It is well established that well developed and inclusive financial systems are associated with more rapid growth and better income distribution. Finance helps the rural poor to catch up with the rest of the economy as it grows. It also extends the range of Individuals, households, firms that can get a foothold in the modern economy and thus reduce damaging concentrations of economic power. There is now a greater sense of appreciation of "Empowerment" dimension of finance to the extent it can give ordinary people and poor an access to opportunity and ability to escape conservative social structure.
Since the inception of 5 year Plans concept of growth in India, successive governments have emphasized the link between improving access to finance and reducing poverty. Access to finance to the rural poor has improved somewhat over the past decades, with the PSBs being the dominant players in the rural finance. Govt. Policy of insisting the SCBs for opening compulsorily rural branches has certainly helped banking outreach.
But vast majority of India's rural poor still does not have access to formal finance. It is observed that the rural banks generally cater to the needs of richer rural borrowers whereas the rural poor face a lot of difficulties in accessing the formal financial services like Savings Money Transfer, Credit and Insurance etc.
Lack of access to adequate funds on reasonable terms to India's rural poor may be attributed to.
- Uncertainty about the repaying capacity of the rural borrowers due to their irregular and volatile Income streams and unexpected expenditure patterns
- Transaction costs of rural lending in India are high due to small size of loans, high frequency of transactions and wide spread illiteracy
- Govt. policy of waiver of rural debts has lead to a financial environment which is not conducive from the banker's perspective to lending in general and rural lending in particular
- High SLR and CRR imposed on banks also leads to curtailing of available scarce resources for private sector lending.
Also rural poor find opening an account with a Bank unattractive because of cumbersome procedure they have to follow for availing a Bank loan. In a Govt. study, it is observed that on average it takes about 33 weeks for a rural poor to avail a loan from a Bank. Also Banks demand collateral which rural borrowers lack.
In order to mitigate all the difficulties enumerated in the foregoing paragraphs, new strategies and new products are being introduced by various Banks/financial institutions at Govt. stance as well as on their own. These are SHGs, MFIs, KCCS etc. and more recently -the Smart cards and biometrics.
Banks can use technology to reduce their transaction costs and also help in empowerment of rural poor by enabling them to carry their credit history in their own hands through the use of - Krishak Smart Cards. This SMART CARD is a product of D2K Technologies India Pvt. Ltd.
A smart card resembles a credit card in size and shape, but inside it is completely different. First of all, it has an inside - a normal credit card is a simple piece of plastic. The inside of a smart card usually contains an embedded microprocessor . The microprocessor is under a gold contact pad on one side of the card. Think of the microprocessor as replacing the usual magnetic stripe on a credit card or debit card.
Smart cards are much more popular in Europe than in the United States. In Europe, the health insurance and banking industries use smart cards extensively. Every German citizen has a smart card for health insurance. Even though smart cards have been around in their modern form for at least a decade, they are just starting to take off in the United States.
Magnetic stripe technology remains in wide use in the United States. However, the data on the stripe can easily be read, written, deleted or changed with off-the-shelf equipment. Therefore, the stripe is really not the best place to store sensitive information. To protect the consumer, businesses in the U.S. have invested in extensive online mainframe-based computer networks for verification and processing. In Europe, such an infrastructure did not develop-instead, the card carries the intelligence.
The microprocessor on the smart card is there for security. The host computer and card reader actually "talk" to the microprocessor. The microprocessor enforces access to the data on the card. If the host computer read and wrote the smart card's random access memory (RAM), it would be no different than a dislette.
Smarts cards may have up to 8 kilobytes of RAM, 346 kilobytes of ROM, 256 kilobytes of programmable ROM, and a 16-bit microprocessor. The smart card uses a serial interface and receives its power from external sources like a card reader. The processor uses a limited instruction set for applications such as cryptography