i nc lu s i ve f i nanc e i nd i a re port 2014
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Finally, the response of RBI Governor Raghuram
Rajan on the undue haste in the implementation of
account opening under the PMJDY is revealing. Rajan
(2014) stated that as far as financial inclusion targets were
concerned, universality, not just speed or numbers, was
essential. It would be a waste if duplicate accounts were
opened, if full coverage was not achieved and if accounts
were not used. RBI would work with banks to ensure
the effectiveness of the measures taken. This would sug-
gest that there is substance both to charges of differences
in the government and RBI perceptions of the pace and
content of the financial inclusion drive; as well as the
views of skeptics unconvinced about the feasibility and
success of the campaign mode adopted.
2.8 CONCLUDING REMARKS
The foregoing analysis and experiences would suggest
that the push for financial inclusion has not had a signifi-
cant impact when we consider the financial system and
nation as a whole. Along with the increase in numbers of
bank accounts there does not appear to be correspond-
ing increase in bank deposits or revenue generation
for the banks and the other intermediaries through an
appreciable increase in the volume of transactions. The
relationship of the banks with the major corporate BCs
has been a mixed one. Several BCs have gone under
while the BC agents almost universally receive low and
inadequate salaries and commissions resulting in high
attrition rates going up to nearly 50 per cent.
Over the past couple of years or so the focus has been
on the banks to upgrade or change their technology and
delivery systems. As a result some greater innovation in
product mix and new channels of delivery opportunities
are emerging to drive financial inclusion across India.
Further, UIDAI and NPCI brought in solutions that
enable standardization and interoperability. The rein-
statement of the Aadhar as an instrument in the identifi-
cation and account opening process holds promise of the
smoothening of the process of account opening in future
though even a significant proportion of the population is
yet to be covered by it.
While some blame is to be placed at the door of the
banks at the slow progress and reluctance to bear the
costs of the social objective, it is equally apparent that
sound and replicable business model has not emerged.
As a result great store is now being set on the use of
mobile technology and its promise of reducing the cost of
financial services delivery on the one hand and the pro-
posal to set up niche banks to cater to the differentiated
needs of various sections.
In some respects the story of financial inclusion is also a
story of exclusions—or the inability to adequately involve
existing structures and financial and quasi-financial
agencies in the task of universal financial inclusion.
District Central Cooperative Banks (DCCBs) were not
initially allowed by RBI in its initial circular to undertake
financial inclusion through business correspondent
model. This was primarily because these banks had not
implemented CBS. NABARD took the lead in having
DCCBs upgraded onto CBS. Recently RBI allowed the
DCCBs to implement the BC model. The associated
PACS present a significant opportunity to drive financial
inclusion by leveraging them as BCs.
Leading MFIs have professional management and
provide useful financial services to their client. However,
it is only recently that NBFC-MFIs have been allowed
by RBI to become BCs of banks. Innovative thinking
is needed to identify how the MFIs can participate in
the process of financial inclusion. Some MFIs had them-
selves launched not-for-profit affiliates to act as BCs of
banks.
Eight million SHGs too have had experience of
working as a micro bank. SHG members, to a varying
degree, are familiar with banking processes and can
perform functions in support of the inclusion process.
However, it is only in very few programmes and areas
that they are being asked to contribute.
Finally, the post office represents an institution that
touches the lives of every individual and has penetrated
the entire country with its savings, insurance and remit-
tance products.
The financial inclusion mission only partially takes
cognizance of these stakeholders in some limited role
such as financial literacy. At the same time it has for
the present shown the intent and ability only to push
by fiat for the access to financial services rather than a
sustained use of a suite of relevant services by a financially
capable population. Chapter 5 takes a closer look at the
policy options in financial inclusion and how they have
been articulated and implemented in the context of the
existing challenges.
