look i ng ahe ad
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as niche agencies focused on serving the lower income
and poorer populations or should they shift to a different
orbit to join the multitude of banks competing for
a slice in the customer pie. The central bank is clearly
in favour of formalization. It is increasingly intolerant
of arrangements that create regulatory arbitrage and
inefficiencies, but more tolerant of failures of vulnerable
institutions leaving insignificant systemic effects.
The current financial inclusion plan has not left
any major role for SHGs too. At the same time,
looking at their central role in NRLM and their active
contribution to livelihood development in programmes
like Kudumbashree in Kerala, it may be argued that
the relevance of SHGs has just been redefined and
not rendered redundant. The substantial increase in
average SHG savings over the years suggests that they
are well-integrated into the banking system. Despite
this fact, credit flow to them has progressively declined
in recent years. With doors open for MFIs to become
banks, a new alliance may evolve between them and
SHGs in the years to come. On a larger plane, it indeed
is a matter of concern that the earlier questions about
exclusion perpetuating poverty and marginalisation are
fading in intensity and significance and the deeper and
more fundamental debates around the structural aspects
of financial exclusion and the intricate interrelations
between multiple exclusions—social, cultural, economic,
and political—are being dumped as irrelevant.
The experience so far does not indicate that agency
banking model using BCs and BF is sure to succeed in
all regions and contexts, though it has been very helpful
and deserves to be promoted. The question is whether
they can be a substitute for the wholesale rural financial
system. The recent assessments have found that people
tend to trust banks, and not agents or non-banking struc-
tures. In such a scenario non-banks and non-profit agen-
cies cannot be expected to play any decisive leading role
in facilitating inclusion. In that sense the current thrust
on the banking system to lead and coordinate financial
inclusion seems the most logical. While the regulated
MFIs have been given options to be part of this process,
the SHGs and non profit MFIs are in a state of flux.
They should also constitute an essential and important
component of the financial inclusion architecture, their
significance measured not in terms of size of financial
transactions but in terms of the number of marginal
groups covered.
Whatever be the nomenclature used, a mission of the
nature and magnitude of JDY demands closer scrutiny. To
begin with there are obvious points of conflict between
what the government considers desirable from the point
of view inclusive development and what the central bank
estimates as feasible from the angles of efficiency and
stability. For instance, the scheme envisions that the bank
accounts would be opened by 15 August 2015. It also
offers an overdraft facility of Rs. 5,000 for all new basic
bank accounts one year after satisfactory operation of the
account. In RBI’s view it will take more than a year to put
the necessary processes and institutions in place to open
the massive number of new accounts. The rising NPAs,
especially in the PSBs, is a major source of concern for
the regulator. It has recommended a rollout of overdraft
over three years. The recent warning from the RBI
governor cautions bankers that hasty implementation
of JDY is likely to create three main risks: opening of
multiple accounts for the same person; patchy coverage
of the scheme; dormancy of accounts. According to him
‘The system is going to be a waste if what we do generates
a whole set of duplicate accounts. It is going to be a
waste if you do not have full coverage. It is going to be a
waste if those accounts are not used, they open and they
languish.’
2
As the Parliamentary Committee on Finance had
suggested the state needs to ensure statutory right to the
citizens to open bank accounts in order to further finan-
cial inclusion. Mor Committee too has endorsed this
proposal and suggested that any adult individual whose
identity is verified and authenticated (through Aadhar for
instance) must have the right to open a bank account.
‘The aggrieved individuals would need to have the right
to seek redress from RBI in case they have not received
this account. Upon receiving such a complaint the RBI
would need to ensure that such an account is opened
within 30 days of receipt of the complaint’ (p. 59).
Prior to making such revolutionary changes, however,
the state must formulate a national policy on financial
inclusion so as to prevent regulatory arbitrage and to
represent the concerns of different stakeholders, more
importantly, of the relatively weaker customer groups.
The central bank seems to have reconciled to the idea
