Financial inclusion through MFIs

This is with reference to “Banks should explore subsidiary route to drive financial inclusion” ( Business Line , March 19) that Indian banks should explore the subsidiary route for achieving financial inclusion. The author has perhaps forgotten what happened to the Regional Rural Banks experiment, started with the objective of providing banking services to remote rural areas with low-cost manpower and infrastructure. RRBs were started as a subsidiary of public sector banks with a different (lower) salary structure but, in course of time, the trade unions of RRBs managed to wrest the sponsoring bank's pay scales and other service conditions. Thus, any experiment with public sector banks gets entangled in politics and the main objective is lost.

The best way is to utilise the infrastructure by way of branches, technology and trained manpower, assiduously built up by the micro-finance institutions to achieve financial inclusion. The staff of MFIs, mostly drawn from the local areas, evince adequate interest in providing financial services to the clients at their doorsteps. Though much maligned for the reported high interest rates and coercive recovery practices, the fact remains that the NBFC MFIs have spread their tentacles into the countryside and they have been doing a fairly good job of making micro-loans available without too many hassles.

Now, the RRBs have shifted their remote branches to urban and semi-urban centres, inconveniencing the clientele but facilitating their staff members.

The country is likely to pay a price for ignoring the contribution made by the MFIs.

B.Vithal Rao

Hyderabad

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