The Hindu Business Line : ‘No frills’ lets them in; but real gains yet to flow

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‘No frills’ lets them in; but real gains yet to flow

FINANCIAL INCLUSION

Our Bureau

Bangalore, Dec. 12 Karnataka has become the first State in the country to achieve full financial inclusion driven by public sector Syndicate Bank, which is the lead bank for the State.

The achievement was made after 26.27 lakh “no frill accounts” were opened by all the public and private sector banks. “No frill accounts” are accounts with nil or low minimum balances. The requirement of a minimum balance in the past had prevented a vast majority of the population, especially in the rural regions, from opening bank accounts. Minimum balances prescribed ranged from Rs 500 to Rs 2,000. Financial inclusion is the initiative of the Reserve Bank of India, triggered by concerns that over 41 per cent of the population are beyond the reach of the banking sector.

Syndicate Bank’s chairman and Managing director, Mr C. P. Swarnkar, said at the meeting of the State Level Bankers Committee (SLBC) here on Wednesday that the exercise of opening the accounts was completed in all the 29 districts of Karnataka. Under the project, all the banks in the State have also issued general purpose credit card facility to 31,240 account holders. Ironically, it is only in Bangalore, the country’s IT hub, where the financial inclusion remains incomplete. But Mr Swarnkar said, “We will complete Bangalore metro region coverage also before the end of the month.”

Only first phase

However, he said that only the first phase of the project was completed. “The task of financial inclusion would be inconclusive if the banking sector does not meet the credit requirement of the households to enable them to take up viable economic activities,” he said.

Among the States likely to achieve full financial inclusion in the coming months are Himachal Pradesh, Andhra Pradesh and Haryana, according to the Union Minister of State for Finance, (Expenditure, Banking and Insurance), Mr Pawan Kumar Bansal.

While Karnataka may be the first State, it was the Union Territory of Puducherry that completed financial inclusion one year ago under the leadership of another public sector bank — Indian Bank.

The Union Minister, however, cautioned banks that inclusion also implied compliance with priority sector directives. “We still find banks insisting on collateral for extending advances under the PMRY (Prime Minister’s Rozgar Yojana) scheme,” he said. PMRY loan scheme is intended for the unemployed youth to start small businesses. At least six per cent of priority sector advances are expected to fall in the PMRY category, though many banks have fallen short of this target.

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