The Hindu Business Line : Banks asked to lend to no frills a/c holders

Mumbai, Sept. 12 Banks must offer loan products that are suitable for low income borrowers to bring them into the formal system and for financial inclusion to be successful, said Ms Usha Thorat, Deputy Governor, Reserve Bank of India.

Addressing a banking seminar, Ms Thorat said that while banks have opened lots of ‘no frills’ accounts, in many cases the accounts have not been operated upon at all after having been opened, due to inadequate follow-up, cost of transaction and access constraints.

“In order to improve access and use of these accounts, banks will have to offer the services much closer to the customer — either through mobile branches, satellite offices, extension counters or using intermediaries like self help groups/micro-finance institutions or through business correspondents using IT to increase scale, access and reduce cost,” she said.

Banks must increase the outlets where customers can do ‘cash-in’ and ‘cash-out’ transactions, she said.

The number of ‘no frills’ accounts has gone up from 5 lakh in March 2006, to 60 lakh in March 2007 and 1.5 crore in March 2008. Low income borrowers can be given credit by the simple overdraft route or general credit card, based on their cash flow or track record, Ms Thorat said.

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