India needs to continue push for financial inclusion, RBI's Rajan says

MUMBAI (Reuters) - India needs to continue fine-tuning rules on collateral and interest rates to ensure financial institutions have enough incentives to keep lending to the poor, central bank Governor Raghuram Rajan said on Monday.

Rajan said the Reserve Bank of India (RBI) would continue to look at the rules as it seeks to find a careful balance between the needs of the poor and the push for profits by financial institutions.

As such, Rajan said the RBI may look at easing rules that at present prohibit taking collateral for loans below a certain size for some population segments, and reducing the ceiling rates for loans provided by micro-finance firms.

"I am confident that in the foreseeable future we will bring formal financial services to every Indian who wants them," Rajan said at a seminar on financial inclusion in Hyderabad, according to a copy of a speech released by the RBI.

"Financial inclusion will be an important element in ensuring access and equity, necessary building blocks for the sustainable growth of our country."

Rajan also said the RBI could be open to allowing individuals, including farmers, to declare personal bankruptcy to win a reprieve from debt, as long as this was used sparingly.

A string of farmer suicides over deteriorating economic conditions have recently raised concerns in rural India.

Rajan has been a big defender of financial inclusion during his tenure. He will step down from the RBI in September after stunning the country last month by saying he would not extend his term.

(Reporting by Suvashree Dey Choudhury; Editing by Sherry Jacob-Phillips)