China eyes India for financial inclusion

The People's Bank of China, the counterpart of the Reserve Bank of India (RBI), and the Chinese Banks Association are trying to understand and take lessons from India in priority sector lending and financial inclusion, an industry source told Business Standard.

The Indian Banks' Association (IBA) was recently in China with a delegation comprising government officials and bankers to discuss how to go about transacting with the less privileged sections of the society, among other issues on the agenda.

Explaining about the visit of the Indian delegation to China, an IBA official said, "Our interaction with Chinese banking professionals indicates that the average economic standing of the Chinese residing in rural areas is better than their Indian counterpart. But their banking system is at a rudimentary stage and access to financial services remains a challenge. Indian banks are tackling this issue effectively."

Indian banks have stepped up efforts in increasing the reach of financial services in rural areas. The thrust on forming self-help groups (SHGs) and opening of no-frill accounts came into focus.

They would also like to know about using information technology in financial inclusion and systems, said a head of a public sector bank, who was a part of the delegation.

According to the RBI data, over 2.9 million SHGs have been linked to banks involving a total credit flow of Rs 18,000 crore at the end of March 2007 and they have opened 12 million no-frill accounts.

"Like India, China also faces problems related to growth and inflation. They (Chinese) want to study jointly various aspects in banking," said UCO Bank Chairman and Managing Director S K Goyel, who was a part of the delegation. "While incidence of poverty in China is low, they face similar challenges in tackling rural poverty like us," said an IBA official.

The incidence of cash-based transactions in quite high. Even salaries are paid in cash. There is common ground to work together," an IBA official added.

The next stop in this joint effort will be the visit of a Chinese delegation later this year.