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Former Deputy Governor of RBI K C Chakrabarty said though the Indian banks were suited to engage themselves in financial inclusion, they have by an large failed to deliver on the ground.
“In the past decade, the Indian banks could not include even 50 per cent of population, who did not have access to banking in the country,” he said at an event on financial inclusion, organised by the Indian Camber of Commerce here on Saturday.
The former banker admitted that it was a failure on the part of the banks. However, Chakrabarty viewed the activity of the micro finance organisations among the poor and un-banked as a “service”. He said MFI charged very high interest rate; maybe lower than what money lenders extracted from the poor. “But by definition this could not be termed as an act of financial inclusion,” he said.
On the contrary, the commercial banks were chasing and reporting a grand number of the zero-balance no-frills accounts, most of which were inactive. The bank branches and official did not take interest in keeping these accounts active through allowing transactions or say a small overdraft, the former RBI official said.
Arun Kaul, CMD of UCO Bank, said that the banks, afflicted by human resources and cost issues, could not effectively deliver in terms of financial inclusion.
Vijay Mahajan, CEO of BASIX Social Services, banks lent funds to MFIs at a substantially high rate at a net interest margin of about 5 per cent. He said the MFIs provided the last-mile reach, slogged it out for recovery and faced external negatives such as loan waivers.
Chandra Shekhar Ghosh, CMD of Bandhan Financial Services, argued that for an MFI reaching the financial service at the doorstep of the clients involved cost and different business engagement than that followed by the commercial banks.
RBI, which announced the new policy for banking licenses on 22 February, 2013, came up with the concept of “differentiated bank license” for effectively extending financial inclusion.
Bandhan and IDFC obtained in-principle approval for banking license. The new kind of banks is expected to be focussed on inclusion while delivering all other usual services.
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