Sales & Distribution of financial products in Rural India

Vijay r Chari Section B

Introduction Financial services are the services provided by the finance industry which encompasses

manage broad range of the business that to manage money, credit union, insurance, loan etc.

Services and products provided to consumers and businesses by financial institutions such as

banks, insurance companies, brokerage firms, and investment companies all of which

comprise the financial services industry. In the past, traditional financial products were

offered in India through government initiatives by Public Sector Banks (PSBs) (deposit

account, credit account), Life Insurance Corporation (LIC), and postal department (recurring

deposit, National Saving Certificate, Kisan Vikas Patra). However, in recent years with the

advent of liberalization of financial services industry, diverse financial products have been

introduced through participation of private and foreign entities in addition to the public sector

enterprises. These include products such as debit and credit cards by banks, open-end and

closed-end mutual fund schemes (Exchange Traded Funds (ETFs), Index Funds, Systematic

Investment Plans (SIP). Insurance, and pension scheme contributing 3.2 to GDP with

consistent year 2014 to 2016. The introduction of varied products has increased the scope of

the financial sector to a very large extent. Even though these products have been targeted

towards urban markets as well as rural markets in India, the rural markets have remained

largely untapped.

Approach adopted by major financial service providers/intermediaries

Banks/NBFC

The sales and distribution strategies of banks are different in urban and rural areas due to

diverse demographic and socio-economic nature of these markets. Private banks are mostly

concentrated in urban areas due to higher income, better infrastructure, higher investor base

and concentration of commercial activities in the urban areas of the country. The distribution

channels used by such banks include bank branches, ATMs, internet banking, phone banking,

direct selling agents, call centres, etc. The distribution networks developed by public banks in

urban as well as rural areas are a result of policy measures due to which the number of public

sector bank branches is higher as compared to private or foreign banks. Private sector banks

are also penetrating into the rural areas by using the non-branch delivery systems like the

Business Facilitator (BF) model or Business Correspondent (BC) model. This model help

bank and NBFC to provide microfinance ,insurance,loan systematic investment planning and

other financial product in rural India.this model is proposed by RBI in year 2006 Under the

BF model, banks utilize the network of intermediaries such as the NGOs, post offices for

banking services such as creating awareness and educating on the financial products,

collecting and processing information of borrowers, selling banking products and financial

services to rural households, etc. The activities in a Business Correspondent model include all

those of the BF model and further include disbursing small value credit, etc. Intermediaries

under these models have knowledge about the local population and provide feedback about

the requirements of the local population.

device handledof se U etc post office NGO,

ETF

BCM BFM

urban rural urban rural

bankingbranch on N Branch banking

distributions

operationANK B

client

Insurance

The insurance sector can be classified into life insurance companies and non-life

insurance companies. Non-life insurance companies utilize distribution channels

such as direct mail, direct sales force, insurance agents, agreements with the

corporates, banks, real-estate companies, etc. However, in life insurance companies;

distribution is mainly through agents, as the personal interaction is necessary for

persuading the customer

The insurance sector used to provide small premium to the rural customer as life

insurance is concerned whare as the people whose income level is more than

30,000 in urban area they just bring some of the insurance scheme as the premium

brand.

MFI (Micro finance institution) are an important distribution channel for many

insurance companies. MFIs lend to Self Help Groups (SHGs) in the rural areas who

collectively credit money from the insurance even some of the company provide

money as credit to micro finance business.

A few insurance companies have also tied up with consumer goods companies like

HuL, ITC, etc. which have a well set-up distribution network.

The private players are also tying up with public sector banks, co-operative bank and

the Regional Rural Banks (RRBs) to penetrate into the rural market. The large rural

customer base and wide branch network of these banks offer an effective distribution

channel to the insurance companies.

Sales promotion

Building bank networks in rural areas

The company have to build their rural network by the help of regional rural bank,

khatt panchayat and by making network with the people who are educated and

trusted.

Minimal deposit scheme

The remote area of India not aware of the money deposit scheme and the bank have

to see first priority as opening their bank account under JAN DHAN YOJNA scheme

rather than profit

Radio channel and direct marketing

Radio channel and direct marketing is one of the great way that financial sector help

people to make rural people educate even through mobile messages in regional

language about financial scheme.

Insurance on Crop

Providing insurance on Crop in minimum premium and provide them good recovery

scheme.

Conclusion

Variety of financial products like mutual funds, insurance, shares, debentures,

derivative instruments, etc. are available in India. However, the reach of these

products is very limited and the features of many of these products are very basic in

nature. The built of trust the stake holders have to crate in rural India though they

have mobile phone they want to upgrade theme selves in factor of relation and trust

which our banking have to see BCM and BFM is best model for the sales to reach

out the remotest village. The regulator also has to promote the financial product in

India for providing the platform to the financial service provider. The distribution

system is quiet complex.

Suggestion and view point

The banking has to just come with micro insurance scheme not for the reason of

generating profit but for the sales purpose. the company have to come with daily

micro finance or by the customized financial product of saving money. For farmer

they have to come with land loan ,agriculture finance scheme, dairy finance scheme

etc.

The company have to provide financial assistance in renovation of their home

MAHENDRA FINANCE and RELIANCE HOUSING FINANCE are providing these

type of financial assistant.

Government have to provide subsidy to villagers directly to their bank account. Which

reduce complexity of the transaction of subsidy.

The micro scale wooden handicraft industry (for example: baster arts) what rural

India is working on.

It is one of the great and potential market for financial institution that they come in this field and

make theme professional and boost theme to become more commercialised and providing

theme a finance because there is huge demand on international and urban market .