Get into action on financial inclusion: RBI

Despite the efforts undertaken by the government and the Reserve Bank of India (RBI), a large number of people are still outside the ambit of banking services, the central bank said today, adding banks should get down to action on financial inclusion rather than doing “lip service” on the matter.

“The extent of financial inclusion in India continues to be unacceptably high,” said K C Chakrabarty, RBI deputy governor, while speaking on the sidelines of a book launch here.

Under the financial inclusion initiative, 150 million accounts were opened, but only 30 million transactions have taken place. “What happened to the remaining 120 million (accounts)” asked Chakrabarty. Look at the 30 million people, who are getting the benefits of financial inclusion. The most important thing is to take the benefits to the left-outs, he added.

Banks have to work together on the delivery model and make it perfect, with the help of technology. “Till now, because of enthusiasm, we are making more publicity. Don’t do lip service alone on financial inclusion,” Chakrabarty told bankers.

The unbanked masses constitute a unique but important stakeholder group for banks, even though they are not bank customers.

Meeting the expectation of this group through financial inclusion efforts presents a huge opportunity for banks. “Financial inclusion is not a charity and poverty cannot be eliminated by charity, do as a normal business,” he said.

The actual number of transactions per account is “extremely low”. This reduces the viability of the financial inclusion efforts and would ultimately result in concerned stakeholders losing interest in the exercise. The low transaction levels could indicate deficiencies on both demand and supply sides.

“Banks need to identify the causes for the low transaction rates and urgently address them in order to be successful, sustainable and scalable.

Financial inclusion efforts should necessarily be carried out in a commercially viable manner for everybody including the bank, the business correspondent and the technology provider.

However, the price should not result in exploitation of the customers,” he added.

‘Banks should strike a balance’

If those waiting to apply for a banking licence are looking at the foray as an opportunity to enter a profitable business, forget it. Banking is not meant to make big profits, is the message from RBI’s deputy governor, K C Chakrabarty. At a book release function, organised by Indian Overseas Bank, he said people felt a bank was efficient if it generated profit. But if banks make too much money, customers are losing theirs. RBI, the implication was, would keep this in mind while framing its final guidelines for licences. “Those ready and waiting for a licence reconsider it, since it is not a very profitable business,” said Chakrabarty. He then went on to add banks do need to make a profit, as capital is required.