CHAKRABARTY SAYS BANKS CAN EASILY BEAR COST OF FINANCIAL INCLUSION

While banks are seeking government support, at least partially, to fund their financial inclusion programmes, the Reserve Bank of India (RBI) thinks the lenders can bear the cost comfortably.

It says the challenge is not funding but to have a viable business and delivery model based on information, communication and technology.

“In reality, the truth is that without appropriate technology, they (banks) could not have done it (financial inclusion) even when willing. It is not their willingness but lack of ability to deliver which is coming in the way,” RBI Deputy Governor K C Chakrabarty said in Bhubaneswar on Saturday.

“In reality, the cost can easily be borne by the banks. The overall cost of financial inclusion will not be more than Rs 3,000-4,000 crore per year. State and central governments can obviously provide a helping hand. Thus, the basic problem is not cost or willingness but absence of a business model and an ICT-based delivery model,” he said.

RBI is pushing banks to achieve financial inclusion and the initial plan is to provide basic banking services to villages with a population of above 2,000 in the next two years. The banks also need to plan to cover villages with population of less than 2,000 in an integrated manner over next three to five years. The objective is also to provide banking services to the entire population in urban and metro centers.

Chakrabarty said if the country was aiming for financial stability, economic stability and inclusive growth with stability, it was not possible without financial inclusion.

“Financial inclusion is no longer a policy choice but a policy compulsion today. And banking is a key driver for inclusive growth,” he said.

The regulator had asked banks to submit their financial inclusion plans, duly approved by the respective broads. According to the plans submitted by the banks, close to 2,00,000 business correspondents and customer service points to be deployed over the next two-and-a-half years. In addition, more than 4,000 branches will be opened in unbanked villages, besides over 100 million no-frills accounts.

“The banks will really have to gear up for implementation of these plans. The numbers look good and if we can successfully execute the plans, India can present a role model to the world,” Chakrabarty said.

SOURCE: http://www.business-standard.com/india/news/chakrabarty-says-banks-can-easily-bear-costfinancial-inclusion/416561/