The Hindu Business Line : Ministry to take up licensing of local area banks with RBI

New Delhi, April 23 The Finance Minister, Mr P. Chidambaram, has said that the Finance Ministry would soon take up with the Reserve Bank of India (RBI) the issue of resuming licensing of local area banks (LABs).

Addressing the members of consultative committee, which met here today to discuss the Dr C Rangajaran Committee report on financial inclusion, Mr Chidambaram also said that as in the case of most other indicators of development, there are regional variations observed in the level of financial inclusion across regions, occupational and social groups.

The Finance Minister said that the southern region had registered a far higher level of financial inclusion followed by the West, North and North-eastern regions of the country.

While Pondicherry is the first Union Territory to achieve full financial inclusion, Palakkad of Kerala is the first district in the country to attain full financial inclusion. The Minister said that six public sector banks had already implemented online submission, appraisal and approval of educational loans and other banks are also in the process of making their educational loan schemes completely online.

Financial Inclusion is defined as the process of ensuring access to the financial services and flow of timely and adequate credit for vulnerable groups such as weaker sections and low income groups at an affordable cost. Considering that a sizeable section of the population, particularly the low income group, remained excluded from the services provided by the financial sector, the Government had constituted a Committee on Financial Inclusion with Dr. C. Rangarajan as the Chairman.

The committee had suggested that financial inclusion should be taken up in a mission mode as a financial inclusion plan at the national level.

It had also recommended, inter-alia, that Regional Rural Banks should be given separate exclusive targets for micro finance and financial inclusion.

The Finance Minister in his Budget 2008-09 speech had indicated that the Government proposes to immediately accept two recommendations of the committee viz :

-- To advise commercial banks including Regional Rural Banks (RRBs) to add at least 250 rural household accounts every year in each of their rural & semi urban branches.

-- To allow individuals such as retired bank officers, ex-service men etc. be appointed as Business Facilitator or Business Correspondent or Credit Counsellor.

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