Financial inclusion can mean big business

MUMBAI: Banks should look at financial inclusion of the rural masses as a business opportunity, stressed Usha Thorat, deputy governor of the Reserve Bank of India (RBI).

“Financial inclusion in India has a long way to go. It should be viewed as a huge business opportunity by all Indian banks. There should be a good synergy between the people and the banks to make this work,” she said at a summit organised by Skoch Financial Technologies in Mumbai on Wednesday.

Thorat’s view was shared by C Rangarajan, chairman, economic advisory council to the Prime Minister of India.

While banks have started rural lending in a big way, he noted that rural lending needs to be done in a proper way to yield efficient results. “Rural lending requires a specific type of organizational ethos, culture and attitude. Rural branches of banks have to be farmer-friendly. Lending to the low-income groups needs motivated bank staff. The possibility of creating a separate cadre of rural bank employees does not appear to be feasible. More needs to be done in this regard,” he said.

Rangarajan lamented that many in India still do not have access to banking services. “While the financial system in India has grown rapidly in the last three decades, some poorer sections of the society have not been able to access adequately financial services from the organised financial system. There is an imperative need to modify the credit and financial services delivery system to achieve greater inclusion. The Interim Report of the Committee on Financial Inclusion has sought to address some of the issues for improving the delivery system,” he said.

“While there are 33,478 commercial bank branches spread all over rural and semi-urban centres in the country, they should be able to reach out to the poor and needy,” he added.

Rangarajan said that creating an appropriate credit delivery system is very essential. “This needs to be supplemented by efforts to improve the productivity of small and marginal farmers as well as other borrowers so that the credit made available can be productively employed,” he pointed out.

“Rural branches must also go beyond providing credit and help in terms of advice on a wide variety of matters relating to agriculture,” he added.

K C Chakrabarthy, CMD of Punjab National Bank, concurs. “70% of the Indian population does not have access to the banking system. Biometric cards could help solve the problem,” he said.

According to Rangarajan, flow of credit to agriculture by commercial and rural banks together has increased from Rs 5,402 crore in 1991-92 to Rs 14,467 crore in 1996-97 and to Rs 60,022 crore in 2003-04. “Although, the flow of credit has shown a rapid increase, farmer households having less than one hectare of land have received very little credit,” he said.

“While public sector banks have been active on agricultural lending, private sector banks have started taking a step forward. The problem is that we do not find enough staff with passion to cater to the needs of the rural people. There are also many hurdles like network issues and power problems in these areas.

However, we have decided to train our resources to cater to the rural masses on the demographics of the rural people to impart knowledge and train them on the use of technology,” pointed out Neena Singh, executive vice president, head of retail-agriculture, HDFC Bank.