RBI issues concept paper on Financial Literacy

Mumbai, Apr 3 (UNI) The Reserve Bank of India (RBI) today sought a ''total and complete'' involvement of top management of banks for the success of financial literacy and credit counselling, which is in its infancy in India.

The RBI, which came out with a concept paper on the issue, said it might issue detailed guidelines after a meeting of CEOs of major commercial banks, Indian Bankers Association, National Bank for Aricutlure and Rural Development (NABARD) and national level associations of cooperative banks, apart from experts and leading NGOs working in this field to discuss the concept, scope and modus operandi of providing financial literacy and credit counselling services.

Offering credit counselling could be made a part of fair lending code for banks in due course, the RBI said.

RBI might issue guidelines to facilitate the setting up of FLCCs by banks for group and individual counselling and to whom banks could also refer cases, apart from encouraging individuals to directly approach such centres. In its advice, RBI may sensitise banks to give due consideration to the Debt Management Plan prepared by such FLCCs before resorting to recovery measures.

RBI might evolve a mechanism for dissemination of information on FLCCs set up by the banks.

The Apex Bank has placed the concept paper on Financial Literacy and Credit Counselling Centres for public comments.

The Working Group to Examine the Procedures and Processes of Agricultural Loans, headed by C P Swarnkar, had recommended in its report that banks should actively consider opening of counselling centres, either individually or with pooled resources, for credit and technological counselling. Another Working Group, constituted by the Reserve Bank to suggest measures for assisting distressed farmers, has also suggested that financial and livelihood counselling are important for increasing viability of credit.

Based on the recommendations of these working groups, the Reserve Bank had in May 2007 advised all the State Level Bankers' Committee (SLBC) convenor banks that they may initiate action to set up a Financial Literacy and Credit Counselling Centre (FLCC) on a pilot basis in any one district in the State/Union Territory coming under their jurisdiction. Several banks have since taken initiatives in opening credit counselling centres in the country.

The concept paper was a step for RBI to move forward on the issue, the RBI said quoting Finance Minister P Chidambaram's announcement in the Budget that individuals such as retired bank officers and ex-servicemen would be allowed to be appointed, among others, as credit counsellors.

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