Create scope for financial inclusion

In perspective

India needs to create favourable climate for economic sectors that can achieve financial inclusion. The World Bank Findex Survey (2012) found that 35% of Indian adults had access to formal bank accounts. According to the NSSO’s 59 th round survey, 73% of farmer households do not have access to formal sources of credit.

Banks have target to open outlets in 4,90,000 unbanked villages with less than 2000 population by March 2016 and banks no longer require prior permission to open branches in centres with less than one lakh population. By March 2013, the number of banking outlets in the villages had increased four times to reach 2,68,454. Business correspondences are on wheel to provide banking facilities in remote villages.

As on March 31, 2013, banks have so far opened 182 million Basic Savings Bank Accounts. The Nachiket Mor Committee has recommended that every resident Indian over the age of 18 years should have an Universal Electronic Bank Account. In order to make the Universal Financial Inclusion more demand driven, a National Strategy for Financial Education (NSFE) has been formulated. In fact, universal financial inclusion could be a reality if proper climate is created to revive the bank’s credit cycle which could plough back profit for the bank and generate surplus for the entrepreneurs.

Nearly 73 crore Indians have access to banking products. The point is whether banking products have contributed to bring change in the lives of those people? According to a study conducted by CRISIL, the number of self-employed people decreased by 25.5 million between 2005 and 2010. The NSSO study shows the employment in agriculture has been stagnant between 2000 and 2012. Banking products can perform if the climate is favorable for entrepreneurship.

Responsible factorsRampant corruption in extension services departments, lack of transparency in marketing network, lack of transportation facility, misdirected credit flow, and high inflation in essential commodities always affect the banks’ credit cycle. Chittoor district of Andhra Pradesh has suffered erosion of ground water resources due to construction of tube wells in massive scale. It adversely affects agriculture, climate, soil quality and increases the cost of crop production. The subsidy attached to tube wells ultimately brings ruin to ground water resources.

Lack of guidance from the horticulture department has let Alphonso mango farmers plant mango trees on rocky hill slopes in Ratnagiri district of Maharashtra. Villagers blast the rock to create a five feet deep saucer shape and fill it with soil before planting mango trees. Millions of mango trees in Ratnagiri are planted after blasting the rocks which is not recommended by horticulturists. Mono cropping on hill slope affects pollination. The mango crop failed in some pockets in 2012 and the day is not far when the area will turn into another Vidarbha.

Inflation seriously affects banks’ credit cycle. Between 2007-08 to 2012-13, the fertilizer and pesticide price has increased by six times, fodder price increased by 18 times, electricity cost doubled and rural wages trippled which had affected the income of majority of people. Food inflation continues to remain grim above 10% from April 2012 to January 2014. The data from Agriculture Ministry shows a decrease in cultivable land measuring 7,90,000ha in 20 states between 2007-08 and 2010-11.

India has 85,807 unused water bodies out of which 8152 have gone dry. Thousands of water bodies have been converted into real estate in the last 30 years, which has created acute drinking water shortage and allowed mushrooming of water bottle industries. Instead of giving free food, there is a need to delink food from commodity market, improve health care, reduce cost of agriculture inputs, let villagers control supply chains, revive ground water, improve banks’ customer relationship and conduct a dedicated survey to determine the end users of credit and grants which are meant for the excluded population.

Rural India has to survive for the country’s sustainable growth. We cannot push more people into urban India as urban India has already become a mess due to over population. In the new gen industry where advanced computers, robots and automation drastically reduce manpower, the industry and manufacturing sector cannot employ the displaced rural population. India is blessed with 24 agro climatic zones, an unexplored animal husbandry sector, rich handicraft sector, fishery, handloom sector, an untapped horticulture sector and a vibrant pilgrim tourism sector which can perform to create employment for the excluded population. India needs to create favorable climate for economic sectors that can achieve financial inclusion. 

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