Betting on young India

India is in the midst of a demographic transition. This will result in the addition of millions of youth, who are potentially a bankable population and present a unique opportunity for the banking system to expand its customer base. It has been estimated that the population in the 15-24-year age group grew from around 175 million in 1995 to 210 million in 2005, increasing by an average of 5 million between 2000 and 2005. In 2020, the average Indian will be only 29 years old, compared with 37 years in China and the US, and 45 years in west Europe. As India is poised to be a global power in the 21st century, GenNext banks can act as catalytic agents in making India a global power. The issue is how the banking system will gear up and tune itself to this new generation.

Indian banks are already providing schemes keeping in mind the requirements of the younger generation. The banking sector can reap the 'population dividend' by providing life-cycle products and services under one roof. The relationship could start at birth with the opening of a savings account. I recall Punjab National Bank's scheme, where an account was opened for a new-born if devotees visited the Golden Temple. During infancy, small health and life insurance services could be offered. Other features could include a recurring deposit and fund transfer from the parents' account to the child's. As the child grows, education loans, debit cards and two-wheeler loans could be offered. Then, as the youth gets his first job, products like home and car loans, credit cards, equity and mutual fund products, demat accounts, etc, could be offered. While loans and insurance could be offered for entrepreneurial ventures, providing products suited to different professions would present a challenge and an opportunity. Also, non-life insurance, like that for a house, could be offered. As the customer ages, loans for refurbishment of house, etc, could be offered and this cycle could continue till there is need for funeral insurance products.

Everyone can have a customised Web page, where they can select various products required by them.

Thus, the aim of GenNext banking would be to not only attract the youth but to do so at infancy so that, in the future, the bank can become the preferred source for all financial needs.

Dr K.C. Chakrabarty is Deputy Governor, Reserve Bank of India.

(The speech was delivered at the 4th International Finance and Banking Conference on 25 November 2009, in Mumbai.)