6 June :The following is the text of the speech of Minister of State for Finance, Shri Pawan Kumar Bansal delivered at the 15th General Assembly organized by World Savings Bank Institute, here today:-
“It is indeed a privilege to be present here at the Inauguration of the 15th General Assembly of the WSBI which is being held for the first time in India.
The chosen theme of the WSBI General Assembly, ‘Overcoming financial exclusion through microfinance’, is most relevant to the objective of inclusive economic growth especially in developing countries like India. Access to finance by the poor and vulnerable sections of society, is a form of empowerment, that will help reduce poverty and bring these groups into the economic mainstream.
The Indian growth story has been attracting worldwide attention. With the economy turning in a growth rate of 9% in the 2007-08, the growth rate for the last 4 years has averaged 8.9%. We are confident of sustaining the growth momentum in the current fiscal also.
In its landmark research work titled “Building Inclusive Financial Sectors for Development” (2006), the United Nations raised a basic question “Why are so many bankable people unbanked?” Financial inclusion has become an issue which is at the centre stage of all international and national deliberations, in the context of formulating development strategies that touch the lives of the economically weaker segments of the population, to increase their participation in the process of economic growth and social development. It involves the all important process of ensuring access to a range of financial services such as bank accounts, credit, remittances and payments, insurance facilities and financial advisory services, at an affordable cost to the economically vulnerable groups.
The banking sector in India has recognised this imperative and has undergone fundamental changes in the last two decades. As a result of various reform measures initiated by the Government, the banking system in India has become strong, healthy, dynamic and resilient – a necessary condition for sustained economic growth and financial stability.
The focus in recent years has shifted to strengthening the Regional Rural Banks (RRBs), Urban Cooperative Banks (UCBs) and Rural Co-operative Banks, recognising their unique positioning and capacity to reach out to the rural poor.
Most businesses of banks in India is, however, still concentrated in semi urban areas. The challenge going forward is to increase banking penetration further. Banks, therefore, need to expand their outreach to hitherto under-banked areas/States by re-focussing their strategies and using appropriate technology and delivery channels.
Since 2006, opening of new branches for any bank is approved only on condition that at least half of such new branches are opened in under-banked areas.
A beginning has also been made to enhance financial literacy and impart financial education to enable new entrants into employment to better manage their finances. “No frills” or “basic bank accounts” are now on offer to every individual. These accounts provide minimum basic banking facilities to the account holders at low or minimum costs to banks. A good number of bank branches have reported 100 per cent financial inclusion. Latest endeavour of the banks is now on loan swapping. Under the loan waiver and debt relief scheme, farmers will again become eligible for fresh agricultural loans. A large number of them are becoming the members of the Self Help Groups.
Microfinance institutions could also play a crucial role in broadening the access of financial services to various sections of society as many of them operate in a limited geographical area and have a greater understanding of the issues specific to rural poor, enjoy greater acceptability and have flexibility in operations which gives a level of comfort to their clientele.
Microfinance has been long recognised and practised in India as a tool for extending banking services to the poor to enable them to save and invest or partake of credit thereby facilitating them to break the chain of poverty. Several micro-credit schemes have brought rich rewards to the beneficiaries. With hardly any NPAs in micro-credit, more and more banks are looking at increasing their operations in this area in a big way.
The focus of the recent policy initiatives has been to promote financial inclusion by providing basic banking services to the common person. The broad approach to financial inclusion aims at ‘connecting people’ with the banking system and not just credit dispensation; giving people access to the payment system; and articulating financial inclusion as a viable business model and opportunity.
The Self Help Group (SHG) which provides a good Bank Linkage programme, is a major plank of the strategy for delivering financial services to the poor in a sustainable manner. As at the end of March, 2007, as many as 2.92 million SHGs have been credit linked with banks, benefitting more than 40 million poor families. 80% of members of the Self Help Group constitute women.
There are several rural and urban poverty alleviation programmes promoted by Government, notably the National Rural Employment Guarantee Programme. From April, 2008, the National Rural Employment Guarantee Programme, which ensures that every rural household in need can ask for paid wage work upto 100 days per year, was rolled out nationwide. Banks are being made intermediaries for routing NREGP payments through bank accounts to enhance financial inclusion.
In a vast country like India with a large rural population, the challenges of promoting financial inclusion are enormous. Inaccessibility, distances, lack of proper infrastructure, pose problems that are not easily overcome.
Creative solutions need to be found for bringing the basic financial services to these areas. Savings products need to be designed to suit the pattern of cash flows of a poor household, small loans and overdraft facilities need to be made easily available for productive and personal purposes.
I am happy that this occasion will offer an opportunity to exchange views on and learn from each others’ experiences in handling this important issue.
In India, we are leaving no stone unturned in utilising the vast infrastructure and soft skills available in our banking and post office network to identify programmes, develop models and products and improve processes whereby more and more intermediation by these institutions becomes possible, in order to widen and deepen the access to financial services to the majority of people who presently do not have such access.
Once again, my heartiest congratulations on the occasion and I hope all the participants are enriched by the deliberations and enjoy a very pleasant stay in Delhi.” Courtsey : DD NEWS