According to a recent press report, Mr. Anand Sinha, Deputy Governor, Reserve Bank of India has said that the transaction costs of financial services to the poor are ‘exceedingly large’ in comparison to their revenue generation potential in the short term.
Mr. Sinha said the existing banking business model was not able to adequately address challenges like high transaction costs. He also said that more than 50 per cent of adult population was still excluded from the financial sector, including many of the lower income categories of urban population. He added saying that the condition was due to the way in which supply of financial services is organised.
He added saying that the use of technology in banking, the Deputy Governor said mobile banking is the hottest area of development in the banking sector and was expected to complement and, to an extent, replace the credit/debit card system in future. He said that the use of technology till now was mainly focused on transaction processing, data storage, service delivery.
The RBI’s recent hike in the base rates is unexpected and is certain to increase the lending rates of Home loan, personal loan, business loan and other loans of most of the banks.