Govt to chart two-year plan for financial inclusion

The government has decided to chalk out a two-year programme to push financial inclusion initiatives by banks to bring it in line with the unique identity plan for the country.

Bankers said that finance ministry officials led by Financial Services Secretary R Gopalan had already held discussions with seven-eight large public sector players. Later this week, Gopalan is due to meet bankers in Mumbai to broad base the discussion.

Last year, the Reserve Bank of India, which is also pushing the financial inclusion agenda, had asked all banks to finalise their plans by March and banks have complied with the directive. Now, the government wants to ensure that it is not just planning that is undertaken, but the plan is translated into real action.

A banker said that the Union Budget had set a target to cover villages with population of 2,000 by March 2011. “But, looking at the current branch network and the vast background work that will be needed, this goal is feasible in two years. This is the basis for preparing a systematic plan,” he added.

The government has asked four groups to make a presentation at the Mumbai meeting. While the first group is preparing a plan on the use of micro-automated teller machines (ATMs), especially in rural areas, the second group is dealing with no-frills accounts. The second group, headed by National Payments Corporation Chief Executive PC Hota, will give a presentation on the possibility of making transactions simpler.

Already, lenders such as the State Bank of India group, which has a network of 17,000 branches, have started exploring the use of tools other than hand-held devices. It was using mobile phone-based system as a pilot in parts of North India, Bihar and Jharkhand, a source said.

The third group has been tasked with clearing the regulatory hurdles facing financial inclusion. The group comprises representatives from the Reserve Bank of India and other banks.

The fourth group will go into the management of cash generated in villages and the agents dealing with it. One of the concerns is the possible misuse of funds deposited with business correspondents, especially because the transactions involve individuals who are semi or partially literate. Some bankers fear that in rural areas, with some powerful politicians controlling trade and lending activity, the funds are prone to misuse.