According to Census 2011, India has a population of about 1.28billion.Out of which, 21.9% of population is still under the poverty line. Many economists say that the poverty can be eradicated by financial inclusion of economic lower sections, but what does that exactly mean? and what role can the RBI play to achieve financial inclusion? Financial inclusion is the process of availing financial services in minimum affordable cost to weaker sections of society so that they can break the shackles of poverty.
According NSSO 59th round survey result; overall 73% of farmers do not have access to credit. As per Crisil report on financial inclusion index out of 100, it has been increasing constantly from 35.4 to 37.6 to 40.1, but is this sufficient? Reserve Bank of India, being India’s central banking institution has taken several steps such as advising bank to open Basic Saving Bank Deposit (BSBD), Relaxing KYC norms, Simplifying the Bank authorization policy, Compulsory opening of branches in places where there are no banks and etc. Recent decision of RBI in giving new licenses to small bank is the one more step to boost financial inclusion. Guidelines laid down for this steps are as follows: Minimum Capital required is Rs.100 crore, professionals with 10 years of experience are eligible, Small bank to follow banking norms, initial capital of investor should be minimum 40% of capital, Minimum 50% of loan should be Rs 25 lakh or less, Investor cannot exit or sell investment before 5 years. It is a win-win situation for investors and consumers as it is an opportunity for MFI, NBFCs, and Local Area Banks (LAB) to become national banks and also it is the poor people who will be benefitted out of this step. As it is said nothing is perfect in this world, some of the investors are opposed to geographic limitations set by RBI, which is resulting delay in decision of distribution of license.
As it was rightly said by Ronald Regan “Trust and Verify”, RBI can also trust the investors by giving them free hand by easing the norms. Finally, RBI’s dream of financial inclusion will be fulfilled, if there is top down push from government in right policy forming and bottom up push from RBI helping government from another end in making this country a better place to live.