to the bank accounts, it has become necessary to have a for a cashless economy.
widespread acquisition network and easy availability of cash-
outs. The CICO network is inter-operable with all banks in order to be
cost-effective. Further, its viability is enhanced by ensuring that
The basic architecture of the CICO network includes BCs and ATMs are able to offer additional transaction services,
components such as bank branches, ATMs, business beyond cash-in/out such as bill payments, telecom recharge,
correspondents and POS devices. All these components are mobile top-up, etc.
inter-operable and equipped to service customers of all banks.
While ATMs require space, capital and infrastructure set-up,
micro ATMs can operate efficiently on a SIM card, which makes
Bank them the best possible device even in remote areas with a low
network. Thus, encouraging banks to deploy CICO through
micro ATMs will effectively drive the agenda of digitisation.

ATM BCs PoS Device

The RBI must ensure a healthy CICO network where:
• All users get an access to a financial institution (such as
The architecture not only allows sharing and collation of data a cooperative or a bank branch) within a 5 km radius
centrally but also improves local connects. Since the primary for banking requirements
use of cash is to make basic transactions, banks must ensure • All users have access to multiple ATMs/BCs within 3 km
that the networks (ATMs, BCs, PoS devices) have adequate radius for cash management needs
facilities for cash-in and cash-out. Further, they should ensure • BCs can serve customers of other bank accounts
that the CICO points are within close proximity (under 500m) • Ensure adequate interchange built in to incentivise BCs
of transaction points. These CICO points and customers must appropriately
be supported by a bank branch within a range of 5 km for cash
Source: R
 eport of the Committee on Deepening of Digital Payments, chaired by
management needs. Nandan Nilekani

Financial inclusion in rural India: Banking and ATM sector in India | 19

Government schemes:
Key milestones (1/2)

Aadhaar follows:

2015 2016 2017 2018 2019

The UIDAI was created with an objective to issue unique
identification (UID) numbers, named as Aadhaar’, to all citizens No. of PMJDY accounts 14.72 21.43 28.17 31.44 35.27
(in crore)
of India. Aadhaar cards have largely benefited the government
in its financial inclusion plan and the population of India, which Deposit in PMJDY 15,670 35,672 62,972 78,494 96,107
accounts (in INR crore)
lacks documentation for processes like opening a bank account
Average deposit per 1,065 1,665 2,235 2,497 2,725
and getting mobile connections. This is because Aadhaar is not PMJDY account
only robust enough to eliminate duplicate and fake identities, (in INR)
but it can be verified and authenticated in an easy, cost- No. of RuPay cards 13.14 17.75 21.99 23.65 27.91
effective manner. issued to PMJDY
account holders
Number of Aadhaar cards issued (in crore) (in crore)
RuPay cards as a 89.30% 82.80% 78.10% 75.20% 79.10%
percent of PMJDY
1,230 1,248 accounts
1,100 1,165
930 Source: PMJDY, Government of India

720
510
Impact of PMJDY
100 210
Rapid financial inclusion of women: In 2014, out of total
savings accounts, there were overall 27% female accounts.
2011 2012 2013 2014 2015 2016 2017 2018 2019 However in 2019, under PMJDY, women accounts constitute
53% of the total Jan Dhan accounts.
Source: Ministry of Electronics and Information Technology, Government of India
Rapid growth in deposits in the PMJDY accounts: Against
an average balance of INR 1,065 in accounts opened under
PMJDY PMJDY in March 2015, the average balance in 2019 has grown
to INR 2,725.
Overview: The government introduced the PMJDY programme
in 2014 aimed at making bank accounts accessible to RuPay debit cards: To ease the transactions and boost
all Indians. This programme has directly raised banking cashless economy, a total of 27.91 crore RuPay debit cards
penetration in India, expanding the market for financial services have been issued till March 2019 to PMJDY account-holders.
sector in the country.
Life insurance cover: A life insurance cover of INR 30,000 has
Features: PMJDY includes an INR 5,000 overdraft facility for been assured to all the account holders who have opened a
Aadhaar-linked accounts and a RuPay debit card with inbuilt bank account under PMJDY between 2014 and 2015.
INR 1 lakh accident insurance cover.

The performance of PMJDY in terms of accounts opened,

Active contribution by BCs in PMJDY
deposit balance and average deposit balance over time is as
• Both public and private sector banks relied on their BCs
network to enroll people and open Jan Dhan accounts

20 | Financial inclusion in rural India: Banking and ATM sector in India

RuPay cards Currently, RuPay has collaborated with almost 600
international, regional and local banks across the country. It’s
Established in 2012, RuPay is a domestic debit and credit card 10 core promoter banks are:
payment network with wide acceptance at ATMs, POS devices • State Bank of India
and e-commerce websites across India. It was introduced to • Punjab National Bank
fulfil the RBI’s vision to have a domestic, open and multilateral • Canara Bank
system of payments. After demonetisation in 2016, RuPay has • Bank of Baroda
experienced robust growth, thus contributing to India moving • Union Bank of India
forward towards being a cashless economy. • Bank of India
• ICICI Bank
RuPay volume and value of transactions • HDFC Bank
• Citibank N. A.
1,127 • HSBC
668
1,175 Going global
283
36 51 349 654 • After RuPay’s success in India, NPCI has aggressive
6 11 plans to go global.
FY2015 FY2016 FY2017 FY2018 FY2019 • As per NPCI, RuPay has the potential to take on global
payment giants Visa and MasterCard, as they struggle
Volume (Mn) Value (INR Bn)
to grow.
Source: NPCI, Government of India

In 2017, RuPay overtook Visa. It recorded 37.5 crore

transactions, thus becoming the largest payment card network
in India. RuPay has gained prominence across the country,
increasing its market share from 0.6% in 2013 to over 50% in
2018. As per data from NPCI, RuPay’s network currently holds
well over 200,000 ATMs and more than 2,614,584 PoS terminals
in India.

Financial inclusion in rural India: Banking and ATM sector in India | 21

Government schemes:
Key milestones (2/2)

DBT Scheme Year-wise fund transfer (INR 000s crore)

DBT was started in 2013 with the aim of reforming the 329.8
government delivery system by re-engineering the existing
process in welfare schemes for simpler and faster flow of 206.5
190.9
information/funds. It ensures accurate targeting of the
beneficiaries and reduction of fraud. DBT aims to provide
61.9 74.7
transparency and terminate pilferage from distribution of funds 38.9
by the government of India. DBT is a high priority and focus
area for the government, as it looks to plug leakages in welfare
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
schemes. (till Sep)

Overview: Launched by the government for transferring the Source: Direct Benefit Transfer, Government of India

benefits and subsidies of various social welfare schemes

like LPG subsidy, MNREGA payments, old age pension, Achievement: Total DBT cumulative INR 9,08,044 crore
scholarships, etc., directly in the bank account of the
beneficiary. • No. of DBT schemes (FY2018-19) – 433 from 56 ministries
• Total number of transactions (FY2019- 20) – over 335 crore
Features: Reforming the government delivery system for simpler • Total DBT (FY2019- 20) – over INR 2,04,451.8 crore
and faster flow of information and funds and ensures accurate
targeting of beneficiaries and reduces fraud.

Year-wise number of DBT beneficiaries (in crore) Aadhaar Enabled Payment

Services (AePS)
129.2 140.7
124
Overview: Launched in 2008, it is a bank-led model allowing
online interoperable financial transaction at PoS (Micro ATM)
77.7 71.2 through the BC/Bank Mitra of any bank using the Aadhaar
70.2
authentication.
31.2 35.7
22.8
59 69.5 Features: AePS empowers individuals to use Aadhaar as an
35.7 46.3
22.8 31.2 identification to access bank accounts. Services it offers allow
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 (till customers to perform basic banking transactions with ease.
Sep)
Cash In-kind schemes Total DBT Beneficiaries

Source: Direct Benefit Transfer, Government of India

22 | Financial inclusion in rural India: Banking and ATM sector in India

Achievement: Total AePS beneficiaries 434.71 crore its launch in 2016. The scheme currently includes 144 banks
(FY2019- 20) nearing 800 million transactions per month (as of March 2019).

Value and volume of transactions

53,534.0
Non-
Aadhaar Beneficiaries
seeded,
58.1%
Aadhaar 9,152.0 8,769.7
seeded, 1,098.0
69.0 179.0
48.9%
FY2017 FY2018 FY2019
Source: Ministry of Electronics and Information Technology, Government of India
Value (INR Lakh) Volume (INR Lakh)

Bharat Interface for Money Source: NPCI, Government of India

(BHIM)-UPI Government schemes such as PMJDY, Aadhaar and digital

infrastructure such as RuPay, UPI, etc., have provided
Overview: UPI enables users to make global, instant, assured
the right platform for driving financial inclusion to the
safe and low-cost payment transactions. Users can make
unbanked. And, while India has made considerable strides
instant bank-to-bank payments and pay and collect money
in this direction, there is still a long way to go before the
using just mobile number or Virtual Payment Address (UPI ID).
country realises its dream of becoming financially inclusive
Features: Empower individuals to use Aadhaar as an and a cashless economy.
identification to access bank accounts. Services offered allow
customers to perform basic banking transactions with ease.

Achievement: It has experienced exponential growth since

Financial inclusion in rural India: Banking and ATM sector in India | 23

Banking in
India

24 | Financial Inclusion in Rural India: Banking and ATM sector in India

Overview

India’s banking sector has undergone a paradigm shift from conventional banking
to convenience banking. Today, banks in India are well poised to adopt the rapid
influx of digitisation and spread their services across urban and rural geographies.
Robust growth in access to basic banking services largely aimed at the rural
population, rapid adoption of mobile and internet banking, and other feasible
models have expanded the physical presence of banks across India. Major strides
taken with financial inclusion and mobile penetration has led India cruising towards
an era of digital banking.
Overview Reserve Bank of India (RBI)
Earlier in the 21st century, informal lending and borrowing
from family and relatives played a prominent role prevalent
across the country. However, with growing trust in the banking
system, people started to move away from the norm of Banks Financial Institution
informal and unorganised borrowing. In the early 2000s, the • Public sector banks • All-India financial
Indian banking sector witnessed a change in the mindsets of • Private sector banks institutions
consumers. Customers progressed from perceiving money • Foreign banks • State-level institutions
as an instrument that was meant to be preserved to one that • Regional rural banks • Other institutions
offered growth opportunities. Still, it was post 2014 with larger • Urban cooperative
emphasis on financial inclusion and digital banking, the entire banks
banking sector witnessed major reforms in terms of the policies, • Rural cooperative banks
regulations, banking services, and customers.

Currently, for a large share of financially excluded Indians, Sector snapshot

the gateway to financial services may not be traditional bank
1. Total banking assets INR 152.5 trillion
branches but access points such as business correspondents,
2. Total bank branches 151.5 thousand
white label ATMs, mobile wallets and POS machines. This
3. Total bank deposits INR 117.9 trillion
opportunity to deliver financial services at the nearest
4. Total basic saving bank deposit accounts (BSBDA)
proximity, with high scale and minimal operating costs has a
5,74.2 million in (FY2019)
huge potential for a larger impact to society. During the period
5. Total ATMs 2,07,052 (as of 2019)
FY2015 to 2019, the total value and volume of transactions via
6. Total mobile banking transaction value INR 29.6 trillion
mobile banking had increased rapidly. The growth of mobile
(FY2019)
banking in India can be largely attributed to the widespread
adoption of smartphones, proliferation of broadband services Source: RBI
and low cost of data across the country.
Bank deposits
Spectrum of financial service Primarily, banks offer two kinds of deposit accounts: Demand
providers deposits like current/savings account and term deposits
like fixed or recurring deposits. Savings accounts are used
As of FY2017, the Indian banking system consists of 27 public to meet daily on-demand requirements of cash, whereas
sector banks, 21 private sector banks, 49 foreign banks, 56 a term deposit account is used to hold money for a fixed
regional rural banks, 1,562 urban cooperative banks and period of time. Private banks registered a growth of 16.3% in
94,384 rural cooperative banks, in addition to cooperative aggregate deposits against public sector banks that had a
credit institutions. Whereas, over the years, the market share deposit growth of 6.7%.
of public sector banks has been gradually declining with
increasing confidence in private and foreign banks.
Financial inclusion in rural India: Banking and ATM sector in India | 25
Total deposits in scheduled commercial banks, INR trillion

CAGR 8.4%

111.1 117.9
94.3 100.9
85.3

2014 2015 2016 2017 2018

Source: RBI

During FY2014 to FY2018, total deposits in the Indian banking

system grew at a CAGR of 8.4%.

Strong growth in savings amid rising disposable income levels

are the major factors influencing deposit growth increasing
confidence in private and foreign banks.

26 | Financial inclusion in rural India: Banking and ATM sector in India

Modes of payment
across India
Payments are the backbone of any economy. The last decade
has witnessed substantial developments in this area across
Cost of cash
India. Some of the positive outcomes of such developments Cash imposes many costs on an economy. Cost of printing
during the period 2015-18 are as follows: notes in India is borne by households, businesses, banks, and
• Ushering introduction of new and innovative systems (such the central bank (RBI). A study in 2016 estimated the net cost of
as mobile wallets, UPI, etc.) cash as 1.7% of India’s real GDP in 2014-15.
• Distinctive shift from paper to electronic payment modes
(such as NEFT, IMPS, etc., over cheques) As per the RBI, the expenditure on printing of notes during
• Customer-centric initiatives 2015-16 (the year prior to demonetisation) was INR 34.2 billion,
which later jumped to INR 79.65 billion and INR 49.12 billion in
2016-17 and 2017-18, respectively.

Types of payments
Non-cash payments
• Globally, developing economies are leading the growth in
the non-cash payment sector and are projected to rise by
Cash Non-cash
23.5% at CAGR between 2017 and 2022.
• In 2017, India’s non-cash transactions witnessed a rapid
Currency in circulation (CIC), INR billion growth of around 39%. India was marginally behind the
leaders Russia, where transactions grew by 40%, and ahead
21,367 of China (35%).
16,635 18,293
14,483 13,353 • Ease of payments, ubiquity and convenience are a few
factors that have led to a steady growth of non-cash
payment in the last 2-3 years.

2015 2016 2017 2018 2019 Types of non-cash payments

Source: CEIC, Government of India • Real-Time Gross Settlement (RTGS)
• PPIs
In 2017, use of currency dropped majorly due to the process of • National Automated Clearing House (NACH)
demonetisation in 2016. However, India remains a largely cash • Credit card at POS
driven economy with a steady rise in the currency in circulation • Debit card at POS
from 2015 to 2019. • Immediate Payment Service (IMPS)
• Paper clearing (cheque)
Currency in circulation (as percentage of GDP) • National Electronic Funds Transfer (NEFT)
• UPI
12% 12% 11% 11% • Electronic Clearing Service (ECS)
9%

Digital payment apps got demonetisation boost

While apps were making steady inroads in the Indian payment
2015 2016 2017 2018 2019
ecosystem, they got a massive push with the government’s
Source: CEIC, Government of India demonetisation policy. From November 2016 onwards, all major
India has a large CIC/GDP ratio as compared to other players have seen significant growth in their user base and
countries. After demonetisation, CIC has witnessed a number of transactions, with Paytm doubling its users from 140
rapid recovery from 9% in 2017 to 11% in 2018, but digital million in October 2016 to 270 million in November 2017.
transactions have gone up too.

Financial inclusion in rural India: Banking and ATM sector in India | 27

 Payment system share FY2019 (Volume)

UPI 22%

IMPS 19%

Debit card @ POS 18%

NACH 12%

NEFT 9%

Credit card @ POS 7%

PPIs 7%

Paper clearing 5%

RTGS customer 1%

ECS 0%

Source: RBI

Others
NEFT 3%
15%

Cheq
ue… Payment
system share
FY2019- Value

RTGS
77%

Others include: IMPS, UPI and NACH around 1% each

Others include: IMPS, UPI and NACH around 1% each

2016 2017 2018 2019

ATM 70% 73% 69% 60%
POS 30% 27% 31% 40%
Source: RBI *as of November every year

Despite the increase in the use of debit cards at PoS, their use
at ATMs still holds a large share. Since ATMs are predominantly
a preferred choice over PoS across India, it naturally creates a
demand for ATMs across India.

28 | Financial inclusion in rural India: Banking and ATM sector in India

Digital payments: Thriving
growth and gaining globally

Digital payment adoption scenario

United Kingdom China
CAGR: 8% CAGR: 18.5%
Smartphone Smartphone
penetration:82.2% penetration:55.3%
GEAR: 6 GEAR: 48

Japan
CAGR: 4.5%
United States India Smartphone
CAGR: 8.6% penetration:55.3%
CAGR: 20.2%
Smartphone GEAR: 22
Smartphone
penetration:77%
penetration: 27.7%
GEAR: 12
GEAR: 28

Source: Digital payments, Statista- 2019 Note: CAGR forecast period: 2019- 2023
Smartphone penetration: 2018
Government E-payments Adoption Ranking (GEAR): 2018

Digital payment per capita (India)

22.4
• Digital payment per capita has witnessed a significant
growth in India, from 2.4 digital transactions per capita
13.2 per annum to about 22 in five years. Further, the RBI and
10.7 the government aim for annualised per capita transaction
4.1 5.4 volume to reach 220 by March 2021.
2.38
• India remains a largely cash-driven economy but with strict
measures and focus on digital financial inclusion, digital
2014 2015 2016 2017 2018 2019
payments as a percentage of GDP has also increased from
Source: Government E-payments Adoption Ranking- 2018 7.14% in 2016 to 8.42% in 2018.

Evolution of digital payment infrastructure in India

Financial inclusion in rural India: Banking and ATM sector in India | 29

Understanding the digital
payment systems
The government’s flagship Digital India programme aims to transform India into
a digitally empowered society and knowledge economy. Making India ‘faceless,
paperless, cashless’ is the predefined goal of Digital India. As part of promoting
cashless transactions and converting India into a cashless society, various modes of
digital payments are available.
RTGS system IMPS
150 2000000 2,000 20,000

1500000 1,500 15,000

100

137 1000000 1,000 10,000

124 1,753
50 98 108
93 500 1,010 5,000
500000
78 221 507
0 0 - -
FY2015 FY2016 FY2017 FY2018 FY2019 FY2015 FY2016 FY2017 FY2018 FY2019

Volume (Million) Value (INR Billion) Volume (Million) Value (INR Billion)

Source: NPCI, Government of India Source: NPCI, Government of India

RTGS is operated by the RBI and it enables transfer of money IMPS is a fast payment system operated by the NPCI. IMPS
from one bank account to another on a ‘real time’ and ‘gross’ saw an increase of 2% in the total transactions taking place
basis. Only banks, clearing houses and primary dealers are the between August 2019 and September 2019.
members of this system, thus posing a challenge
for non-banks. Use of IMPS has gone up steadily during FY2015-19 at a
CAGR 117%. The average transaction size has varied
RTGS usage (in volume terms) has steadily grown with a CAGR between INR 0.7 lakh and INR 0.9 lakh.
10.2% from FY2015 to FY2019. During the same period, the
NACH
average transaction size has varied between INR 70 lakh and
INR 90 lakh. 3,500 16,000
NEFT 3,000 14,000
2,500 12,000
10,000
2,000
8,000
1,500 3,035
2,503 6,000
1,000 2,057 4,000
1,404
500 2,000
340
- -
FY2015 FY2016 FY2017 FY2018 FY2019

Volume (Million) Value (INR Billion)

Source: NPCI, Government of India

Operated by the NPCI, it is regularly used for making

Source: NPCI, Government of India payments related to government benefits, for instance,
subsidies. NACH is a centralised, web-based clearing service to
NEFT facilitates fund transfers across all computerised
ease the work of banks, financial institutions, the government
branches of banks (member/sub-member of NEFT) across the
and corporates by consolidating all regional ECS systems
country. Traditional paper (cheque) transactions as compared
into one national payment system, thereby removing any
to RTGS and NEFT have declined during 2015-19 at a CAGR
geographical barriers in efficient banking. The average size of
of -2%. The average size of the transaction during the period
the transaction during the period FY2015-19 was INR 2700-
FY2015- 2019 was INR 0.60 lakh to INR 1 lakh. NEFT usage
4900. NACH usage across India is estimated to grow at
across India is estimated to grow at CAGR 26%.
CAGR 72.8%.

30 | Financial inclusion in rural India: Banking and ATM sector in India

Other digital payment
modes

Banking cards offer consumers security, convenience and control. Currently, across India, a wide
variety of cards are available that include credit, debit and prepaid cards. These cards provide two-
factor authentication such as PIN and OTP for secure payments. RuPay, Visa and MasterCard are
some examples of card payment systems.
Banking cards
Payment cards empower people to purchase items from stores, on the internet, through mail-order
catalogues and over the telephone. They save both customers and merchants’ time and money, and
thus facilitate ease of transaction.

AePS is a bank-led model which empowers a bank customer to use the Aadhaar number to access
AePS the bank account and perform basic banking transactions like cash deposit, cash withdrawal, intra-
bank or inter-bank fund transfer, balance enquiry and obtain a mini statement through a BC. Its other
key objective is to facilitate disbursements of government entitlements like NREGA, social security
pension, etc. of any central or state government bodies, using Aadhaar and authentication thereof as
supported by UIDAI.

It brings multiple bank accounts into a single mobile application (of any participating bank), further
UPI merging several banking features, seamless fund routing and merchant payments into single
umbrella. It also provides the peer-to-peer collect request, which can be scheduled and paid as per
requirement and convenience. Currently, each bank provides its own UPI a pp for Android, Windows
and iOS mobile platform(s).

A mobile wallet is an easy alternate to carry cash in digital format. Instead of using a physical plastic
card to make purchases, wallets allow users to pay with their smartphone, tablet or smart watch. An
individual’s account is required to be linked to the digital wallet to load money in it. Today, a large
Mobile wallets
number of banks and some key private players such as Paytm, Freecharge, Mobikwik, Airtel Money,
Jio Money, iCitrus Pay, Vodafone M-Pesa, ICICI Pockets, etc., offer mobile wallet services.

Mobile banking is a service provided by a bank or any other financial institution to allow its customers
to conduct different types of financial transactions remotely using a mobile device. It uses an app-
Mobile banking based platform provided by the banks or financial institution for transaction purpose.

Micro ATMS are devices that are used by a large number of BCs to deliver basic banking services. The
platform enables BCs to conduct instant transactions.

Micro ATMs Connected to banks across the country, these micro ATMs offer services through low-cost devices.
They enable consumers to instantly deposit or withdraw funds regardless of the bank associated with
a particular BC. This device is based on a mobile phone connection and is available at every BC.

Financial inclusion in rural India: Banking and ATM sector in India | 31

Branch banking
and BCs

32 | Financial Inclusion in Rural India: Banking and ATM sector in India

Expanding the customer
reach
In India, the increasing reach of banking services is supported Commercial bank branches per lakh population, 2019
by both the public and private sectors. Currently, huge
emphasis is being laid on financial inclusion, increase in 50.9

number of bank branches and increasing customer reach

in rural areas. Supplementing the innovative government 15.9
initiatives such as PMJDY and DBT, introduction of alternative 6.2
delivery channels such as WLAs, BCs, RuPay debit cards and a
host of electronic money transfer services (RTGS, IMPS, NEFT) Urban Semi Urban Rural
has helped enroll and activate about 80% of adult Indians in
Source: RBI and GT Analysis
the formal banking sector.

Rise in bank branches Bank branches are concentrated in urban parts of the country,
as a result of which the rural population remains largely
155.0
7.2% 6.9% 8.0%
underserved. India’s average for commercial bank branches
150.0 per 100,000 adults stood at 14.5, whereas the global average
145.0 4.1% 6.0%
for high income economies was 20.3, upper middle-income
140.0 2.5% 4.0%
135.0 1.5% economies was 16.4 and lower middle-income economies was
130.0 2.0%
125.0 131.6 140.7 146.5 148.6 152.4 8.1 in 2018, according to the World Bank. Rural India is pegged
120.0 0.0% at 6.2, significantly below the world average for low middle-
2015 2016 2017 2018 2019 income economies.

Branches (000s) YOY growth

Commercial bank branches per lakh population, 2019
Source: RBI
Others
2%
India has the highest number of commercial bank branches Regional Rural
banks
in the world. Over the years, banks have been slowing their 15%
branch expansion, preferring to focus on their digital initiatives
as a potential cost-saving measure. In order to further increase
their efficiency and access to rural and semi-urban areas, Types wise - Bank
branches FY2019
banks have adopted the BC model and partnered with non-
Priv ate sector
bank entities to deliver such services. Banks Public
22% Sector
Banks
61%

Source: RBI

During 2017-2019, amongst the public sector banks, State

Bank of India (SBI), Punjab National bank (PNB) and Canara
Bank were the top performers in terms of customer reach.
Together, these three contribute over 40% to the branch
network across India, with SBI alone having a 25.4% share in
FY2019. In terms of private sector banks, the top contributors
in expanding their branch network are ICICI Bank, HDFC Bank
and Axis Bank. Together, these three contribute over 42% to the
branch network across India, where ICICI and HDFC had a
share of around 15% each in FY2019.

Financial inclusion in rural India: Banking and ATM sector in India | 33

Why India needs a BC model

India has made a huge difference by prioritising financial inclusion through its
policies and other initiatives. However, due to the sheer size of the population and
considerable amount disparity among the urban and rural parts of the country, a
large section of the adult population still does not have access to formal financial
services. Cost-effectiveness and sustainable delivery mechanisms to reach out to
remote locations further add to the complexity of the situation. The RBI soon realised
that banks alone will not be adequate to meet the requirements of the country.
To overcome such challenges, the BC model, which aims to serve as an alternate
banking channel to millions, was introduced in 2006.

BCs are agents contracted by banks for providing basic

banking services at locations other than a bank branch or ATM.
Need for BCs in India
BCs are ideally an extended arm of the bank, and thus are India covers a vast geographical area, with two-thirds of its
vital in the promotion of financial services and expanding the population and 70% of the workforce residing in rural areas.
outreach of banks to unbanked and underbanked regions. However, even with the growing share of the rural economy
and increased usage of basic financial services amongst rural
BCs are engaged by banks to provide a variety of core banking
consumers, banks find it hard to service the demand arising
services, which include (but are not limited to):
out of rural regions. Excessive capital and high operational
• Bank account opening
costs, reducing margins on financial transactions and lack
• Transactional banking-deposits, transfer and withdrawal
of financial literacy at banking points impede the physical
Other than the functions mentioned above, BCs aid in the sale expansion of bank branches in India. As a result, a large portion
of third-party products such as insurance and investments. BCs of the Indian population is left unbanked or underbanked
help create awareness and build knowledge about financial with rural customers having to travel miles to access basic
products and advice on money management and debt banking services such as deposits, credit, remittances and cash
counselling to those in their vicinity. withdrawals.

Existing business model To address this problem and enable banks to overcome
the last-mile connectivity challenges associated with rural
in India consumers, the RBI had mandated the creation of a network
of BCs to assist banks in reaching rural consumers and
The BC model typically involves a financial ecosystem and a facilitate the expansion of formal banking services to unbanked
key touchpoint that enables banks to expand their outreach at geographies.
a substantially lower cost. Introduced by the RBI in 2006, the
model allows banks to have third-party, non-bank agents that
extend their services to customers in rural areas. Currently,
Eligibility
around 10 lakh BCs across rural and urban India work on With the RBI’s emphasis on having a BC touchpoint in each
income based on the fees and commission paid by the sponsor of the six lakh plus villages across India, an exhaustive list of
bank, which also takes care of their training needs. A fixed fee is eligible entities was provided, which included:
usually paid to BCs for every new account. For transactions like • Retired government servants like postmasters, employees
deposits, withdrawals and transfers, BCs get a variable fee that and ex-servicemen
is between 0.3% and 0.5% of the transaction amount. • Individual owners of ‘kirana’, medical, petrol pumps and fair
price shops
• Public call office (PCO) operators

34 | Financial inclusion in rural India: Banking and ATM sector in India

• Agents of small savings scheme of the government During 2010-19, the number of BCs in rural areas witnessed
• Authorised functionaries of SHGs, which are linked to banks an exceptional growth at a CAGR of 36%. Moreover, the share
• Non-bank private entities of BCs in total banking outlets in rural areas significantly
increased from 51% in 2010 to 91% in 2019. The growth of BCs
It is mandatory for every BC to provide banking service for a over the period was driven by multiple factors such as:
minimum of four hours per day for at least five days a week to
be counted as a banking outlet. Increased rural focus: As per the RBI guidelines, at least 25%
of the banking outlets opened in a financial year must be
Increase in number of BCs (in 000s) opened in tier 5 and 6 cities. Since the typical brick-and-mortar
branch in such areas might be an unviable option due to the
91% high operating cost, BCs can be a feasible alternative.

570 597
519 545

51%
68 34

2010 2018 2019

Total Rural Banking Outlets Total Rural BCs

Source: RBI, Government of India

Financial inclusion in rural India: Banking and ATM sector in India | 35

Taking banking to the people

In 2014, the government had introduced PMJDY, which aimed expanding bandwidth, BCs also enable banks to provide
at making bank accounts accessible to practically all Indians. doorstep banking in remote regions of the country.
Thus, to reach out to the large population base in India, banks
need to adopt models like BCs. Since BCs involve local stakeholders in everyday processes,
they know the customers at a personal level. This not
Account opened in rural India (in crore) only strengthens the bank’s position but also improves its
performance with increased customer reach, trust and service
29 32 21
opportunities through a BC model.
19
A bank gets access to deep rural cash flows and is centric
to the rural consumption play as there are enormous CASA
2018 2019 (current and savings account) opportunities.
BCs PMJDY
Banks get access to the existing customer base and store
Source: PMJDY and RBI footfalls that would provide huge business potential to build
assets and loan portfolio.

Share of BSBDA account opened (in lakh)

BSBDA by BCs and PMJDY accounts opened in rural India

have significantly increased in 2019. 18% 54% 56%
5,362 5,742
2,888 3,195

Digital initiatives: The government’s push towards the cashless 130 735
economy and digital payments has encouraged a large 2010 2018 2019
number of people to use RuPay cards, mobile and internet BCs Total
banking. However, low awareness and literacy levels act as a
challenge for the population. This gap creates an opportunity
for the BCs to reach out to the people where banks cannot. Source: RBI, Government of India
BSBDA- Basic Savings Bank Deposit Account

Advantages Each BC has to go through the BCs/facilitators exam and are

certified by Indian Institute of Banking and Finance. Thus, they
Interestingly, the BC model not only promotes financial are qualified enough in promoting financial literacy among the
inclusion but is also an avenue through which individuals can rural populace. As members of local communities, BCs disperse
raise their disposable income. knowledge regarding complex financial products and money
management, strengthening the adoption of financial services
The model stimulates a sense of entrepreneurship, allowing
initiatives across India.
individuals to utilise their current retail outlets and knowledge
to extend financial products, services and literacy within their
local communities. It enables banks to expand their outreach Challenges
and provide limited banking services at no initial set-up cost
or recurring operational cost. Banks are able to leverage BCs play an integral part in India’s push towards financial
the infrastructure set-up by the BCs without any capital inclusion. BCs have been vital in the promotion and adoption
expenditure. of formal banking services, especially with consumers in rural
India. However, the model itself is confronted with uncertainties
BCs are an integral addition to the RBI’s vision of promoting and there are several hurdles that need to be crossed in order
financial inclusion in India. Apart from cost saving and to ensure the success of BCs in India.

36 | Financial inclusion in rural India: Banking and ATM sector in India

The main challenge confronting BCs is the share of inactive
or dormant accounts. Despite increasing levels of awareness
regarding banking services, according to the World Bank
about 48% of the accounts opened in India are inactive. As a
result, banks question the viability of the BC model and there
is a shortage of funding for increasing BCs’ capacities and
expanding into unbanked regions. Additionally, banks have
cited low volume of business generated by BCs and high costs
associated with low-volume small-value transactions.

Another hurdle facing BCs is the low penetration of financial

and digital literacy amongst consumers in rural India.
According to S&P’s ‘Global Financial Literacy Survey’, the
financial literacy rate in India is 24%. This acts as a major
hurdle for BCs in dispersing their services to the rural populace,
with many individuals opting for informal avenues such as
money lenders and indigenous bankers.

The BC approach is further hampered by regulatory concerns.

Currently, BCs are required to complete accounting and settle
withdrawals with bank branches within a 24-hour window after
completing a transaction. Distance, lack of technology and
manpower make this an unviable option.

Innovative business models with improved technology and

last-mile reach through local presence helps in increasing
trust and are driving business opportunities for rural
entrepreneurs

• Today, companies such as Vakrangee, FINO and Sahaj

are creating a strong network of rural entrepreneurs on
the back of their technology-enabled platforms, offering
a range of quality services.
• They are the last-mile link connecting India’s rural
populace to modern technology and services via retail
outlets spread across India.
• Banks are able to leverage the infrastructure set-up
by companies like Vakrangee without any capital
expenditure. The entire cost is taken care of by the
company. The banking counters at the kendras are fully
equipped with a laptop, display monitor and biometric
device. More than 80% of Nextgen Vakrangee Kendras
are planned in tier 5 and 6, thus keeping them in line
with the RBI guidelines (which specify that minimum
25% of the total number of banking outlets should be
opened in unbanked rural centers).
Financial inclusion in rural India: Banking and ATM sector in India | 37
Taking banking to the people

Vakrangee Fino FIA Global Sahaj e Village Atyati RBL Finserve

Kendras

Num ber of BC NA NA 1,228

12,000+ ~10,000 NA
points

Allahabad Bank, YES Bank,

Punjab National Axis Bank, Kotak, Syndicate Bank,
Partner Banks Bank, Union Bank Suryoday Small SBI, YES Bank, HDFC, Bank of Central Bank of
Finance Bank Bank of Baroda RBL Bank
of India ,Bank of Baroda, Gramin India, Induslnd
India, Bank of Bank Bank, Punjab
Baroda, 8 others National Bank, SBI

Geographical
Presence PAN India PAN India PAN India PAN India PAN India PAN India

Service Offered

Banking &
Financial      
Insurance
  

ATMs   
WLAs and micro ATMs
WLAs Micro ATMS

Skill
development
and E-learning 
E-Com m erce
  
E-Governance
  

Logistics   

Prominent BCs such as Vakrangee and FINO with over 10,000 touch points each and pan-India presence offer a wide range
of services, thereby taking banking and other service to not only the urban but also the rural areas of India.

Source: Company data- Vakrangee Ltd and FINO, Company website- FIA Global, Sahaj e- Village, Atyati, RBL Finserve and GT analysis

38 | Financial inclusion in rural India: Banking and ATM sector in India

ATMs and WLAs
across India

Financial Inclusion in Rural India: Banking and ATM sector in India | 39

Relevance of ATMs

Potential of transactions through mobile and internet is • There was a net decline in ATMs during 2017 to 2019 of
contributing to the ‘less cash economy’ objectives of the 6,200 ATMs. Approximately 55.7% of this decline was from
government and the RBI, but the importance of ATMs cannot on-site ATMs and the remaining 44.3% was accounted for by
be de-emphasised. ATMs play a critical role in the financial off-site ATMs.
inclusion revolution. Interactive, multi-channel, deposit-taking • Stringent regulations by the RBI significantly raise legal
ATMs promote financial literacy while allowing cash to circulate compliance costs and have made a large proportion of ATMs
continuously, reliably, quickly, cheaply and safely in local economically unviable.
markets. • SBI ATMs have a major presence across India followed by
private sector banks like ICICI, HDFC, etc.
According to the ‘Benchmarking India’s Payment Systems’ report,
India is next to China in terms of the number of ATMs deployed. Others
However, the rate of deployment is still relatively low when the 2%

size of the population is taken into consideration. The availability

of ATMs doubled over the six-year period between 2012 and
2017 with dependency reducing from 10,832 persons per ATM in Priv ate sector Public
2012 to 5,919 persons per ATM in 2017. BanksTypes
wise - Bank Sector
31%
ATMs FY2019 Banks
Total ATMs across India (in 000s) 67%

199 208 207 202

181

102 110 107 106

89 Source: RBI

97 99 100 96
Growth of ATM transactions
92
The number of ATM transactions witnessed an approximate
2015 2016 2017 2018 2019 growth of 9% CAGR between 2015 and 2019, primarily
dominated by debit cards. The value of transactions grew at
On- Site ATMs Off-site ATMs Total a CAGR of 11% over the same period. However, the average
transaction value increased by a mere 5% since 2015.
Source: RBI

Rising cost of ATM transactions due to the high costs of

compliance and operations is a major concern for banks
Number of ATMs by population, FY2019* coupled with digitisation and the growth of mobile banking,
Metropolitan 50,210 which are further demotivating banks to install more ATMs. Low
transaction value further cements the sentiment for banks.
Urban 41,413
Semi-urban 44,051
Rural 33,645
Source: RBI *(as of September 2019)

40 | Financial inclusion in rural India: Banking and ATM sector in India

Total ATM transaction volume by financial card (in million)
RuPay card usage at WLAs in rural India
9,869.4
8,078.5 8,569.4 8,610.1 • RuPay card usage in rural India has gained significant
7,000.1
traction, accounting for major share of transaction
9,859.5 compared to Visa and MasterCard.
8,072.5 8,563.1 8,602.3
6,995.8 • Amongst major WLAs, Vakrangee reported a 58% share
4.3 6.0 6.4 7.8 9.8
for RuPay card transactions, while it was 60% of BTI in
2015 2016 2017 2018 2019 rural India.
Debit Card Credit Card Total

Source: RBI

Total ATM transaction value by financial card (INR billion)

33,153.2
29,024.3
25,388.2 23,631.1
22,232.1

28,987.6 33,107.9
22,208.7 25,357.9 23,602.7

23.5 30.2 28.4 36.7 45.3

2015 2016 2017 2018 2019
Debit Card Credit Card Total

Source: RBI

Financial inclusion in rural India: Banking and ATM sector in India | 41

ATMs and bank branch density in India
ATMs per 100,000 adults

224.1 228.9
221.8 221.5 220.6
According to the World Bank data, the
185.3 average number of ATMs around the
172.6 168.7 164.0 160.9 world in 2018 was 41.6 (per 100,000
129.5 131.3 129.6 128.1 adults), whereas in India it was 21.7.
115.7
118.1 115.1 112.2 Globally, some of the developed and
108.0 104.8
96.8 developing economies like the UK,
54.8 81.5 84.2
76.8
Canada, China, Brazil and Russia
37.3 39.0 39.8 41.6
36.0 have an average of over 95 ATMs (per
17.8 19.7 21.2 22.1 21.7 100,000 adults), which is far ahead
of India. Thus, it clearly indicates the
2014 2015 2016 2017 2018 gap in ATM infrastructure to serve
World India UK Canada China Brazil Russia the population adequately and
Source: World Bank and GT analysis appropriately.

State-wise analysis

Top 10 states (in population, 2019)

States Area (sq. km) Population ATM density Branch density ATMs/lakh population Branches/lakh population
(million)
India total 32,91,721 1335 14.85 0.04 15.1 9.4
Uttar Pradesh 2,43,286 229 12.05 0.01 7.6 0.8
Maharashtra 3,07,713 121 11.98 0.04 19.3 10.2
Bihar 99,200 119 12.83 0.05 5.2 4.2
West Bengal 88,752 98 7.83 0.09 10.8 8.3
Madhya Pradesh 3,08,252 82 30.17 0.02 11.2 6.7
Rajasthan 3,42,239 78 32.49 0.02 11.5 7.4
Tamil Nadu 1,30,060 76 5.06 0.08 29.4 13.6
Karnataka 1,91,791 66 10.73 0.04 25.5 13
Gujarat 1,96,024 64 17.08 0.04 17.5 11.7
Andhra Pradesh 1,60,205 53 15.18 0.04 17.5 11.1
ATM density – Area covered per ATM (lower the better) Branch density – Area covered per branch (lower the better)
Source: RBI and GT analysis

India has an ATM density of 14.8 km and branch density of where rural Karnataka is underserved when compared to
0.04 (based on state areas) only. Bank-operated branches and metropolitan cities such as Bengaluru, which has 12 ATMs per
ATMs are becoming unviable, considering the cosmic area of lakh population.
each state, the cost of transporting cash in rural areas and
interest being paid out on idle cash. Currently, India is witnessing a demand-supply gap, which
presents a huge potential for the banking industry in rural
ATM penetration in India is also skewed towards urban cities and semi-urban areas. With the rapid growth of Jan Dhan
compared to rural areas. In 2019, as per RBI data, Delhi led in Yojana accounts and RuPay cards, millions of rural customers
terms of ATMs per lakh population (42), followed by Tamil Nadu now have a debit card and bank account but lack basic
(29 A) and Karnataka (25). Over the years, most of the states in infrastructure like an ATM to be able to use these easily.
India have encountered a distinctive concern like in Karnataka,

WLA operators targeting rural ATM market

WLA operators, with their innovative and stand-alone business models, are ideally placed to provide ATM services in rural
India. Many private players like Vakrangee, BTI and Tata Indicash are opening more and more of their WLAs in rural areas.

42 | Financial inclusion in rural India: Banking and ATM sector in India

WLA – An introduction

WLAs hoardings inside ATM premises is an attractive model for private

players. Subsequently, the government schemes regarding
WLAs are set-up, owned and operated by non-bank entities. opening of WLAs ensure that private players are able to
They provide banking services to the customers of banks in generate a healthy profit margin while keeping in mind the end
India, based on the cards (debit/credit/prepaid) issued by the goal of financial inclusion and betterment of the masses.
banks. Under the Payment and Settlement Systems Act, 2007,
the RBI has mandated the creation of a network of WLAs across Key benefits and government
the country and it is necessary for White Label ATM Operators
(WLAOs) to have a rural presence. initiatives
The WLA model is attractive for private companies. The idea
Evolution and role of WLAOs provides an incentive to private players deploying ATMs with
a focus on rural India and is also beneficial for the Indian
In 2012, as per the RBI guidelines, non-bank entities populace and banking system as it ensures greater access to
incorporated in India under the Companies Act 1956 were formal banking services and eases pressure on the banks.
allowed to set up, own and operate ATMs. Non-bank entities
that intend to set up, own and operate ATMs were identified The government has taken several steps to drive interest in the
as WLAOs and such ATMs were called WLAs. The objective WLA model. The FDI limit on WLAs was recently increased to
of the initiative is to expand the network of ATMs across 100%, attracting foreign companies to enter this space with a
India, especially in semi-urban and rural centers. Prior to the service provider and SCB.
introduction of WLAs, India witnessed a steady growth of ATMs
with majority of these deployed in tier 1 and 2 cities. Thus, with The government schemes with respect to opening WLAs are
an effort to boost the presence of ATMs and expand the delivery designed to ensure that private institutions deploying WLAs do
channel of banking services in rural India, the RBI mandated not just focus on the financial incentives of this business model,
the creation of a network of WLAs across India, with a focus on but rather drive the overall goal of financial inclusion in India
tier 3-6 cities. During March 2018 to September 2019, WLAs by focusing on tier 4-6 cities.
increased at a rate of 22%. Currently, to boost WLAs, the
RBI has also allowed to advertise non-financial products and
services within its premises, except the main signboard.

Need for WLAs in India

In India, there are less than 21.7 ATMs in India per one lakh
adult population, compared to 115 in the UK and 96 in China.
This is a serious impediment to driving financial inclusion and
ensuring every Indian has access to a formal banking point in
the country. This problem is even more prevalent in rural India,
where the masses are living in the age of digitisation and yet
do not have access to basic ATM services. Banks find it hard
to penetrate remote regions of the country as the costs of
deploying ATMs do not resonate with the low value and volume
of transactions relative to urban centers. Private players and
non-banking companies are incentivised by the WLA model,
as it provides them an avenue to generate profit out of the
financial system. The ability to earn a commission on every
transaction and further scale revenue through advertisement

Financial inclusion in rural India: Banking and ATM sector in India | 43

Number of WLAs
Grow th 22% (18 m onths)

19,507 21,244
15,195

March(2018) March(2019) September(2019)

Metro
Centres
9%
Urban
Rural Centres
Centers
47%
12%

Region-wise
deployment of
WLAs (2019) Semi - Urban
Centres
32%

Metro
Centres
Rural Centres
13%
42%

Urban
Centers
Region-wise 13%
deployment of
WLAs (2018)
Semi - Urban
Centres
32%

Source: NPCI and RBI

WLAs witnessed a rapid growth of over 30% in rural India from

March 2018 to March 2019. In 2019, the share of rural WLA
centres was over 47% followed by semi-urban centres with a
share of 32%.

44 | Financial inclusion in rural India: Banking and ATM sector in India

WLAs market - Key players
and their presence
Top 10 states with major share of WLAs in 2019 Major players in WLA market in 2019

8,446 8,352
Number Market share 8,231
1. Tamil Nadu 3,225 15.2%
5,153
5,042 Dec-18
2. Uttar Pradesh 3,201 15.1% 4,661
3,985 Mar-19
3. Maharashtra 2,632 12.4% 3,250
2,820
2,189 Sep -19
4. Rajasthan 1,943 9.1%
770 776
5. Bihar 1,611 7.6%
6. Andhra Pradesh 1,355 6.4% TATA Vakran gee Hita chi BTI

7. Telangana 1,346 6.3%

Source: RBI
8. Madhya Pradesh 1,164 5.5%
Growth of WLAs across India in 2019 has been remarkable,
9. Karnataka 1,029 4.8%
with major penetration in states like Tamil Nadu and Uttar
10 West Bengal 767 3.6%
Pradesh. From March 2018 to September 2019, the share of
Source: RBI and GT Analysis *As of Sep 2019
WLAs of players such as Vakrangee, Hitachi and BTI increased
consistently.

In terms of year-on-year growth, Vakrangee has witnessed a

massive growth of over 300% from March 2018 to 2019 (and
CAGR of 157.5% from 2017 to 2019) in its number of WLAs
across India. During the same period, Vakrangee added over
3,200 WLAs across India, followed by Hitachi, which added over
2,000 WLAs during the same period.

September March March December Change in the

2019 2019 2018 2017 number
of ATMs
(Mar ’18-Sep ’19)
Tata Communications – Indicash 8,352 8,231 8,446 8,380 -94
Vakrangee Limited 3,985 3,250 770 601 3,215
Hitachi Money Spot ATM 2,820 2,189 776 669 2,044
BTI Payments – India1 ATM 5,153 5,042 4,661 4,584 492
Muthoot Finance 222 220 215 211 7
Riddi Siddhi Bullions Limited 638 501 128 128 510
AGS Transact Technologies 74 74 199 223 -125

Source: NPCI, RBI and GT analysis

During March 2018 to March 2019, though the total number of ATMs across India decreased marginally from 2,06,871 to
2,02,196, the number of WLAs increased from 15,195 to 19,507 (addition of 4312 WLAs), a growth of 28%. The addition of
WLAs from March 2018 to March 2019 was majorly through players like Vakrangee, which contributed to 58% to the growth
of WLAs.

Financial inclusion in rural India: Banking and ATM sector in India | 45

ATM distribution
(Top 5 players)
Public sector banks

Name Number of Urban Semi-urban Rural Urban share Semi-urban Rural share
ATMs share
State Bank of India 58,567 27,907 19,931 10,729 48% 34% 18%
Bank of Baroda 13,153 7,586 3,025 2,542 58% 23% 19%
Punjab National Bank 8,985 5,018 1,933 2,034 56% 22% 23%
Canara Bank 8,801 4,645 2,657 1,499 53% 30% 17%
Union Bank of India 6,798 3,404 1,715 1,679 50% 25% 25%
Others 37,635 18,037 10,412 9,186 48% 28% 24%
Total 133,939 66,597 39,673 27,669 50% 30% 20%
Source: RBI and GT Analysis

Public sector banks have an expansive network of ATMs across areas (tier 5 and 6 cities). The low presence of PSU ATMs in rural
India. The major players are SBI, Bank of Baroda and Punjab localities can be attributed to the high costs and relatively low
National Bank. The total number of ATMs in this network is profitability of launching bank respective ATMs in these regions.
133,939 with majority of ATMs located in metropolitan and
urban centres. The presence of PSU ATMs in semi-urban and
rural India is trivial, with only 20% of all ATMs located in rural

Private sector banks

Name Number of Urban Semi-urban Rural Urban share Semi-urban Rural share
ATMs share
Axis (UTI) Bank Ltd. 17,315 11,061 4,349 1,905 64% 25% 11%
ICICI Bank Ltd. 15,159 11,868 2,531 760 78% 17% 5%
HDFC Bank Ltd. 13,514 9,302 3,149 1,063 69% 23% 8%
IDBI Bank 3,693 2,384 901 408 65% 24% 11%
IndusInd Bank Ltd. 2,662 2,254 325 83 85% 12% 3%
Others 17,348 9,981 5,689 1,678 58% 33% 10%
Total 69,691 46,850 16,944 5,897 67% 24% 9%
Source: RBI and GT Analysis

Private banks mainly focus their ATM operations in metropolitan to strive for profitability, are deterred by the low interchange
and urban cities. Combined, these regions represent 67% of fee and relatively low value and volume of transactions
the private bank ATM network across India. The major private combined with the high costs of operating in rural and semi-
banks with the largest presence in rural India are Axis, ICICI urban cities.
and HDFC. In total, only 9% of the private bank ATMs are
located in rural areas (tier 5 and 6 cities). Private banks, aiming

46 | Financial inclusion in rural India: Banking and ATM sector in India

WLA operators

Name Number of Urban Semi-urban Rural Urban share Semi-urban Rural share
ATMs share
Tata Indicash 8,352 2,357 2,214 3,781 28% 27% 45%
BTI Payments 5,204 552 2,041 2,611 11% 39% 50%
Vakrangee Limited 3,985 471 889 2,625 12% 22% 66%
Hitachi Payment 2,820 613 1,063 1,144 22% 38% 41%
Riddhi Siddhi Bullions 638 54 470 114 9% 74% 18%
Others 298 120 113 65 40% 38% 22%
Total 21,297 4,167 6,790 10,340 20% 31% 49%
Source: RBI and GT analysis

WLAOs, however, have designed their business models in view enterprises and non-banking companies such as Tata Indicash,
of needs and wants of customers in semi-urban and rural India, Vakrangee and BTI Payments are incentivised by the WLA
which is essentially their target market base. Of the 21,297 model.
WLAs present in India, 49% are located in rural areas (tier 5
and 6 cities). A further 32% are present in semi-urban centres, The ability to earn a commission on every transaction and
with only 20% of WLA deployed in urban and metropolitan further scale revenue through advertisements placements
cities. inside WLA premises is attractive for private players. The
convenience and ease associated with transactions at WLA
As stated previously, commercial banks, both private and premises pull demand from the rural consumer base and have
public, find it hard to penetrate rural regions as the cost of allowed WLAOs to create a marketplace amongst the rural
deploying ATMs does not resonate with the low value and populace.
volume of transactions relative to urban centres. Private

Rural share of public sector bank is 20% and private sector banks is 9%, but the rural share of WLAs is 49%. This indicates
that WLAs have a larger presence across rural India. Also, players like Vakrangee and BTI Payments have a major share of
66% and 50% respectively in rural WLAs.

Financial inclusion in rural India: Banking and ATM sector in India | 47

Case studies

48 | Financial Inclusion in Rural India: Banking and ATM sector in India

Vakrangee Ltd. (1/5)

Introduction Management and Board of

Vakrangee is one of the leading companies in India driving Directors experience
financial inclusion. With its unique technology-driven focus, it
is on course to build one of India’s largest networks of last-mile Mr. Ramesh Joshi is the company’s non-executive chairman.
retail outlets to deliver banking, e-governance, e-commerce, In his career sprawling over 40+ years, he has held several
WLAs, logistics and other services to the unserved rural, semi- leadership positions in the RBI and has been nominee director
urban and urban geographies. on behalf of the RBI on the Boards of various banks, and retired
as an executive director of SEBI. He is also on the Panel of
The company started its journey in 1990s by working with the Arbitrators for NSE, BSE and MCX.
central and state governments to record digitisation projects for
various departments. It then participated in the Aadhaar card Vakrangee’s management is led by Mr. Dinesh Nandwana
issuance initiative and worked as one of UIDAI’s largest partners (Executive Chairman and Group CEO), who has over 27 years
on the project. of experience and continues to drive the company’s overall
business strategy and operations since its inception. He also
In 2012, the company started opening kendras offering received the ‘CA Business Leader - SME (3rd Rank)’ award by
government-to-citizen services (G2C), gradually adding the Institute of Chartered Accountants of India in 1997.
several services in sectors such as banking, insurance and
e-commerce, amongst others. Dr Nishikant Hayatnagarkar (Director – R&D) has been part of
Vakrangee since 1994 and is responsible for the R&D initiatives
Vakrangee has undergone major transformation over the of the company. He is a pioneer in the field of microchip
last few years, improvising with not just its service offering designing. Over his career spanning four decades, he has led
but the entire customer transaction experience. It has gone the creation of various indigenous technologies solutions, such
from non-exclusive stores offering a limited range of services as voice-recognition system used in the telecom industry and
to an exclusive store with multitude services with an enviable multi-lingual keyboards, amongst others.
presence, especially in rural India.
Mr. Rajesh Bhojwani (CEO – WLA) and Mr. Sanjeet Mahajan
(CEO – BFSI) have two decades of experience in their
Company’s vision and mission respective areas, including key management positions, before
joining Vakrangee.
As per the company’s management, Vakrangee has a vision to:
• Become the most trustworthy physical as well as online The company is also backed by an experienced board of
convenience-store across India directors.
• Give every Indian access to a wide range of products and
services, which are fairly priced and of high quality
• Keep expanding network, until they are in close proximity to Strengths and capabilities
the last excluded person within the country
• A major player in e-governance solutions in the last 20 years
Also, the company has a stated mission to be “India’s No.1 • Strong in-house technology capability, from data
rural-centric retailer by offering innovative ideas and proven digitisation to technology management
modern technologies for facilitating universal financial & social • Good track record for delivering mission critical projects due
inclusion”. to strong on-ground execution capabilities
• Strong rural-focus promoting entrepreneurship
• Real-time technology integration
• Robust on-ground field presence, assisting franchisee
at block level (through block officers and relationship
managers)

Financial inclusion in rural India: Banking and ATM sector in India | 49

Vakrangee (2/5)

transactions, which the service provider has to establish over

Some of the key achievements and certifications for the a period of time.
company are as follows:
Hence, any company looking to make inroads in the rural
• Participation in key projects such as MCA 21, RSBY, Passport banking sector needs to have a strong omni-channel strategy
Seva Kendra, UIDAI to make a mark in this space. Vakrangee is one of the few
• Second largest Aadhaar enrolment agency in the country, companies that has managed to make an impact.
empaneled as T3F4 category service provider (highest
category)
• CMMI maturity level III certified organisation Vakrangee model and its
• Other certifications include ISO 27001, ISO:IEC 20000 advantages
Services offered Vakrangee has over the years developed a unique franchise
business opportunity, which taps rural entrepreneurs and
• Banking and financial service provides them with right technology platform and support to
• ATM offer a multitude of services efficiently and reliably.
• E-commerce
• E-governance In 2018, Vakrangee established the ‘Next Gen’ Vakrangee
• Insurance franchisee model, which includes ‘Vakrangee’ branded
• Logistics services exclusive physical stores. At these ‘Next Gen’ outlets, the
company has laid down strict norms to provide consumers with
a standardised in-store experience and exclusivity of services.
Challenges in rural India
Its outlets offer a bouquet of services, ranging from banking to
Indian bank and financial institutions face a number of
e-commerce to logistics, all under one roof. With the presence
challenges in providing financial services in rural India. Some of
of trained professionals in its centres, it helps develop the trust
these are highlighted below:
factor that is critical for people in rural India.

High cost of service delivery

Vakrangee outlets help address the problem of last-mile
• There is poor transportation infrastructure, leading to long
delivery by having a physical touchpoint for its services,
journey duration, inefficient transportation technology and
managed by its franchise partners. Also, multi-service offerings
inefficient routes, which add to the cost of transportation.
provide the franchisee with diversified sources of income. This
• Low population density in rural areas leads to time wastage
subsidises the high cost of delivery for banking services, thus
and also limits benefits of economies of scale.
improving unit economics of outlets.
• Low ticket size contributes significantly to high delivery cost.

Building trust and attracting customers

• Large population in rural India still lacks adequate levels
of financial literacy, a key deterrent in the adoption of a
number of financial products and services.
• There is lack of trust amongst customers in rural market
who still doubt the credibility of online services, especially
financial services.
• Despite rapid growth in rural internet penetration, internet
literacy still remains a challenge.
• There is preference for personal relationships over digital

50 | Financial inclusion in rural India: Banking and ATM sector in India

Vakrangee (3/5)

Some of the key advantages of Vakrangee’s Vakrangee provides banking services in partnership with the
model are as follows: following banks:
• Union Bank of India • Baroda Uttar Pradesh
Operating cost Vakrangee
• Bank Of Baroda Gramin Bank
Diversified Y Multiple services offered, including
revenue sources e-commerce, logistics, etc
• Bank of India • Baroda Rajasthan
• Punjab National Bank Kshetriya Gramin Bank
Store rental N Franchisee-owned store, hence no
need for rental • Allahabad Bank • Maharashtra Gramin Bank
• Rajasthan Marudhara • Baroda Gujarat Gramin
Store CAPEX Y CAPEX gets split across multiple
sources Gramin Bank Bank
Utilities cost Y -
• Kashi Gomti Samyut • Nainital Bank
(Electricity, Gramin Bank • Purvanchal Bank
internet, etc.)
Cash N Franchisee facilitates cash Basic Savings Bank Deposit Accounts (BSBDA) opened
management management, and no need of third- Vakrangee was one of the early movers to capitalise on the
party cash management services government’s vision of providing financial services to every
Security guard N ATM located inside store, hence no citizen within a radius of 5 km. A key contribution of Vakrangee
need of security guard
in this initiative was their participation in opening BSBDA and
Jan Dhan accounts as part of their BC service offering.

Vakrangee serving the Vakrangee presence and impact

financial inclusion goal in • Has over 12,000 BC touchpoints, of which, 82% are
situated in rural India.
rural India • In FY ’18, Vakrangee BCs opened 31.7% of all BSBDAs
opened by BCs in India.
Vakrangee has been at the forefront of driving the Indian • Banking and ATM throughput from Vakrangee network
government’s mission of financial and digital inclusion. It has for FY 2019 (till 31 December 2019) is INR 218 billion.
evolved from being a centre offering e-governance and bill
payment services to a complete financial services provider.

Over the years, Vakrangee has worked with 13 banks as

Vakrangee’s WLA
their BC, offering a wide range of banking services in the Vakrangee first opened its WLA in FY ’16, closing the year with
underserved markets. Currently, it has over 12,000 franchise 262 ATMs in its first year of operation. In the last two years, it
touchpoints offering banking services. Of these, 82% are has expanded aggressively and added over 3,200 ATMs, with
situated in rural India, where there is limited direct presence special focus on rural India.
of banks and other financial institutions. Also, since all Next
Gen outlets are exclusive physical stores, many of them meet Number of ATMs
the RBI’s eligibility criteria for being counted amongst bank
branches, a key consideration for banks in choosing corporate CAGR 97% 3,985
banking correspondent partners. 3,250

Number of BC points (by Tier) 9,854

770
262 371

814 1,385
FY'16F Y'17 FY'18F Y'19 FY'20 (till
Urban Semi-Urban Sep)
Rural
UrbanS emi-UrbanR ural Source: RBI data and GT analysis
Source: Company data- Vakrangee ltd. and GT analysis

Financial inclusion in rural India: Banking and ATM sector in India | 51

Vakrangee (4/5)

Vakrangee has developed a unique model, which has low

CAPEX and operating cost, making it financially viable to offer
ATM services in the remotest locations. Vakrangee’s performance

Vakrangee ATMs are located inside its Next Gen outlets, which  As on Sep ‘19 Count Total Rank Share %
count
does away with need for dedicated air conditioning and
security guards. The franchisee, who is also a BC, is responsible ATMs in India 3,985 227,886 13 2%
for cash refilling in these ATMs, whereas other players pay ATMs in rural India 33,645 3 6%
cash management companies for filling their ATMs. Also, ATMs ATMs by WLA in 10,340 2 25%
2,625
are a key footfall driver in these Next Gen outlets, allowing the rural India
franchisee to cross-sell other services, and thus subsidising its ATMs by public 27,669 2 NA
operating cost of ATMs. sector banks in rural
India
This model has been particularly successful in rural India, ATMs by private 5,89 1 NA
where the cost of offering last-mile services has been especially sector banks in rural
India
challenging for financial institutions. In a survey of over 3,500
outlets, it was found that 99.5% of Vakrangee ATMs were active, Source: RBI data and GT Analysis

which is an industry leading metric.

Vakrangee - Number of ATMs (by area) Future roadmap

Vakrangee outlets allow people to capitalise benefits of
financial inclusion and Digital India, apart from giving them
2,625 access to basic services at affordable cost to operators.

The company has aggressive growth plans, backed by keen

889 interest from potential franchisee. The management plans to
471
open 25,000 Next Gen outlets by close of financial year in
2020. Till December 2019, it had already opened 8,500 Next
Urban
UrbanS emi-UrbanR
Semi-Urban ural
Rural Gen outlets.
Source: RBI data and GT Analysis
Number of Next Gen outlets
Overall, Vakrangee is the 13th largest operator of ATMs in
India. In rural India, it is the 3rd largest player, behind only SBI
(10,729 ATMs) and Tata Indicash (3,781 ATMs) in rural India.
CAGR 144%
300,000
When compared to private sectors banks, it ranks over a
number of major banks such as Axis Bank (1,905 ATMs), HDFC
Bank (1,063 ATMs) and ICICI Bank (760 ATMs) in rural India.
8,500 25,000

FY’20 (till Dec) FY’20 (estimated) FY’25 (estimated)

Source: Company data- Vakrangee Ltd

It is the company’s grand vision to open Next Gen outlets in

all postal code in India by FY ’25, taking the total count to
300,000.

52 | Financial inclusion in rural India: Banking and ATM sector in India

Vakrangee (5/5)

Vakrangee state presence No. of ATMs Distribution of Share of Vakrangee to

Vakrangee ATMs WLAs in state

Rajasthan 1,109 28% 57%

Uttar Pradesh 906 23% 28%
Maharashtra 891 22% 34%
Madhya Pradesh 308 8% 26%
Punjab 102 3% 65%
Bihar 101 3% 6%
Gujarat 98 2% 31%
Chhattisgarh 93 2% 26%
Odisha 91 2% 20%
Haryana 84 2% 23%
Jharkhand 44 1% 16%
Delhi 41 1% 18%
West Bengal 38 1% 5%
Uttarakhand 30 1% 13%
Karnataka 24 1% 2%
Himachal Pradesh 9 0.20% 28%
Goa 8 0.20% 24%
Chandigarh 7 0.20% 78%
Kerala 1 0.00% 0%

Source: Company data- Vakrangee Ltd.

Vakrangee has added over 3,200 ATMs in the last two years, with focus on building capacity in Tier 5 and Tier 6 towns in India.
Of these, 61% are in Rajasthan and Uttar Pradesh, states which have high population and low ATM density. It is also a key WLA
player in places such as Maharashtra, Madhya Pradesh and Punjab.

An independent survey of over 3000 Vakrangee Next Gen outlets showcased the following:

For 52% of outlets, 99.5% of Vakrangee ATMs were Average number of ATM
ATM was the most utilised found to be operational transactions – 40-50/day
services during the survey

Financial inclusion in rural India: Banking and ATM sector in India | 53

BTI Payment Private
Limited

Introduction Mr. Sanjay Bajaj (CCO) is a Chartered Accountant with over

20 years of experience in the manufacturing industry. He has
BTI Payments is a company promoted by the BankTech Group, worked with companies such as Bharti Airtel and Williamson
Sydney, a financial services firm focused on providing payment Magor Group.
processing infrastructure, deployment of ATMs and PoS
Mr. Kumara Krishnan (Chief Sales and Marketing officer) is
terminals in India, Australia, Hong Kong, and Philippines.
a MBA graduate. He has over 19 years of experience in sales
BTI Payments entered the Indian market with an initial focus and has worked in companies such as Bharti Group and Tata
on PoS terminals and managing ATMs for banks before their Global Beverages.
foray into WLAs in 2013. With the RBI in principle authorisation
for operating as a WLAO, the BankTech Group roped in ICICI Challenges in rural India
Venture Fund Management Company Limited as an investor in
the company. BTI operates as a WLAO under the brand name • ATM services are not ‘core’ banking services for commercial
of India1ATM, with a focus on servicing the demand originating banks. The high costs associated with operating ATMs in tier
from rural India. 3-6 cities deter banks from expanding into these regions.
• The cost per transactions relative to the realisation per

Services offered transaction is usually loss making for commercial banks.

• The reduction in interchange fee from card issuing bank
BTI focuses largely on the WLA market in India. Through its WLA to the ATM service provider in 2012 and the incremental
brand ‘India1ATM’, it offers the following standard services to compliance costs have led to viability issues for ATM service
customers: providers.
• BCs, although pivotal in driving financial inclusion in India,
• Cash withdrawal are not well equipped to provide cash-out services. Hence,
• Balance enquiry they are not an ideal service provider to replace ATMs
• PIN change and the void must be filled by companies such as BTI that
• Mini-statements operate on the WLA business model.
• Aadhaar seeding  
• Card to card transfers
Bringing banking at the
Since the launch of their first WLA in 2014, BTI has become a
prominent player in the WLA industry in India. Today, BTI offers
doorstep
a network of close to 5,200 India1ATMs, with 89% of WLAs BTI Payments aims to address these problems and offer ATM
located in semi-urban and rural geographies. services to hitherto unbanked and underbanked individuals in
an affordable and accessible manner.
Management track record Today, close to 89% of BTI’s ATM network supports customers in
semi-urban and rural India, with a focus on tier 4, 5 and 6 cities.
BTI’s management is led by Mr. K Srinivas (MD and CEO),
BTI Payments installed ATMs in remote villages like Kirgavulu
a mechanical engineering graduate with a PGDM from a
in Mandya District (Karnataka) and Thally in Krishnagiri
prestigious management institute in India. He has over 30 years
district (TN) - areas that saw an ATM for the first time - thereby
of experience in companies such as Bharti Group, Britannia
eliminating the need to go several kilometers to reach the
and Hindustan Unilever.
nearest ATM.
Mr. Rajeev Desai (COO) is an electronics engineering graduate.
BTI’s exponential growth in deploying WLAs across India with
He has worked with large financial players such as Barclays
a special focus on semi-urban and rural India means that
(UK), Citibank and HSBC and ATM service providers like Prizm
today BTI is the 11th largest ATM provider in India with respect
Payments.
to WLAOs, private and public banks. Further, in rural India, BTI

54 | Financial inclusion in rural India: Banking and ATM sector in India

ranks 4th in deployment of ATMs, behind SBI, Tata Indicash and Tier-wise split of India1ATM, September 2019
Vakrangee.

WLAOs – Share of rural network

2611
2041
552
Others,
Hitachi, 179 Urban Semi-Urban Rural
UrbanS emi-UrbanR ural
1,144
Tata, Source: Company data- BTI Payment Services
3,781

BTI, 2,611

Vakrangee
, 2,625

Source: RBI

BTI state presence No. of ATMs Distribution of BTI ATMs Share of BTI to WLAs in
state

Tamil Nadu 1,400 27% 43%

Uttar Pradesh 927 18% 29%
Bihar 590 11% 37%
Andhra Pradesh 580 11% 43%
Karnataka 471 9% 46%
Telangana 395 8% 29%
Kerala 303 6% 72%
Maharashtra 213 4% 8%
Madhya Pradesh 205 4% 18%
Chhattisgarh 34 1% 10%
Pondicherry 33 1% 41%
Uttarakhand 26 0.50% 12%
Jharkhand 25 0.50% 9%
Gujarat 1 0.00% 0.30%
West Bengal 1 0.00% 0.10%

Source: Company data- BTI Payment Services

Of the 5,204 ATMs that BTI has, 27% are located in Tamil Nadu and 18% in Uttar Pradesh. It is also a key WLA player in places
such as Kerala, Karnataka, Tamil Nadu and Andhra Pradesh, where it has 72%, 46%, 43% and 43% share of all WLAs in the state
respectively.

Financial inclusion in rural India: Banking and ATM sector in India | 55

Fino

Introduction Strong investor backing

Fino is one of the niche entities in its space that has Fino is promoted by 24 public and private sector banks such
experience in providing technology-enabled banking services as ICICI Bank, ICICI Lombard, Indian Bank and Union Bank of
in unbanked and underbanked areas. It is the pioneer of India as well as insurance companies like the Life Insurance
biometrics technology enabled financial inclusion in India and Corporation of India (LIC). Bharat Petroleum is one of the
the operator of one of the world’s largest BC networks that largest investors and strategic partner of Fino. BPCL outlets act
facilitates access to banking services in remote areas across as Fino banking points.
the country.
Fino is led and managed by visionary individuals who excel
Fino’s approach is backed by strong distribution, technology in their respective fields. The management brings in extensive
and partnership strategy that makes banking simple, experience ranging between 13 and 20 years, many of whom
convenient and paperless. have held positions at reputable global organisations.

Fino provides assisted services using technology platforms Further, Fino’s board of directors comprises experienced
such as AePS, mPOS devices, micro ATMs, tablets and mobile, professionals from leading financial institutions such as
etc. The group also diversified into payments bank in 2017. the Blackstone Group, ICICI Bank, HAV3 Holdings and the
International Finance Corporation.
Company’s vision and mission
Challenges
As per the management, Fino has a vision to “catalyse nation
building by making every citizen financially secure”. The traditional banking correspondent model, considered to
be the potential solution for challenges faced by the banking
Further, Fino has a stated mission: “To become the preferred sector in rural India, has been met with only limited success.
bank for our customers by providing the simplest and the most This has been mainly due to the following:
accessible financial services to grow their wealth”.
• Low commission rates associated with the BC model, which
Services offered prevent BC operations from becoming sustainable.
• Cash management associated with the BC model makes it
Fino operates one of the largest BC networks in India. Through dependent on entrepreneurs with high cash liquidity.
its extensive agent network, Fino offers its customers a suite • Asset-light models focusing on remote banking via POS
of banking and insurance products as well as technical terminals are met with suspicion as the fraud rates
assistance and knowledge sharing. Fino offers the following associated with such services are high in rural areas.
services through its BC model:
Therefore, any company or individual looking to make inroads
• Account opening
in rural banking via the BC route must create an innovative
• Deposits
and secure business model, aiming to provide these banking
• AePS
services in an efficient, cost-effective and reliable manner.
• Insurance
• Gold loans referrals
• Money transfer
• Micro-ATMs
• Utility bill payments
Apart from the mentioned financial services and products, Fino
is an essential player in offering digital payments for national
highway tolls and also assisted e-commerce services.

56 | Financial inclusion in rural India: Banking and ATM sector in India

Business model Achievements and the road
Fino’s business model aims to provide branchless banking, ahead
through its in-house developed, low-cost technology solution for
customer acquisition, servicing and monitoring. Fino was started in 2006 and in the last 13 years, Fino has
brought banking close to over 100 million people from over
This asset-light and cost-effective model allows Fino’s retail 60,000 remote locations across India that previously had
agents to profitably dispense financial services to rural limited or no access to banking services. It manages over 180
consumers who are not serviced by commercial banks and million banking transactions annually, at an annual run rate of
traditional brick-and-mortar outlets. INR 150 billion.

Further, Fino ensures reliable and secure transactions through Fino’s contribution towards financial inclusion is well noticed
its BC network. Biometric smart card authentication along and appreciated by the banking community. In 2015, it was
with physical identification prevent customers from being among the 11 entities that received the RBI’s in-principle
susceptible to fraud, while still availing the benefits of low-cost, licence to start a payments bank, and received the final licence
doorstep banking. operate in March 2017. The group launched the Fino payments
bank in July 2017.
Fino’s focus on streamlining and innovating its backend
capabilities through its in-house technology solutions allows it As of December 2019, Fino has an extensive network of
to easily adjust its offering to the needs of the target market. 1,50,000 touchpoints offering banking services and has
Over the years, Fino has developed the following technology deployed over 85,000 micro-ATMs across the country.
platforms:

• Accounting and MIS systems: Fino builds and maintains

backend processing systems to facilitate and track
transactions at financial institutions.
• Point-of-transaction (PoT) terminals: These handheld devices
allow Fino agents and customers to conduct transactions
such as deposits, loans and payments remotely and cost-
effectively.
• Biometric smart cards: The smart cards are authentication
devices carried by customers and agents to ensure
transactions are secure on both sides.

Financial inclusion in rural India: Banking and ATM sector in India | 57

Acknowledgements

This report from Grant Thornton India LLP on financial inclusion in rural India was made possible with the support and
contributions of many individuals and organisations. Grant Thornton would like to gratefully acknowledge representatives of the
banks, non-banks and BC agents for providing insights from the ground and industry standpoints. Grant Thornton is thankful to
various departments of major companies such as Vakrangee, BTI payments and Fino for providing valuable insights, comments
and suggestions.

Grant Thornton would like to thank the ATM and banking heads, and the management of Vakrangee Limited:

• Mr. Sanjeet Mahajan (Head, BFSI), who joined in October 2017. He is responsible for building and running the banking,
insurance and retail and SME loans; mutual fund and other allied businesses at Vakrangee Ltd. Prior to joining Vakrangee, Mr.
Mahajan was associated with HDFC Bank for over two decades and served across multiple roles in his last assignment as a vice
president at HDFC Bank.
• Mr. Rajesh Bhojwani (Head, ATM), who joined as executive vice president and head the ATM vertical. He joined Vakrangee from
HDFC Bank Ltd., where he had worked in ATM, SME lending and retail branch banking divisions for over 12 years. His last
assignment at HDFC Bank was as Head–ATM Business Process.

Grant Thornton is grateful to BTI Payment Service’s management led by Mr. K Srinivas (MD and CEO). He has over 30 years of rich
working experience across the FMCG and Telecom sectors and in various companies such as Hindustan Unilever Limited, Britannia
and Bharti Airtel. Before joining BTI Payments in 2013, he was President–Consumer Business for Bharti Airtel Limited taking care of
Airtel’s mobile, fixed line, broadband, DTH and Airtel Money businesses for India and South Asia. He is also Director of CATMi (The
Confederation of ATM Industry), an industry body of ATM operators.

Finally, Grant Thornton would like to thank Fino payments bank management and Mr. Ashish Ahuja (Chief Business Officer). He
is responsible for developing innovative products and services for the Fino. He is also entrusted with the task of ensuring that
the bank’s products are accessible seamlessly across multiple platforms - digital as well as physical. Earlier, he successfully
managed Fino’s corporate business and retail initiative of Money Marts. Over the years, Mr. Ashish has represented Fino in multiple
businesses and government forums on financial inclusion, DBT and AEPS amongst others.

Grant Thornton India LLP

58 | Financial inclusion in rural India: Banking and ATM sector in India

List of abbreviations

AePs Aadhaar Enabled Payment System MIS Management Information System

ATM Automated Teller Machine NACH National Automated Clearing House
BC Business Correspondent NEFT National Electronic Fund Transfer
BF Business Facilitator NPCI National Payments Corporation of India
BHIM Bharat Interface for Money PCO Public Call Office
BSBDA Basic Saving Bank Deposit Account PFRDA Pension Fund Regulatory and Development
Authority of India
CIC Currency in Circulation
PMJDY Pradhan Mantri Jan Dhan Yojana
DBT Direct Benefit Transfer
POS Point of Sale
ECS Electronic Clearing Service
PPI Prepaid Payment Instruments
FDI Foreign Direct Investment
PSB Public Sector Bank
G2C Government to Citizen
PSU Public Sector Undertaking
GCC General Credit Card
RBI Reserve Bank of India
GDP Gross Domestic Product
RTGS Real-time Gross Settlement
GEAR Government E-payments Adoption Ranking
SCB Scheduled Commercial Bank
IMPS Immediate Payment Service
SEBI Securities and Exchange Board of India
INR Indian Rupee
SHGs Self Help Groups
IRDAI Insurance Regulatory and Development
Authority of India UID Unique Identification Number
JAM Jan Dhan Aadhaar Mobile UIDAI Unique Identification Authority of India
KCC Kisan Credit Card UPI Unified Payment Interface
KYC Know Your Customer USD United States Dollar
LBS Lead Bank Scheme USSD Unstructured Supplementary Service Data
MFI Micro Finance Institutions WLA White Label ATM
MGNREGA Mahatma Gandhi National Rural Employment WLAO White Label ATM Operator
Guarantee Act

Financial inclusion in rural India: Banking and ATM sector in India | 59

List of sources

Data Source Link

Adults with an Account The Global Findex https://globalfindex.worldbank.org/sites/globalfindex/

Database, 2017 files/2018-04/2017%20Findex%20full%20report_0.pdf
Average banked population in developing The world bank https://www.worldbank.org/en/news/press-release/2018/04/19/financial-
and developed economies inclusion-on-the-rise-but-gaps-remain-global-findex-database-shows
Regional overview of FI The Global Findex https://globalfindex.worldbank.org/sites/globalfindex/
Database, 2017 files/2018-04/2017%20Findex%20full%20report_0.pdf
Adults without an Account The Global Findex https://globalfindex.worldbank.org/sites/globalfindex/
Database, 2017 files/2018-04/2017%20Findex%20full%20report_0.pdf
Snapshot of FI in India The World Bank https://databank.worldbank.org/source/global-financial-inclusion
Database
FI vs. GDP / Capita in India The World Bank https://databank.worldbank.org/source/global-financial-inclusion
Database
Indian Population (Country and State level) Population census 2011 http://censusindia.gov.in/Tables_Published/A-Series/pca_main.html
Accounts opened under PMJDY PMJDY website https://pmjdy.gov.in/account
Growth in deposits under PMJDY PMJDY website https://pmjdy.gov.in/account
Rupay debit cards issued NPCI https://www.npci.org.in/statistics
PMJDY Features PMJDY website https://pmjdy.gov.in/account
DBT Features and Progress DBT website https://dbtbharat.gov.in/
AePS Ministry of Electronics https://meity.dashboard.nic.in/DashboardF.aspx
and Information
Technology
BHIM-UPI Progress NPCI https://www.npci.org.in/statistics
Indian Banking Sector Snapshot EMIS Indian Banking
Sector Report
Rise in Bank Branches Reserve Bank of India https://dbie.rbi.org.in/DBIE/dbie.rbi?site=publications
Database
Spectrum of Financial Services Providers Reserve Bank of India
Database
Total ATMs across India Reserve Bank of India https://dbie.rbi.org.in/DBIE/dbie.rbi?site=publications
Database
Share of Bank Branches per SCB Reserve Bank of India https://dbie.rbi.org.in/DBIE/dbie.rbi?site=publications
Database
Number of ATMs by population Reserve Bank of India https://m.rbi.org.in/Scripts/StateRegionATMView.aspx
Database
ATM and Branch density Reserve Bank of https://dbie.rbi.org.in/DBIE/dbie.rbi?site=publications
India Database and
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Total Deposits by bank type and deposit Reserve Bank of India https://www.rbi.org.in/Scripts/QuarterlyPublications.
type Database aspx?head=Quarterly%20Statistics%20on%20Deposits%20and%20
Credit%20of%20Scheduled%20Commercial%20Banks
Total Deposits in India SCBs Reserve Bank of India https://www.rbi.org.in/Scripts/QuarterlyPublications.
Database aspx?head=Quarterly%20Statistics%20on%20Deposits%20and%20
Credit%20of%20Scheduled%20Commercial%20Banks

60 | Financial inclusion in rural India: Banking and ATM sector in India

Data Source Link

Transaction Value for ATM, Debit and Credit Reserve Bank of India https://www.rbi.org.in/scripts/ATMView.aspx?atmid=85
cards Database
Currency in circulation CEIC, GoI
Cost of Cash study in 2016
Payment systems share of value Reserve Bank of India https://www.rbi.org.in/scripts/paymentsystems.aspx
Database
Growth in non-cash payments
Global Digital Payments Adoption Digital Payments 2019, https://www.statista.com/outlook/296/100/digital-payments/worldwide
STATISTA
Digital Payments per Capita (India) Government E-Payment https://currentaffairs.gktoday.in/tags/government-e-payments-adoption-
Adoption Ranking 2018 ranking
Progress of different digital payment NPCI https://www.npci.org.in/statistics
systems in India
Number of Business Correspondents in Reserve Bank of India https://m.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2598
India Database
Share of BSBDA Opened Reserve Bank of India https://www.rbi.org.in/scripts/PublicationsView.aspx?id=18969
Database
Number of WLAs in India NPCI & RBI Database https://www.npci.org.in/product-statistics/nfs-product-statistics-0
Region and State wise deployment of WLAs NPCI & RBI Database https://m.rbi.org.in/Scripts/StateRegionATMView.aspx
Distribution of ATMs by Bank Type Reserve Bank of India https://www.rbi.org.in/Scripts/ATMView.aspx
Database
Vakrangee Case Study Vakrangee Company
Data
BTI Payments BTI Company Data
FINO case Study FINO Company Data
RBI must insure a healthy CICO Report of the Committee
on Deepening of Digital
Payments, chaired by
Nandan Nilekani

Financial inclusion in rural India: Banking and ATM sector in India | 61

About Grant Thornton
in India
Grant Thornton in India is a member of Grant Thornton International Ltd. It has 4,500+ people across 15 offices around the
country, including major metros. Grant Thornton in India is at the forefront of helping reshape the values in our profession
and in the process help shape a more vibrant Indian economy. Grant Thornton in India aims to be the most promoted firm in
providing robust compliance services to dynamic Indian global companies, and to help them navigate the challenges of growth
as they globalise. Firm’s proactive teams, led by accessible and approachable partners, use insights, experience and instinct to
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people

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15 offices in New Delhi
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One of the largest Gurgaon Noida

fully integrated
Assurance, Tax &
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62 | Financial inclusion in rural India: Banking and ATM sector in India

Contributors

Authors For media queries, please contact

Sonika Pruthi Gupta  Spriha Jayati

Associate Director E: [email protected]
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