Banks may have just two years to achieve the ambitious target of providing a universal electronic bank account to every Indian resident above the age of 18.

This recommendation, among several others, was made by the central bank-appointed Nachiket Mor Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households.

Every resident should be issued a Universal Electronic Bank Account automatically at the time of receiving their Aadhaar number by a high quality, national, full-service bank. An instruction to open the bank account should be initiated by the Unique Identification Authority of India upon the issuance of an Aadhaar number to an individual over the age of 18.

By January 1, 2016, the number and distribution of electronic payment access points would be such that every resident would be within a 15- minute walking distance from such a point anywhere in the country.

Charges

Each such point would allow residents to deposit and withdraw cash from their bank accounts and transfer balances from one bank account to another, in a secure environment, for both very small and very large amounts, and pay “reasonable” charges for all of these services.

At least one of the deposit products accessible to every resident through the payment access points would offer a positive real rate of return over the consumer price index.

By January 1, 2016, each low-income household and small business would have “convenient” access to formally regulated lenders that have the ability to assess and meet their credit needs, and offer them a full range of “suitable” credit products, at an “affordable” price.

By that date, each district and every “significant” sector (and sub-sector) of the economy would have a credit to GDP ratio of at least 10 per cent. This ratio would increase every year by 10 per cent with the goal that it reaches 50 per cent by January 1, 2020.

Each low-income household and small business would have “convenient” access to providers that have the ability to offer them “suitable” investment and deposit products, and pay “reasonable” charges for their services.

Each district would have a Total Deposits and Investments to GDP ratio of at least 15 per cent. This ratio would increase every year by 12.5 per cent with the goal that it reaches 65 per cent by January 1, 2020.

Insurance products

Small businesses and low-income households may also get universal access to a range of insurance and risk management products which, at a minimum allow them to manage risks related to: commodity price movements; longevity, disability and death of human beings; death of livestock; rainfall; and damage to property, and pay “reasonable” charges for their services.

Each low-income household and small business would have a legally protected right to be offered only “suitable” financial services. While the customer will be required to give “informed consent”, he/she will have the right to seek legal redress if he/she feels that due process to establish “suitability” was not followed or that there was gross negligence.

(This article was published on January 7, 2014)
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