Huge untapped potential exists in the 'rurban' market: Report

NEW DELHI: To boost their business, banks and insurers need to partner with mobile operators, FMCG firms and the postal department to reach out to millions of Indians, especially those belonging to 2,500 towns which were earlier classified as large villages, a CII-PwC report today said.

"Massive urbanisation will result in the increase in disposable income from Rs 40,000 in 2010 to Rs 78,000 by 2016. This is likely to result in higher consumption and need for financial products in order to enhance savings and investments," the report said.

"Banks and other financial services providers will need to partner with technology service providers, mobile operators, FMCG companies, postal department, or identify other alliances which could work out a viable revenue-sharing model," it said.

The survey found that multiple roadblocks exist in these 'rurban' areas -- towns recently classified as urban -- in terms of inadequate infrastructure, low levels of financial literacy and lack of strong distribution channels.

"Financial providers do not seem to identify any viable opportunities from tapping these markets, given the cost of reaching the rural areas," it said.

"Financial inclusion is a huge project and cannot be undertaken by a single provider. Partnerships and alliances are necessary in order to collaborate and seek answers to reach the unbanked," Associate Director at PwC India Gaurav Dev Burman said.

Currently, Indian banks are required to give 40 per cent of their loans to weaker sections of society and farmers, among others.

The report suggests that cohesion of the government, regulator and industry players is required to bear the torch of financial inclusion.

Besides, industry players need to understand the nuances related to consumer behaviour in these regions to align their needs and preferences (income, consumption and risk patterns) with product development.

Going forward, the report points out that the industry needs to have a relook at its distribution channels, product design, technology mix, awareness programmes for investors and service initiatives among other things to increase penetration and business as a whole.