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Financial inclusion: The last mile challenges

Published: 30th Mar, 2021

Over dependency on Digital technology has weakened the financial inclusion in rural India.


Over dependency on Digital technology has weakened the financial inclusion in rural India.


  • Financial Inclusion and the Evolving Scenario - India has developed its financial ecosystem to increase the last-mile connectivity of financial services to its people with only the intent to provide the underprivileged and marginalised access to financial resources to improve their lives.
  • Financial Inclusion in rural India – Direct benefit transfer synonymous with the Aadhaar Payments Bridge Systems (APBS) is used in rural India for various government programmes such as maternity entitlements, student scholarships, wages for MGNREGA workers
  • Coverage – According to research, only 16% of rural users access the Internet for financial transactions due to lack of electricity and poor network quality.
  • Last-mile challenges - Majority of the rural population faces digital problem due to a lack of technical knowledge and nexus of service providers, intermediaries, government officials, and others. Thus facing many hurdles in accessing their money.


What are the implications?

  • Lack of Financial literacy- Workers have little or no clue about where their wages have been credited and what to do when their payments get rejected.
  • Lack of accountability – When the payment gets rejected they have no idea who is accountable for the repayment.
  • Absence of grievance redressal - Due to technical reasons such as incorrect account numbers and incorrect Aadhaar mapping with bank accounts there is no one to address their grievances for APBS and AePS and that would continue to impact all DBT programmes.
  • Lack of adequate checks and balances - Absence of any accountability framework for payment intermediaries that have made the already vulnerable at higher risk of being duped.
  • Lack of infrastructure- Lack of infrastructure can simply mean distance to a formal banking outlet and in rural and semi-urban centres it is a hindrance for both consumers and financial institutions.
  • Corruption – This gave rise to a new form of corruption just like the massive scholarship scam in Jharkhand, where many poor students were deprived of their scholarships owing to a nexus of middlemen, government officials, banking correspondents and others.

Case study: To understand some-last mile challenges, LibTech India Surveyed nearly 2,000 MGNREGA workers across Andhra Pradesh, Jharkhand, and Rajasthan.

What were the Outcomes of the survey?

The survey attempted to understand the experiences of workers in obtaining wages in hand after they were credited to their bank accounts.

  • Rural banks are short-staffed and tend to get overcrowded therefore 45 per cent of workers had to make multiple visits to the bank for their last transaction.
  • An estimate 40 per cent of the workers had to make multiple visits to withdraw from CSPs/BCs due to biometric failures which sometimes cause loss of day’s wages.
  • More than two-thirds of the time workers were denied the facility to update their passbooks at banks. Some workers get charged for transacting at CSPs/BCs which is meant to be free.
  • However, branch expansion into rural unbanked locations significantly reduced poverty and with technological advances, the costs of running rural banks will also be lower.

What are the Government measures?

  • Service Points (CSP) and Banking Correspondents (BC) – This is promoted in rural areas as they are private individuals who offer banking services through the Aadhaar Enabled Payment Systems (AePS) and Subject to network connectivity and electricity, beneficiaries can perform basic banking transactions such as small deposits and withdrawals at these kiosks.
  • Optical Fibre Network (NOF-N)–National Optical Fibre Network (NOFN) is an ambitious initiative to trigger a broadband revolution in rural areas by connecting 2.5 lakh gram panchayat.
  • Unnati ­– An initiative of Hindustan Petroleum Corporation Limited (HPCL) which strives to provide Computer education in the schools of rural students with poor economic and social background.
  • Pradhan Mantri Gramin Digital SakshartaAbhiyan (PMGDISHA)–It is the scheme to make six crore persons in rural areas, across States/UTs, digitally literate, reaching around 40%of rural households
  • E-pathshala - Providing study materials online for every rural and urban student.
  • Inclusion of regional language- The Government’s digital payment services like Unified Payments Interface (UPI) and Rupay has been enabling digital inclusion on a large scale by offering easy and secure payment options using various Indian languages.

Way Forward

  • Returning to basics - Rights of the marginalised must attain primacy over technological quick fixes.
  • Transparency - The right to access your own money in a timely and transparent manner should be the priority.
  • Accountability - The rights of the marginalised must be protected through strengthening grievance redressal processes and setting accountability norms for all payment intermediaries.
  • E-Governance -A technological intervention must have a governance framework in which more choices can be provided to the marginalised.
  • Inclusion of digital Literacy – An increase in digital literacy in a rural area can improve the overall usability of digital banking.


There has to be a multidimensional approach through which existing digital platforms, infrastructure, human resources, and policy frameworks are strengthened. More importantly, human resources should be leveraged by skilling and positively engaging with them to achieve the last-mile connectivity of financial institutions.

However, if corrective measures are taken to tide over the existing problems, interventions, such as Digital India, have the potential to amplify the benefits of economic growth to the poor. Not only will it reduce the costs for the financial institutions, but it would also address safety concerns and the accuracy of the data involved in financial transactions.

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