In order to expedite financial inclusion, a committee chaired by veteran banker Nachiket Mor (pictured, left) has proposed a goal for all the banks.
“By January 1, 2016, each Indian resident, above the age of 18 years, would have an individual, full-service, safe and secure electronic bank account,” the committee set up by Raghuram Rajan, governor of Reserve Bank of India (RBI) suggested in a report.
The Universal Electronic Bank Account (UEBA) will be opened automatically upon receiving an Aadhaar number by a national bank.
“The committee recommends that the RBI issue a circular indicating that no bank can refuse to open an account for a customer who has adequate Know Your Customer, which specifically includes Aadhar,” said the report.
There will be no account opening fee but the bank will be free to charge the customers for transactions, including balance enquiry. Also, by January 1, 2016, the number and distribution of electronic payment access points would be such that every single resident would be within 15 minutes walking distance from such a point anywhere in the country.
With the help of these points, people will be able to deposit and withdraw cash, transfer balances and pay ‘reasonable’ charges for all of these services.
The committee suggested that at least one of the deposit products would offer a positive real rate of return over the consumer price index or retail inflation.
However, bankers who are also the part of this committee said it would be more practical to push the deadline to 2018.
“Looking at the enormity of the task, particularly in low-density rural areas, and the need of supporting physical as well as virtual infrastructure vis-à-vis their present state, the timeline rather looks pressing,” said Shikha Sharma, managing director & CEO, Axis Bank and S S Mundra, chairman and managing director, Bank of Baroda in a joint statement to Mor.
The panel also identified 10 existing and potential banking designs.
These are: National Bank with Branches, National Bank with Agents, Regional Bank, National Consumer Bank, National Wholesale Bank, National Infrastructure Bank, Payments Network Operator, Payments Bank, Wholesale Consumer Bank and Wholesale Investment Bank.
The report recommended that banks must be asked to disclose the results of their stress tests publicly at least annually. In terms of priority sector lending (PSL), the report proposed that RBI could consider replacing the current 40% PSL target with an Adjusted 50% PSL (APSL) norm.
Bankers said that the transition could be allowed in 2-3 years time.
They also requested to include banks’ equity investments in complementary infrastructure such as rural warehouses, market yards, godowns, silos and NBFCs in low financial depth districts.
Bankers said RBI could allow banks to garner ‘Priority Sector Deposits’ that originate from
identified districts, weaker sections and below poverty line segments.
They suggested that banks could be incentivised for actively pursuing such deposits by reducing the amount of priority sector loans and exempting them from requirements such as cash reserve ratio and statutory liquidity ratio.
For the common man
An electronic bank account with an Aadhar number
Access points within 15 minutes walking distance
Deadline set at January 1, 2016
Review existing priority sector lending norms
Ten different banking models aimed at targeted inclusion