Financial inclusion must be qualitative, not quantitative

The message is loud and clear from the Reserve Bank of India (RBI). While bringing more villages within the realm of financial services remains the focus, steps must be taken to improve service quality and increase the number and value of transactions in these areas, the banking regulator said.

“Going forward, the focus will be more on the number and value of transactions in no-frills accounts and credit disbursed through information and communication technology-based business correspondent outlets. For this purpose, banks have been advised that financial inclusion plans prepared by their head offices are disaggregated at respective controlling offices and further at branch levels," RBI said in its monetary policy statement for 2012-13, released here on Tuesday.

 

It also mandated the State Level Bankers’ Committees (SLBCs) to prepare schedules for covering all unbanked villages with a population of less than 2,000. SLBCs will then nationally allot these villages to banks for providing financial services in a time-bound manner. RBI will soon issue a detailed guideline in this regard.

By the current map of providing banking services in every village with a population above 2,000, SLBCs had identified 74,414. These were allocated to banks, including regional and rural ones, for providing financial services by March. Banks have so far covered 74,199 of these villages.

“Now, the challenge is to cover all the unbanked villages in the country," RBI said.

Industry players estimate there are around 600,000 villages in India. Banks are currently providing services in rural areas through 138,502 outlets, including 24,085 rural branches and 111,948 business correspondents. No-frills accounts have expanded to around 99 million.

“Our assessment is that in next couple of years, all villages will be serviced by banks and business correspondents together. In the first stage, basic services will be offered. Ultimately the objective is to have provisions for all types of financial services in these villages,”said Anirban Roy, founder and managing director of SEED Financial Services, a New Delhi-based business correspondent.

He added efforts were on to provide financial products, besides the savings deposit accounts in villages covered by the financial inclusion programme in the past two years.

“There is a need to provide products and services like pension schemes for old age security, life insurance and loans in these villages. Business correspondents are playing a crucial role in this space. Going forward, this model needs to be incentivised,” Roy said.