Financial inclusion necessary for sustainable growth: Raghuram Rajan

Rajan said if everyone had tools and resources to better themselves, it would increase output, growth, economic prosperity

Pitching for financial inclusion, RBI Governor Raghuram Rajan said on Monday the central bank is trying to make it attractive for institutions to offer banking services to everyone, as it is a necessary building block for sustainable growth.

Observing that bankers usually focus on large borrowers with bottomline in mind, the governor said Aadhaar Enabled Payment System will go a long way in taking financial services to the underserved.

"After all, should we not give everyone access to the (banking) services we all in this room enjoy?" Rajan said in an interactive session at the National Institute of Rural Development and Panchayati Raj.

Stating that imperative for financial inclusion is both, moral as well as one based on economic efficiency, Rajan said if everyone had the tools and resources to better themselves, it would increase output, growth and economic prosperity.

"In the foreseeable future, we will bring formal financial services to every Indian who wants them. Financial inclusion will be an important element in ensuring access and equity - the necessary building blocks for sustainable growth of our country," he said.

The country has come a long way in the process of financial inclusion, Rajan said, but "still has a way to go".

"We are steadily moving from mandates, subsidies and reliance on public sector banks for inclusion to creating enabling frameworks that make it attractive for all financial institutions to target the excluded, even while the interests of the excluded are protected through education, competition and regulation," Rajan added.

Easy payments and cash out would make formal savings more attractive and strengthening the network of banking correspondents, creating a registry of banking correspondents, giving them the ability to take and give cash on behalf of any bank through Aadhaar Enabled Payment System would go a long way in reaching financial services to the underserved.

"With expanding cash-in, cash-out points through soon-to- be-launched Postal Payment Bank and telecom affiliated payment banks and making transfers from bank account to bank account easier via mobile through the Unified Payment Interface, we are on the verge of solving the last mile problem," Rajan said.