After Kalawati pushes N-power, Aruna sells financial inclusion

One isn’t sure about the political leanings of Duvvuri Subbarao, but it seems the scion of the Nehru-Gandhi family has left a profound impression on the Reserve Bank of India (RBI) governor.

The inspiration drawn from Rahul Gandhi, it appears, isn’t just about the dirt road the governor has started to take lately or about unscheduled stops at shanties to understand banking, or more appropriately, the lack of it.

Gandhi, or at least his successful use of anecdotes from the lives of two simple women to communicate complex matters rather simply, has moved Subbarao. If the Congress general secretary spoke of Kalawati and Sasikala in Parliament to underscore the need for the nuclear deal with the US, Subbarao has anecdotes from Aruna and Lakshmi to heighten the central bank’s pitch to take banking to the hinterland.

Gandhi said the nuclear deal with US would bring electricity into the dwellings of Kalawati and Sasikala in the Vidarbha region of Maharashtra. Of course, a cult-like status followed Kalawati, including the offer of a ticket to contest for a Parliament seat. Whether Aruna or Lakshmi get a similar response remains to be seen. The women spoken about by Gandhi and Subbarao have similarities — economic and geographical — all four hail from Maharashtra, for example.

The subtle difference, however, is that the governor had more success stories to offer.
Aruna, a farm labourer, managed to get a loan to set up her own, now-thriving, vegetable stand. 

This allowed her to shift away from the back-breaking work of tending other people’s fields, Subbarao told bankers in Kolkata on Wednesday.

“Her former hand-to-mouth existence had given way to a new reality, one which includes savings and checking accounts at the bank, and the credit needed to keep her kids in school,” he said.

Lakshmi Shelar, widowed at 17, helped form a local self-help group. The 177 women of Lakshmi’s self-help group have all borrowed and repaid their loans, the governor said. This section of his lecture was titled “Let a thousand flowers bloom”.

“This is what financial inclusion is all about - giving people an opportunity to build better lives for themselves and their children,” Subbarao said exhorting banks to go to under-banked areas.

Aruna and Lakshmi are just two of the millions of women across the country who have demonstrated what is possible if only rural women can have access to basic financial services, Subbarao said.

Another difference is that while the politician has tried to catch the imagination of the youth by visiting universities and colleges, Subbarao is preferring to catch them younger.

At an outreach programme at Jalanga village in Orissa, Subbarao conducted a quiz programme for school children. He told the children that providing banking to the poor was the most important task before the central bank besides ensuring financial and price stability.

Financial inclusion isn’t a new project for the RBI. Subbarao, perhaps, has made it his pet one for now. He seems to have placed rural-banking very high on the hierarchy of the central banking goals.

Apart from setting out on tours to the countryside with his senior colleagues in “outreach programmes” to boost financial inclusion, Subbarao has started to make specific demands from banks. RBI is asking the lead bank in each district to draw a roadmap—by March 2010—to ensure that all villages with a population of over 2,000 will have access to financial services through a banking outlet by March 2011. He is also asking banks to come up with their board-approved plans for financial inclusion by March 2010. These plans, after being shared with RBI, are to be rolled out within three years.

Not just state-owned banks, even private and foreign banks will have to comply, Subbarao said. The RBI will also ask all banks to include criteria on financial inclusion in the performance evaluation of their field staff.

Subbarao said the RBI has chosen not to come out with a uniform code on financial inclusion for all banks to ensure better ownership. He wants each bank to build its own strategy in line with its business model and comparative advantage.

“Financial inclusion has to be real and meaningful and not just opening of bank accounts,” he told journalists in Kolkata. And to journalists, too, the message lately has been mostly about inclusion. Subbarao’s aides keep reminding reporters chasing the governor in the outreach programmes, “only inclusion... not inflation!”

It is early days, but the governor’s efforts seem to be paying off. Banks say there is more sensitivity now. “We are very serious about adhering to RBI’s directives,” said the executive director at a state-owned bank when asked for his reaction to Subbarao’s demand. “By the way,” he said, “I am right now at a village, one hour away from Ahmedabad, conducting a free, detailed medical camp.”

“CMDs and EDs like us are personally conducting visits to ensure financial inclusion,” he said. There will be more Arunas and Lakshmis who will inspire several others who will become inspiration stories. The “congress” of banks, it seems, has understood the “high command’s” wish.