Making Financial Inclusion A Reality Banks in Odisha have failed to reach inaccessible areas
Out of 87,000 bank branches in the country 30 per cent are in the rural areas. With 70 lakh SHGs linked to 2070 crore finance, Micro Finance Institutions (MFI) industry is growing with 18,200 crore business. Still there is a need to include rural India.
If poverty alleviation is the objective, if addressing BPL people is the goal then profit motivation sometimes needs to be re-thinking/re-viewing and re-looking.
Despite repeated circulars from RBI and decisions in State Level Bankers Committee (SLBC) meetings, banks in Odisha have failed to reach those inaccessible areas targeted to be included in banking operations. Though SLBC has identified 1877 villages with 2000 plus population and has distributed among banks, they are yet to achieve the target under Financial Inclusion Programme (FIP).The public sector banks, which were assigned with 1164 villages till June 30 of which, they have been able to cover 889 villages with 16 branches, 857 Banking Correspondent (BCs) models and 16 mobile van banking outlets. Private sector banks like ICICI and Axis were given one each but they have failed to do so. Gramya banks, which were asked to cover 711 villages, have opened only 76 outlets of which are 19 bank branches, five BCs and 52 mobile van banking outlets. To realise total FIP it has been decided to open at least 84/85 branches in the current financial year. Besides these on convergence, it has been agreed that people have the option of multiple banking and banks should have no problem.
Millions of poor in India are financially excluded. There is a need for comprehensive social and economic inclusion and integration. Financial inclusion thus constitutes one of the priority areas of development policy concern towards facilitating poverty reduction.
The National Sample Survey data shows that 51.4 per cent of nearly 89.3 million farm households do not have access to any credit either from institutional or non-institutional sources. A large percentage of rural population does not have a deposit account which means that they don’t have access to even the basic financial services. The country has 87,000 bank branches out of which only 30 per cent are in rural areas. There is a need to include more in rural India. The government of India including the RBI has started a number of initiatives aimed at providing basic financial services for everyone. Despite these initiatives the impact on the ground seems to be limited and non-uniform.
Out of 30 districts in the state, 29 districts have been included leaving Malkangiri, which is inaccessible and insurgency prone. The SLBC in its last meeting has decided to include Malkangiri by December 31 this year. According to the agenda set for the meeting, which was held on August 18, 2011—as per the directive received from IBA, Mumbai—villages with population of 1000 to 2000 have been identified. The LDMs of the respective districts have allotted the villages to different banks with regards to their service area allocation in the DCCs and are requested to do so immediately and send the approved list to the Convenor, SLBC, for ratification by SLBC.
Meanwhile, to further this process G C Pati, Additional Secretary, Government of India, Ministry of Agriculture, in his letter dated July 20 to the Chief Secretary has asked government to promote banking facilities in the unbanked villages through BC model. He stated that for promoting inclusion and expanding outreach of banking facilities in unbanked area, RBI had permitted the banks to use the services of various organisations like Self Help Groups (SHGs), Primary Agriculture Credit Societies (PACs) etc as intermediaries through the use of Business Facilitators (BFs) and BC model. The BCs are permitted to conduct banking business as agents of the banks at places other than bank premises. The scope of activities that could be undertaken by BCs includes disbursal of small value credit; recovery of principal/collection of interest; collection of small value deposits; sale of micro insurance/mutual fund product/pension product/other third party products and receipt and delivery of small value remittances and other payment instrument etc.
He further added that the BC/BF model was envisaged to play an important role in achieving total financial inclusion. Though RBI has allowed the commercial banks to engage PACs as BCs and BFs but the progress in this regard is not satisfactory. NABARD has reported that so far only 207 PACs in Andhra Pradesh and 11 PACs in Jharkhand have been engaged by commercial banks as BCs. considering the immense potential of PACs, commercial banks should take up this issue in a time-bound manner and state governments should play a proactive role in it.
In addition to this, financial analysts have observed, BC model is hugely helping poor people transact money so frequently that they are very much feeling part of the financial world. BC model is a pitch for institutional gaps. Banks don’t feel it is a viable model but they are forced to do this. Micro payments lay the foundation of financial inclusion; there is a need to develop a micro-payment infrastructure.
Agriculture has been the most neglected sector as far as bank assistance is concerned. According to the data available with SLBC the total agriculture support target was 4523.40 crore but under Annual Credit Plan (ACP), banks have provided only 1543.15 crore, out of this crop loan target was 3045.29 crore, achievement is 1313.06 crore, agriculture term loan target was 795.83 crore, achievement is 149.25 crore, allied sector target was 682.28 and the achievement is 80.84 crore. The above data reveals that the performance of banks under ACP 2011-12 up to the first quarter ended June 2011 is only 34 per cent. The district-wise review of performance for June 2011 says that except Jagatsinghpur district, no other district has achieved more than 60 per cent of its target. This has been a bone of contention between banks and state government, even CM has expressed concern over this. Though the finance under agriculture sector by commercial banks as on June 30, 2011 is 27.43 per cent against the national target of 18 per cent.
Banks in Odisha with the network of 3363 branches (Public Sector 1991, Private Sector 158, RRBs 875, Co-operative 337 and others 2 OSFC &SIDBI), out of which 1892 Rural Branches, 792 Semi-Urban branches and 679 Urban Branches and with 182372.20 crore turnover; have only 22063.71 crore agriculture advances which is 30.52 per cent of the total advances.
By financial inclusion it means the provision of affordable financial services viz. access to payments and remittance facilities, savings, loans, insurance and many other social security services like pension etc.
Of late, it has been felt that the poor can take out a loan and repay at a competitive rate. Recent experiments with the poor and especially the rural mass has proved that without the grant and subsidy the development can happen.
Micro-finance institutions also play a key role in expanding and achieving the objective of financial inclusion.
Though, Government of India has brought Micro Finance (Development and Regulation) Bill 2010 after the recommendations made by the Malegam committee which was constituted by RBI after AP crisis to regulate and recognise micro finance and micro credit in the country.
With clouds hanging over MFIs and banks departing from priority sector lending—there in a possibility of new kinds of banks getting licenses, thus paving the way for new financial inclusion banks.
By Sudarshan Chhotoray From Bhubaneswar