Financial Inclusion

The recommendations made by a committee chaired by Nachiket Mor, set up by the Reserve Bank of India three months ago, for financial inclusion might seem too ambitious to achieve for most people.

The scale of the task to be done is very huge and the period in which the committee wants it to be done is very short. The strategy and methods to accomplish this are also novel, unconventional and hitherto untried in the country. The committee wants all adults in the country to be provided with a universal electronic bank account by January 1, 2016. The proposal is mainly intended at small businesses and low-income households who are now outside the ambit of formal financial institutions.

 About 90 per cent of small businesses and 60 per cent of the rural and urban population have no functional bank accounts and dealings with financial institutions.  They are not effectively a part of the formal national economy ruled by financial regulations.

The committee feels that they can be brought into it with the help of modern communications technology and innovative banking methods and practices. It wants the automatic issue of an electronic bank account to every resident with the issuance of an Aadhar card and a banking access point within 15 minutes’ walking distance for any person within the country. New types of banks and financial products which are suitable and useful for the majority of the unbanked population have been prescribed. One important suggestion is for a new credit regime which will offer financial and credit products at affordable prices.  The committee also wants priority sector lending to be increased and banks made more competitive in this area of functioning.

There is no doubt that financial inclusion of the large majority of people is necessary for improving their living standards. It will also widen the economy’s scope and strengthen it. Though individual accounts might be small, the large numbers can create volumes which may, in course of time, make significant contributions to the national economy. More importantly, it will give a sense of financial empowerment to the majority of the people. Bank accounts are not only for reaching government doles to beneficiaries but also to make their owners players in the national economy in their own ways, however small. The recommendations call for active consideration, and even if the goal is not achieved by the targeted date, a partial success will be worth the effort.

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