Compulsory dedication for financial inclusion
In some of the bank branches ‘no-frills’ accounts are opened, but no credit facilities are given.
Development of one sector and lack of any facility for other sectors creates socio-economic inequalities. India, which aspires to be a super power, has to face discontent due to the inequality. Both the planners and the government have so far failed to create a system which would ensure development of all sectors.
It is only after 62 of Independence and 41 years of banks’ nationalisation that the reality in Indian life is realised and the concept of financial inclusion is considered as a priority.
‘Financial inclusion’ should be understood in broader perspective to mean the provision of the full range of affordable financial services namely access to payments and remittance facilities, saving, loans and insurance services by the formal financial system to those who are or tend to be excluded from these services. The Reserve Bank of India (RBI) has been urging the banks in the country to review their existing practices to align them with the objective of achieving greater financial inclusion.
RBI directions
The RBI has already taken certain measures in this direction. All banks in the country are advised since November 2005 to make available a basic banking with ‘no-frills’ accounts either with nil or very low minimum balances as well as charges that would make such accounts accessible to vast sections of population.
With the objective of providing hassle-free credit to constituents in rural and semi-urban areas the banks were advised to consider of a General Credit Card (GCC) to such constituents. The card is expected to have credit limit of Rs 25,000 — based on the assessment of income and cash flows of the household without insistence on security, purpose or end-use of credit.
The credit facility should be in the nature of revolving credit entitling the holder to withdraw up to the limit sanctioned. The banks should charge appropriate and reasonable interest on the facility. Banks are also advised to make available all printed material used by retail customers in their respective languages.
What have the banks done during the past five years? Most of the banks’ branches in rural and semi-urban areas are either not knowing about the ‘no-frills’ accounts system or they have not cared to see the relevant circulars and carry out the scheme. In most branches ‘no-frills’ accounts are opened but no credit facility is given. The branch managers concerned do not seem to be interested in such banking which they consider as ‘social banking’.
But in a poor and developing country like India, social banking is a must because a vast bulk of the population has not yet realised as to what are the banking facilities. The Union government and the RBI have now realised after five years that 50 per cent of the population of this country is not getting any banking facility. This means that while 50 big rich and powerful families are having vast amount of wealth and getting most of the banking facilities with lenient approach, 50 crore people are neglected by the banking system and that too when they are struggling hard for their daily living. As banks have neglected them, they are depending on private money lenders who are widespread in rural and semi-urban areas so much so that they have created a private monetary system and have caught most of the poor and the needy under their clutches.
That is why seminars and meetings are currently organised only on the subject of financial inclusion in which RBI governor and deputy governors have been insisting that banks should implement the system so that the financial inclusion will be achieved as per expectation. However, the RBI is only advising banks without any strict warning.
It has been the RBI’s policy to be relying only on communicative rather than enforcing approach — particularly regarding the schemes which are in the interest of common consumers or neglected sections of society. When asked about the lethargy of banks in regard to implementation of the instant credit system, the RBI informed that it has informed about it to the Indian Banks Association (IBA). IBA is so far known to be pleading banks’ case before the RBI when the big corporate sector and the rich clients are in crisis and RBI’s help is needed to be soft or lenient in the big loans which need restructuring instead of recovering the due amount. If the IBA pleads banks for big accounts, how can it ask banks to be equally or more lenient in cases of small accounts and for those who are so far neglected from the banking system.
The RBI should therefore be more firm in its approach to banks’ negative approach in carrying out the system of financial inclusion.
