Reserve Bank of India (RBI) governor D Subbarao on Thursday sent out a firm message to bankers on financial inclusion.
He said all banks should have a clear-cut roadmap for financial inclusion, failing which the central bank may not hesitate in finding other alternatives.
Commercial banks should be more responsive towards financial inclusion, Subbarao said.
“Only 40% of the population has bank accounts, 10% has life covers and 0.6% has general insurance covers. The RBI does not want to impose any financial model. Every bank should devise its own strategy in line with its business model and comparative advantage, which would ensure better ownership,” he said at the sidelines of the central bank’s board meeting.
RBI’s plan envisages that the lead bank in each state should draw a roadmap by March 2010 to ensure that all villages with a population of over 20,000 would have access to financial services through a banking outlet by March 2011, for which board-approved specific plans are to be in place by March 2010.
“The RBI is committed to achieve bank-led financial inclusion. And if the banks fail, we will not hesitate to use other models,” Subbarao said.
Other options being mulled are the use of microfinance institutions (MFIs). “The MFIs have demonstrated that low-income groups can be a bankable proposition. However, interest rates charged by MFIs are still high at around 24-30%,” he pointed out.
The main challenges for financial inclusion, he told bankers, were lack of access, infrastructure, understanding and knowledge.
Some of the notable efforts of RBI, he said were no-frills accounts, easier credit facilities, simpler know-your-customer (KYC) norms, use of information technology, 100% financial inclusion drive and business correspondent model, etc. In its platinum jubilee year, the RBI aims to reach out to remote villages with a focus on financial awareness, Subbarao said.
In his note to bankers, he emphasised the need to set up financial literacy and credit counselling centres in one district on a pilot basis and extend the facility in due course.
He also asked banks to use IT-enabled financial inclusion by leveraging on the smart card/mobile technology and electronic benefit transfer (EBT) through the medium of business correspondents.
“Banking on the poor could be a rich proposition since financial inclusion is a win-win opportunity for the poor, for the banks and for the country,” he said.
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