Letters: Financial inclusion | Business Standard

Letters: Financial inclusion | Business Standard

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Business Standard, July 17, 2013

Letters
Financial inclusion

This refers to the report ‘No target for number of new bank licenses’ (July 16). It is comforting to find that ‘supporting financial inclusion’ which was included as one of the objectives for allowing new banks when the discussion paper on the subject was released almost three years back, remains in the back of RBI’s mind. The observation ‘Financial inclusion has to be a precondition for such banks…’ coming from RBI Executive Director R Gandhi, who also said in the same context that ‘Post independence, we had a resolution to give attention to poverty alleviation. Our economic planning had poverty alleviation as a key plank…Still, these forty-odd years (sic), efforts have not made serious dent. This indicates the enormous challenges that lie ahead for us in achieving financial inclusion,’ gives credibility to the central bank’s intentions.
A recent CRISIL study conducted on the basis of three parameters -- branch, deposit and credit penetration -- across the 632 districts in India showed the bottom 50 districts had just three banks per 100,000 of population, just half of the 7.6 bank branches on an all-India level. These districts had just two per cent of the total bank branches in the country. Besides, they also had just 4,068 loan accounts per 100,000 of population as compared to an all-India level of 11,680 accounts. 
Lack of awareness, low incomes, poverty and illiteracy were among the key factors identified which lead to a low demand for financial services and, consequently, to exclusion.
Recent years have seen RBI, after a gap of almost two decades, taking aggressive interest in improving banking outreach by propagating the slogan of ‘Financial Inclusion’. But, the branch expansion had lost priority in the anxiety to reduce costs and save on regular staff by allowing Banking Correspondents etc.
During the one year or so, that the prospective new banks will take to come into being, RBI, through the existing mechanism of State Level and District Level Bankers
Committees, revisit the process of identifying potential centres for opening ‘brick and mortar’ bank branches in semi-urban and rural areas and publish the list to give an opportunity to existing banks to open branches. The prospective new banks should also be asked to select centres from the list simultaneously with their plan to open urban branches.


M G Warrier, Mumbai

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