provide a large and growing source of deposits for banks. banks that are ahead of the curve in establishing a presence in the vast hinterland of the country will have a first mover advantage in exploiting this potentially huge opportunity. second, there is the opportunity of capturing remittances. although there are no firm figures, i have been told that thousands of crores of rupees of remittances take place across the country today, predominantly from migrant labour, and over ninety per cent of this happens through non - formal channels. if banks can capture even half of this into their fold, they will not only reduce costs for the labour making remittances but they will also have the advantage of an enormous, permanent float. 33. third, ebt, the electronic benefit transfer, is another big opportunity. i believe banks are inhibited about pushing this forward because of the fear of the unknown : they are not certain that the business can be cost - effective. banks are clearly underestimating the potential. if indeed, all or even most government payments to rural people are captured through the ebt mode, this again can give banks a large float and make it an attractive business proposition. so far there has been a sharing of the costs between banks and state governments with regard to ebt. as ebt mode expands and becomes universal, banks will find that this is a viable business model even without any service charges. 34. it is also relevant here to acknowledge the potential of the unique identification number ( uid ) that nandan nilekani and his team are working on. the uid will be a powerful instrumentality for helping poor people establish their identity to meet the banks ’ kyc norms. i believe, this is going to reduce cash and non - cash transaction costs both to the banks and to the potential customers. the uid is another powerful illustration of harnessing technology to the benefit of the poor. 163 / 2009 35. the reserve bank has made a commitment to bank - led model of financial inclusion and will support banks in their financial inclusion initiatives by way of information dissemination, sharing of best practices and also through regulatory incentives. however, i want to add that our commitment to a bank led model is not irrevocable. there are other models of financial inclusion that are being experimented elsewhere in the world. should banks fail to come forward and exploit this opportunity of financial inclusion, the reserve bank will not hesitate to explore other models of furthering financial inclusion

that listening to the participants at the workshop was an enormously rich learning experience. the big take away from that workshop, for the reserve bank as an institution and for me personally, was that even as there are problems to extending financial inclusion, these are not insurmountable. if the reserve bank and the commercial banks put their minds, and more importantly their hearts, together these problems can be resolved. 28. according to what we heard at the workshop, the three big challenges are : ( i ) cost ; ( ii ) lack of robust technology ; and ( iii ) lack of awareness. some of these challenges are clearly being exaggerated and others can be easily redressed. 29. cost, of course, is the main consideration. it is nobody ’ s case that each of the over 500, 000 villages in the country can each be covered through a brick and mortar branch. that is clearly not a “ bankable ” proposition. we need to go through the low cost business correspondent model and leverage technology to deliver financial services. 30. the reserve bank has encouraged banks to use it - enabled financial inclusion by leveraging on the smart cards / mobile technology. business correspondents of banks are making extensive use of hand held devices / mobile phones to reach banking services to remote villages, and especially for electronic benefits transfer of nrega wages and social security payments. this has been very successful in andhra pradesh, and a state - wide project has recently been kicked - off in orissa. in addition, pilot projects are underway in most states of the country. 31. as a village - to - village robust electronic remittance system is presently not available in the country, it can be enabled by building suitable infrastructure to connect the systems of various banks which are presently involved in electronic benefit transfer ( ebt ) through the medium of business correspondents. a robust switch similar to the national financial switch ( nfs ) located for the purpose in the national payments corporation of india / institute for development research in banking technology may fulfil a long felt requirement of a nationwide remittance system for the country. this will make the remittance system more efficient, and therefore, more attractive. 32. i also want to emphasize that there is tremendous opportunity on the way forward for reducing costs by increasing volumes. let me elaborate a bit. first, there is the demographic profile – the labour force in the 15 – 64 age group is going to increase. as job opportunities grow and these people start earning, their incomes