HR Khan, Deputy Governor or the Reserve Bank of India, encouraged banks to develop better strategies to tap into the base of the pyramid market in India. Speaking at at FICCI-IBA confernece in August, Mr. Khan explained that mobile banking and Aadhaar enabled payment systems will not only expand financial inclusion but also generate value for banks. Mr. Khan promoted electronic payment systems over cheque payments and discussed the benefits of making mobile network operators business correspondents so as ot increase banking coverage. With 145 million households virtually excluded from the formal financial system and the internet commerce industry rapidly growing, it is an opportune time for banks to expand their reach both geographically and to a wider population.

Addressing the FICCI-IBA Conference on Global Banking, HR Khan, Deputy Governor of Reserve Bank of India said that financial inclusion should be seen not only as a social responsibility but also as a potential business model because of the huge untapped market that it seeks to bring into the fold of banking services.

Highlighting that India has the highest number of households (approximately 145 million) who are excluded from banking, he asked banks to devise appropriate strategies for tapping the banking value that is represented by these large number of households at the bottom of the pyramid.

Mr. Khan discussed financial inclusion enablers such as mobile banking, Aadhaar enabled payment systems, liberalisation of BC guidelines etc, which when deployed with a sound business plan can generate value not only to the customers but also to the banks.

Drawing attention to the recent RBI issued “Operational Guidelines on implementation of Electronic Benefit Transfer (EBT) and its convergence with Financial Inclusion Plan (FIP)”, he said that these guidelines are expected to give a fillip to financial inclusion efforts and lead to a scalable and sustainable financial inclusion model.

As a part of the e-governance initiative to move towards a paperless funds transfer system, Union Finance Ministry has advised all state owned banks and financial institutions to make payments only through electronic transfers and not through cheques from 1st September 2011.

Further, the Deputy Governor expressed hope that the liberalized Business Correspondent (BC) guidelines which allows Mobile Network Operators to become BCs, will result in expansion of the banking coverage and along with technology provide a sustainable ecosystem for the unbanked and financially excluded segments of the population to be part of formal banking network.

In Mr. Khan’s opinion, Aadhaar which will provide a unique identification valid through the country when integrated with payment system application has the potential to shape the payment system future in the country. “The unique identity number (Aadhaar) is poised to be an important driver of financial inclusion initiatives”, he said.

He discussed about the Aadhaar enabled payment system (AEPS) which is a bank led model that allows online financial inclusion transaction at PoS (MicroATM using handheld device) through the business correspondent of a bank using the Aadhaar authentication.

At present AEPS service can be availed by customers at their respective bank business correspondent outlets. AEPS will support four types of banking services viz. balance enquiry, cash withdrawal, cash deposit and Aadhaar to Aadhaar funds transfers. UIDAI along with NPCI has piloted Aadhaar enabled Payment System in Jharkhand.

As per the report on the E-commerce released by the Internet and mobile Association of India (IAMAI), the internet commerce industry in India is expected to INR 46,520 crores by end of 2011. “Banks and payment system operators could leverage on the huge potential of e-commerce and m-commerce”, he said.