The Hindu Business Line : No RBI subsidy to banks for ‘no frills’ accounts

Business Daily from THE HINDU group of publications Friday, Sep 21, 2007 ePaper

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Home Page - Banking
Money & Banking - RBI & Other Central Banks
No RBI subsidy to banks for ‘no frills’ accounts

To take banking basics to people by train

Ms Usha Thorat, RBI Deputy Governor

Our Bureau

Bangalore, Sept. 20 The Reserve Bank of India (RBI) has ruled out support or subvention to banks for the opening of ‘no frills’ accounts as part of the nationwide financial inclusion project.

Speaking to reporters here today after inaugurating the country’s first biometrically- enabled smart cards of Canara Bank, the RBI Deputy Governor, Ms Usha Thorat, said, “Banks stand to benefit through financial inclusion and they are prepared to incur the costs for the purpose.”

She said that States such as Andhra Pradesh had initially come forward to help the banks in financial inclusion, including bearing part of the costs.

However, currently banks were prepared to go ahead with financial inclusion without any support.

Financial inclusion, she said, allowed the State governments to dispense social security, subsidies and pensions directly to the beneficiaries through their bank accounts. She also said that for the last financial year, about 60 million ‘no frills’ accounts had been opened by the public sector banks.

Biometric cards

Canara Bank and Punjab National Bank were among those prepared to open ‘no frills’ accounts and to absorb the costs, she added. This included issue of biometrically-enabled smart cards. These cards allowed customers to use Automatic Teller Machines, especially in the rural regions where literacy rates were low.

Customer identification is done on the basis of finger prints. Such systems were voice-enabled and configured to the regional languages, to make them user-friendly.

These cards are estimated to cost anywhere between Rs 80-100 each.

Mismatch

But the RBI was worried over the mismatch between financial inclusion and literacy. Ms Thorat said “We are concerned over the low level of financial literacy in the country.” Accordingly steps were being initiated to correct the situation.

These included nationwide public campaigns. As part of this campaign, the RBI and the banks intended running a nationwide train spreading the message of financial literacy and accelerating the pace of banking.

Mr M.B.N. Rao, Canara Bank Chairman and Managing Director, said that the bank was readying for cross acceptance of biometrically-enabled cards. “As and when other banks are ready with their smart cards, we are prepared to accept them, since we already have ATM- sharing arrangements.”

He said that Canara Bank intended to complete banking inclusion in 1639 villages by the end of the current financial year and open at least 10 lakh ‘no frills’ accounts. The bank, he said, had opened about 6.5 lakh such accounts after completing the inclusion project in 23 districts where it was the lead bank. With the inclusion project, the bank had extended about 33000 general purpose credit cards to the customers.