RBI To Evaluate Financial Inclusion Drive

The Reserve Bank of India (RBI) proposes to evaluate the progress of districts under financial inclusion through an independent external agency, said RBI Deputy Governor V Leeladhar.

The State Level Bankers’ Committee (SLBC) will identify one district in each state for 100 per cent financial inclusion. He added that to bring more such districts under financial inclusion, RBI has asked banks to introduce more no-frill accounts and general purpose credit cards (GPCCs) with limits of up to Rs 25,000 in rural and semi-urban branches.

From The Business Standard. This is good news. Our own research in Karnataka by CMF RA Minakshi Ramji, a summary of which was published in the RBI's journal CAB Calling and presented at the RBI's College of Agricultural Banking a couple of months ago, revealed that the BPL holders of "no-frills" savings accounts created during the financial inclusion drive there rarely used their accounts. Many weren't even aware that they had accounts. This wasn't the banks' fault: frills or no-frills, it just doesn't make sense for someone from a BPL household to spend 20 - 40 rs traveling to a bank branch in order to deposit 30 rs. Which is why I was not very impressed when, after lengthy deliberations, one of the few concrete measures to increase financial inclusion recommended by the Committee for Financial Inclusion was to increase targets for opening of no-frills accounts by banks.

The financial inclusion drive, while not a bad idea, has only resulted in more of the same when it comes to financial access for the poor. Hopefully, the RBI's evaluation will shine some much needed light on the drawbacks of this approach.