RBI takes woman, girl-child route to financial inclusion

In a bid to push financial inclusion, an RBI panel has recommended a slew of measures, including a special deposit scheme for the girl child, government-to-person social cash transfer, and opening interest-free windows (Islamic banking) by banks.

To address the problem of a large number of women being left out of the financial system, the committee on medium-term path on financial inclusion chaired by RBI Executive Director Deepak Mohanty said banks have to step up account opening for women. The committee suggested that the government consider a welfare scheme — Sukanya Shiksha — that can be jointly funded by the Central and State governments.

The scheme will link education with banking habits by crediting a nominal amount in the name of each girl child belonging to the lower income group who enrols in middle school.

This would make it incumbent on the school and the lead bank and its designated branch to open an account for social cash transfer. This scheme will also have the benefit of lowering school dropout rates and empowering the girl child. According to Brookings Institution’s latest Financial and Digital Inclusion Project Report and Scorecard , India accounts for 21 per cent of world’s and 67 per cent of South Asia’s unbanked population. Though the Pradhan Mantri Jan Dhan Yojana has facilitated the opening of 185 million bank accounts as of September 2015, there is still a gap.

Given the low level of personal disposable income, particularly for the bottom quartile of the population, the RBI committee is of the view that meaningful financial inclusion will not happen without Government-to-Person (G2P) social cash transfers.

The committee said there is a need for better use of the mobile banking facility for G2P payments, and this would push government in its financial inclusion drive.

The committee also recommended that a unique biometric identifier such as Aadhaar be linked to each individual credit account and the information shared with credit information companies. This will not only help in identifying multiple accounts, but will also help mitigate the overall indebtedness of individuals who are often lured into multiple borrowings without being aware of the consequences.

The committee recommended that commercial banks in India be enabled to open specialised interest-free windows with simple products. In an interest-free banking structure, the bank accepting deposits will not engage in lending as a purely financial activity but undertakes operations on the basis of profit and loss sharing by engaging in equity and/or trade financing.

To increase formal credit to all agrarian segments, the committee said digitisation of land records is the way forward.

This should be backed by an Aadhaar-linked mechanism for credit eligibility certificates to facilitate credit flow to actual cultivators. The panel suggested phasing out the agricultural interest subvention scheme and ploughing the subsidy amount into an affordable technology-aided universal crop insurance scheme with a monetary ceiling of ₹2 lakh to end agrarian distress.

To encourage discipline in loan repayments, the panel recommended a scheme of ‘Gold KCC’ (Kisan Credit Card) with higher flexibility for borrowers with prompt repayment records.

This move could be dovetailed with a government-sponsored personal insurance, and digitisation of the KCC to track expenditure pattern.

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