BANKING SECTOR AND MICROFINANCE IN INDIA

India's growing economy has rapidly attracted global attention. Amidst the euphoria, an area gaining increasing policy attention is the inclusive growth across population segments. In turn, one of the key drivers for such growth is a welldeveloped and inclusive financial system. A scan of the recent speeches by key policy actors such as the Finance Minister, Governor of the Reserve Bank of India and Chairman of NABARD reveals the consistent mention of microfinance as one of the focus areas towards promotion of inclusive financial systems in India. In 2004, Mr. Vinod Khosla, a venture capitalist, called it 'one of the most important economic phenomena since the advent of Capitalism and Adam Smith' and used an Indian Microfinance organization; SHARE to illustrate its potential to impact lives. SHARE, then an MFI with 0.2 million clients and approximately USD 19 million in portfolio size, has evolved into a financial institution with more than 10 million clients and USD 91.7 million (INR 3.9 billion) in portfolio by March 2007. In addition, it managed to attract an external equity infusion of USD 27.5 million (INR 1.1 billion) in 2007. SHARE's exceptional growth that started from being an NGO in 1992 to the financial institution that it is today is representative of the larger evolution of Indian microfinance. Today, Indian microfinance has evolved into an ecosystem with massive outreach and impacts, diversity in approaches, increasingly mainstream terminologies and financial instruments, acknowledged by policy makers and wooed by commercial financial actors. It is observed in great detail and debated with passion by economists, business men, regulators and development workers alike. While the expectations placed on microfinance by each of the above actors vary and are at times conflicting, all of them are interested in the status of Indian microfinance, its potential and challenges. This article is an attempt to map the Indian microfinance landscape, with specific focus on opportunities for IT.

India Banking Sector India Banking sector is considered still hugely under developed and with great growth potential.

As per Dr. K.C. Chakrabarty, Deputy Governor of RBI (August 2009), in India only 28.3 percent of people having annual income less than Rs.50, 000 (USD 1100) had bank accounts, with just 13 percent availing loans. He pressed that the above facts underscore the urgent need for extending the banking and financial services to every part of the country for achieving the objective of providing access to affordable banking services to every person. Indias Banking sector is profitable just by focusing on the middle class and affluent markets.

A per IFC Word Bank (2007), it is a Great opportunity for India Banking sector to expand outside of traditional middle class and affluent market segments. Microfinance in India

Key Trends Shaping its Future Course Blurring Boundaries, Changing Transaction Sizes: Redefining Micro Development Initiatives Becoming Social Businesses Diversification & Linkages in Search of Value Creation Opportunities Reaching Out to the Unreached: Moving Beyond Rural and 'South

Technology has implications for growth, standardization, transparency and risk management Can standardize processes, create efficiencies, and help reduce transactions costs associated with servicing millions of lowincome clients. Can assist with managing and mitigating risks such as fraud and mistakes on account of manual transactions. Sector level technology infrastructure like a credit bureau, can help track multiple financing of clients and foresee the probability of defaults and systemic failures. Costreducing technologies encourage commercial players that have historically shied away from serving lowincome clients to engage with MFIs.