Mumbai: Efforts by the Reserve Bank of India (RBI) to enforce its initiative of inclusive banking seem to be showing results, with a majority of Indian banks submitting their business plans for financial inclusion in the next three years.
Photo: Hemant Mishra / Mint
The central bank had directed all commercial banks to submit by 31 March their plans to extend affordable banking services to the country’s large population of disadvantaged and low-income earners.
In response to RBI’s directive, a majority of banks, including State Bank of India, Union Bank of India, Bank of India, ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd, IndusInd Bank Ltd, Dhanalaxmi Bank Ltd and Yes Bank Ltd, have submitted their plans.
“The Reserve Bank of India has asked banks to submit their three-year plans on financial inclusion by 31 March, which includes how many villages the banks will cover and what products they would roll out,” said Tilisa Gupta Kaul, head of micro credit and agriculture at Dhanalaxmi Bank.
RBI aims to reach out to remote villages to spread awareness about the economy, and the financial services that banks offer as well as the benefits of using such services. Banks have tended to neglect such sections of the population on the grounds that delivering services to them was not financially viable.
Commercial banks have been using the bank correspondent model to tap the rural market. Under this model, the banking regulator allows banks to use non-governmental organizations, micro-finance institutions, a mix of retired bank employees and government employees, and many other civil society organizations to provide financial services on a commission basis.
According to data with the central bank, only 5% of 600,000 habitations in the country have a bank branch and around 50% of the population has a bank account. A mere 10% of India’s 1.2 billion population is estimated to have any kind of life insurance cover and 9.6% has any kind of non-life insurance.