India’s Financial Inclusion Scheme Can Bring Unorganized Remittances Under Banking Channels
Wednesday, October 15, 2014
MUMBAI: Shardul Majid, a 28-year old construction worker in Mumbai, has a side business that earns him about Rs 20,000 extra every month. Many of his fellow villagers from Bengal are in Mumbai, working in the construction field and as domestic helps, watchmen and roadside vendors. Majid helps them send money back home. He collects the money and deposits it in the bank accounts his relatives have in Bengal. “My relatives withdraw the money from the home branch in my village and deliver it to the beneficiaries,” he says.
This informal remittance service isn’t illegal, but it’s costly. Sending money through formal banking channels costs 0.25% to 1.5% of the transferred amount; Majid charges as much as 10%. His customers aren’t complaining though — they don’t have access to banks and so there are few faster ways to send money to their near and dear ones, and most of them are ignorant about formal financial services.
Prime Minister Narendra Modi has recently announced a financial inclusion programme, the Pradhan Mantri Jan Dhan Yojana, which aims to provide every household with access to banking services. Successful financial inclusion efforts will substantially mitigate problems over money remittances by those working in unorganised sectors with no access to banks, says KC Chakrabarty, a former deputy governor of the Reserve Bank of India. “All stakeholders need to make earnest efforts in this direction.”