Deputy governor of the Reserve Bank of India K.C. Chakrabarty was chief guest at the Mint Clarity Through Debate in Chennai. Edited Excerpts from his speech:

I agree with the panel on many things, but many things I don’t agree (with). I have nothing against the loan waiver; it was a necessity.

Pitching for the poor: RBI deputy governor K.C. Chakrabarty at the Mint Clarity Through Debate in Chennai on Monday.

Let us first understand what you mean by financial inclusion? Opening a no-frill account is not financial inclusion. That’s the first thing (in the process of financial inclusion). If we define financial inclusion, many of the issues (confronting the implementation of the programme) will be over. Financial inclusion is about providing appropriate, transparent, cost-effective banking and financial products to the vulnerable group by the mainstream institutional players. So, NBFCs (non-banking financial companies), microfinance institutions do not come into picture. Financial inclusion has to be done by the banking system. NBFC’s have been there for 200 years; they have not been able to bring the financial inclusion.

At present, …99% of the society is financially excluded. Many of us do not know what is the most appropriate banking product for us, but we are discussing access for it. The initiative for this (the process of financial inclusion) has come from Reserve Bank of India. It was the governor, Reserve Bank of India, who said there has to be financial inclusion and that the banks have a responsibility.

First, we must change the mindset of people. We must change ourselves. And that’s where I have a problem. I think we are still not ready for change.

To make any product available to the society, we require technology. Because banking technology was not there, even when the banks were nationalized, we could not reach the people. The Cooperative movement was started, again for financial inclusion. In fact, urban cooperative bank was the first model for financial inclusion. But it could not succeed. Even today all banks have not implemented core banking solutions.

Financial inclusion is not just about opening no-frill accounts, it is also about banks extending an overdraft to such accounts and providing remittance facility.

The annual profit of banks, including those in the public and private sector is not less than Rs30,000 crore. Can they not spend Rs3,000 crore? If they think that is a viable proposition, where does the question of subsidy arises?

The focus should be on priority sector lending. (Besides,) government subsidy, through various schemes, should reach the right beneficiaries through bank accounts. If you can do that, it will be a totally viable proposition. Beyond that, don’t expect anything, don’t expect any subsidy, it is not necessary, it will not work.

Banks need to take advantage of the business correspondent model, which is a powerful reform measure. The scheme will be liberalized soon so that banks can extend the use of a business correspondent.

We require a high-level national committee for financial inclusion. It may be chaired by the finance secretary or the additional finance secretary, banking. The committee can have reputed people (from other sectors). Then the committee can set up the agenda, and decide on the “monitorable" targets.

We need to set up a high-level national committee for financial inclusion. The committee can set the agenda and identify monitorable targets.