High on am­bi­tion

Govern­ment set am­bi­tious tar­gets for the fi­nan­cial in­clu­sion plan, but ig­nored cru­cial needs

Down to Earth - - COVER STORY -

Three years af­ter the Fi­nan­cial In­clu­sion Plan ( FIP) was im­ple­mented in the coun­try, the Re­serve Bank of In­dia ( RIB) pre­pared the progress re­port of the first phase of the plan. The re­port states that the coun­try is show­ing signs of im­prove­ment in in­clud­ing the low in­come and dis­ad­van­taged ru­ral pop­u­la­tion in the for­mal bank­ing sys­tem. The state- level bankers’ com­mit­tees of dif­fer­ent states, the nodal body for im­ple­men­ta­tion of FIP, also claim sim­i­lar achieve­ments. Mad­hya Pradesh claims to have achieved its tar­get of cov­er­ing all vil­lages with more than 2,000 people. In Ma­ha­rash­tra, against a pop­u­la­tion of 78 mil­lion, the state has 70 mil­lion bank ac­counts, says L M Desh­mukh, mem­ber sec­re­tary of the state- level bankers’ com­mit­tee. “Andhra Pradesh has suc­cess­fully com­pleted the task of pro­vid­ing bank­ing ser­vices to all the 6,640 vil­lages which have more than 2,000 people,” says M Bala Bhasker of Andhra Bank, chief man­ager state-level bankers’ com­mit­tee. Jhark­hand also claims hav­ing achieved the tar­get.

Based on these, the Nachiketa Mor Com­mit­tee, set up by RIB, stated in its re­port that the tar­get of uni­ver­sal fi­nan­cial in­clu­sion by Jan­uary 1, 2016, is achiev­able. The com­mit­tee was formed in Septem­ber 2013 to pre­pare a roadmap of fi­nan­cial ser­vices for small busi­ness and low in­come house­holds. Ground re­al­ity and facts be­lie the claim. RBI’s an­nual re­port states that 119,000 vil­lages have been cov­ered un­der FIP. Ac­cord­ing to Cen­sus 2011, the coun­try has only 115,000 vil­lages with more than 2,000 people. These vil­lages com­prise more than half of the ru­ral pop­u­la­tion— 400 mil­lion. As per RBI’s an­nual re­port only 100 mil­lion ac­counts have been opened in the first phase.

The com­mit­tee also based its re­port on the suc­cess of Aad­haar card en­rol­ments for di­rect ben­e­fit trans­fer scheme, says Cha­ran Singh, chair pro­fes­sor RIB at IIM Ban­ga­lore. The

Govern­ment banks have a com­bined staff

strength of 850,000. More than 200,000 posts are



coun­try has al­ready given Aad­haar num­bers to 550 mil­lion people. Af­ter link­ing them with their bank ac­counts, achiev­ing the uni­ver­sal fi­nan­cial in­clu­sion tar­get would not be dif­fi­cult, the com­mit­tee as­sumed. But the mega pro­gramme lost its ob­jec­tive af­ter the Supreme Court or­dered that it was not manda­tory to have an Aad­haar card to avail govern­ment ben­e­fits, says Singh. “The 2016 tar­get is far too am­bi­tious,” he adds.

When the govern­ment rolled out DBT in Jan­uary 2013, there were only 4 mil­lion ben­e­fi­cia­ries in the first phase. These, too, could not be cov­ered be­cause of the ab­sence of bank­ing in­fra­struc­ture and tech­ni­cal glitches in pre­par­ing bio­met­ric Aad­haar card ( see ‘ Tran­si­tion Fail­ure’, June 16- 30, 2013). Cov­er­ing 833 mil­lion ru­ral people un­der FIP, no doubt, is a gi­gan­tic task.

Govern­ment fal­ters

When the govern­ment planned FIP, it adopted a tech­nol­ogy- driven model. The aim was to re­duce cost and curb cor­rup­tion. But it ig­nored the fact that tech­nol­ogy has its own con­straints. In­ter­net con­nec­tiv­ity in re­mote ar­eas is very poor and bank­ing cor­re­spon­dents de­mand broad­band ser­vices for seam­less ser­vice in trans­fer­ring bio­met­ric files. To over­come the cri­sis, the govern­ment launched a pro­gramme to pro­vide broad­band ser­vices to all the 250,000 pan­chay­ats in the coun­try. It aimed to com­plete the task by 2013, but till date noth­ing has been done. The tar­get has now been ex­tended to 2015.

As per RIB rules, each bank branch must or­gan­ise camps to make people aware of FIP. This has hap­pened, but only on paper. Camps were planned in two blocks of Sa­gar district in Mad­hya Pradesh on April 21. It was can­celled at the eleventh hour. “This is the third time that such a pro­gramme has been can­celled. On paper, how­ever, it was stated to be a suc­cess,” says a bank of­fi­cial on con­di­tion of anonymity. To ed­u­cate people, banks have opened 896 fi­nan­cial lit­er­acy cen­tres across the coun­try, but few func­tion.

There are se­ri­ous flaws in the ap­point­ment of bank­ing cor­re­spon­dents. Al­most 200,000 cor­re­spon­dents were ap­pointed in the first three years of FIP. Banks fix their IT ser­vice providers through bid­ding. The ser­vice providers ap­point bank­ing cor­re­spon­dents. “This is against the spirit of FIP,” says Navin Ku­mar of the Na­tional In­sti­tute of

Bank­ing Man­age­ment, Mum­bai. It smacks of ir­re­spon­si­bil­ity and is the prime rea­son for poor re­la­tions be­tween cor­re­spon­dents and banks, he adds.

Be­sides, the schemes that banks of­fer are more for the ur­ban pop­u­la­tion than ru­ral folks. “To en­cour­age credit lend­ing, the fi­nan­cial prod­ucts should suit ru­ral needs,” says Gopal Naik, pro­fes­sor IIM Ben­galuru.

Fre­quent changes in de­ci­sions by banks have not gone down well with people ei­ther. Banks had not even com­pleted the tar­get of cov­er­ing vil­lages with a pop­u­la­tion of more than 2,000 pop­u­la­tion, that the sec­ond phase was im­posed. It tar­gets cov­er­ing vil­lages with less than 2,000 people. “There have been in­stances in Kar­nataka where the area of oper­a­tion for the bank was changed af­ter it had started work,” says Singh. “The bank lost its in­vest­ments, while thou­sands of people suf­fered.”

FIP im­ple­men­ta­tion in­creased bank ac­counts by 100 mil­lion in three years. But the govern­ment made no ef­fort to in­crease bank staff. “Cur­rently, there are only 850,000 staff in govern­ment banks. More than 200,000 posts lie va­cant,” says C H Venkat­acha­lam, gen­eral sec­re­tary, All In­dia Bank Em­ploy­ees’ As­so­ci­a­tion. Banks’ ap­proach to­wards FIP is, there­fore, half-hearted.

People of Par­so­ria vil­lage in Mad­hya Pradesh queue up at the bank for trans­ac­tions

Ramesh Ku­mar, 60-year-old tea ven­dor in Sa­gar district in Mad­hya Pradesh, could not open a bank ac­count be­cause of

tech­no­log­i­cal glitches

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