Wide variation in banking coverage between Indian states:RBI

Kochi, Sep 19: There is a wide gap in the reach of banking services between various Indian states, with 89 per cent of the adult population in Kerala having deposit accounts as compared to 21 per cent in Nagaland, RBI Executive Director V S Das said today.

Inaugurating a national conference on 'Financial Inclusion and Beyond:Issues and Opportunities for India', Mr Das said the national average was 59 per cent, which was quite low compard to developed countries such as Britain, where it was more than 90 per cent.

Stating ''financial inclusion'' of the disadvantaged sections, particularly in rural areas, was a major concern of the RBI, Mr Das said that the State Level Bankers Committees had been advised in April this year to initiate action for indentifying at least one district in their state or union territory for 100 per cent financial inclusion.

A National Pilot Project for Financial Inclusion (NPPFI) had also been launched in Pondicherry for a period of one year from January one this year. The NPPFI envisages opening of saving bank accounts for all eligible individuals at their doorsteps in the rural and semi-urban areas by using simplified 'Know Your Customer' (KYC) procedures.

It also includes issue of 'grameen credit cards' and 'kisan credit cards' to all eligible farmers to enbale them to source their input, consumption and post-harvest requirment; a one-time settlement scheme to bring in existing defaulted borrowers to the pilot project after settlement of dues.

The issue also comprises strengthening of self-help groups by giving general line of credit, based on the past records; providing social security through insurance products; IT connectivity at branch level and facilties like overdraft to all eligible individuals, preferably at the lower segment.

The RBI was also keen to utilise the vast network of post offices, numbering 139,000 in the rural areas. An initial project had been started in Maharashtra to purvey rural credit in association with post offices. If found successful, it would be extended to other states also, he said.

Mr Das said the RBI was also looking forward to the findings and recommendations of the Committee on Financial Inclusion, set up by the Centre under the chairmanship of Dr C Rangarajan, Chairman of the Economic Advisory Council to the Prime Minister. The committee is expected to submit its report by November-end. Describing 'financial inclusion' as delivery of banking services at affordable cost to the vast sections of disadvantaged and low-income groups who tend to be excluded by formal banking services, Mr Das said that financial inclusion was not an end in itself.

Instead, it was an important instrument for promoting the economic development of the hitherto neglected, but predominant sector of the country, he added.

Referring to the disparity in the reach of banking services between different Indian states, Mr Das said states such as Bihar, Orissa, Rajasthan, Uttar Pradesh, Chattisgarh, Jharkhand, West Bengal and a large number of North-Eastern states were ''under-banked'', where the average population per branch continued to be high compared to the national average.

The average population per branch in the country was 16,000 at the end of March, 2005, as compared to 64,000 in 1969.

Mr Das said the Annual Policy Statement of the Reserve Bank for 2005-06 had urged all banks to review their existing practices to bring them in line with the objective of financial inclusion and to make available basic banking through ''no frills accounts'' with either nil or very low minimum balances and charges.

Earlier, in his presidential address, Mr K N Kabra, Chairman, Institute of Small Enterprises and Development (ISED), the organiser of the national conference, said that micro-finance initiatives had become imperative as the government's anti-poverty programmes had not been able to deliver the desired results.

With the liberalisation of the economy, micro-finance had assumed greater importance. Micro-finance initiatives presently covered 16 lakh beneficiaries and an amount of Rs 7,000 crore.

However, for micro-finance to become an instrument for just and fair financial inclusion, it should be implemented in a time-bound manner, he added.

Mr Marc Soquet, Asia Coordinator, ILO, said almost 90 per cent of the labour force worldwide was deprived of social security.

He said India had launched the largest number of micro-insurance schemes in the world, covering health, life, assets and livestock.

While banks were gradually realising that the poor were not only bankable but also a source of profits, their micro-financing initiatives should not be guided by a ''market-oriented'' but a ''rights-based'' approach, he added.

UNI