True development of a Nation can be realized only through its formal banking system .How can the Nation progress if millions of its citizens are left out (Financially Excluded) from the formal banking system.

In India the bare minimum financial inclusion means a savings bank account for all. In developed countries it means access to insurance, home loans and other types of loans, pension and money transfers.

What are small banks?

Small banks are smaller in size than commercial banks. They are much smaller in operations. Just like commercial banks these small banks accept deposits from you and also sanction you a loan.

Small banks focus mainly on basic banking products. They offer the bare minimum banking services to the financially excluded. (People in rural areas who have no access to banks).

They do lend (Give loans).These loans are of a smaller quantum (Most of the loans under INR 25 Lakhs). These loans are smaller in size as people in rural areas do not need a large amount of loan).

These banks focus on the rural segment (As people in these areas are financially excluded by the larger banks).They do not deal with sophisticated or exotic products like demat accounts and derivatives.

These small banks focus on agriculture, small scale industries and micro credit.

(Financial services such as savings bank accounts for the poor in rural areas).

How do small banks service so many people with so few staff?

The answer is technology. With technology a lot of work can be done with less number of people. (Keep it Small and Simple).

Extensive use of technology also reduces operational costs. Rural customers may be issued smart cards which work on mobiles. Easy transactions and rapid up gradation of account details mean a very high efficiency.

The use of high technology means even people in remote locations can be reached. No longer does location become a hindrance.

Some of the salient features of small banks:

Around 75% of the lending by small banks is in the priority sector such as agriculture and small industries.

Lending is in rural areas means most of the loans will have a quantum of loan less than INR 25 Lakhs.

Individuals and Banking and financial services Companies (NBFC’s ,Micro Finance Companies with over 10 years of experience ) mainly those serious about lending in the rural sector (Agriculture and small industries) apply for a small bank license.

True development of a Nation can be realized only through its formal banking system .How can the Nation progress if millions of its citizens are left out (Financially Excluded) from the formal banking system.

In India the bare minimum financial inclusion means a savings bank account for all. In developed countries it means access to insurance, home loans and other types of loans, pension and money transfers.Why financial inclusion?

Financial inclusion starts at the bottom “The poor people in rural areas who do not have access to the formal banking systems.

These people are ripe for exploitation by money lenders and the informal lending system.
This means financial inclusion is very necessary to save people in the rural areas from the clutches of these money lenders.

People in rural areas can avail the benefits of a formal banking system only if they are aware of it.

This means it is very necessary for people in the rural areas to know about the formal banking system and avail its benefits.