Go beyond lip service when it comes to financial inclusion: RBI to banks

The banking regulator Reserve of Bank of India (RBI) today asked the banks not to do lip service, but get into actual action on the financial inclusion initiative.

Speaking on the sidelines of a book launch, organised by Indian Overseas Bank at Chennai today, K C Chakrabarty, Deputy Governor, RBI said that despite several steps having been taken by the government and RBI, the extent in the Indian financial systems continues to be unacceptably high.

Under the financial inclusion initiative, 15 crore accounts were opened, but only three crore transactions have taken place, what happened the remaining 12 crore, questioned Chakrabarty.

He added one side of looking this issue is all “bogus”, but look at the three crore number, which are getting the benefits,. The most important thing is how to take the benefits to the left outs.

Banks have to work together on delivery model and make it perfect, with the help of technology and proper delivery mechanism.

“Till now because of enthusiasm, we are making more publicity. Dont do lip service alone on financial inclusion,” he told the Bankers.

The unbanked masses constitute an unique but important stakeholder group for banks, even though they may not be 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 told Bankers.

He added, there is no “one-size-fits-all”, financial inclusion strategy or approach, it is important that banks recognise three necessary and sufficient conditions that are required for maximising the benefits of financial inclusion efforts including holistic approach to provision of financial services, not just credit or deposit alone, meeting the needs of small firms and focusing on segments of population excluded by gender or geographical remoteness.

The actual number of transactions per account of per business correspondent to be 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 the 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 BC and the technology provider. However, the price should not result in exploitation of the customers”.