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Policy changes for inclusion

Posted on July 29, 2014 by Sumita Kale
After a short lull, the financial inclusion policy space is on the move again. The DFS is set to unveil an ambitious new plan

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on August 15th. The scheme to be named Sampoorn Vittiyea Samaveshan (SVS) envisages bank accounts for every
Indian and banking services within 5km of every town and village, and all by March 2016! The focus will be on

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households, not on villages unlike the previous plan, and apart from a basic bank account, the scheme includes an
overdraft facility of Rs.5,000 and a Rupay-enabled debit and ATM card with inbuilt accident insurance cover of Rs.1 lakh.
The intent is there to link to technology and here the Aadhaar number will be most useful, this account will also be the
single point for government benefit receipts.

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The government does plan to tap all existing networks for thisnot just the banks, but post offices, payments banks etc
as well. One of the main problems that plague the current scenario is the low commercial viability of the BC agents, here
the government proposes to set remuneration at Rs.5,000 per month. It appears that this payout will also fall on the
banks. Banks also have to now make sure that every transaction is part of the digital online system, connected to the core
banking network. So there are quite a few many changes in the offing.
In addition to the DFSs plan, the RBI has also gone ahead. Draft guidelines for Payments Banks have been released for
feedback, and in a recent speech HR Khan has given a concise summary of inclusion in rural India, mentioning the intent
to tap into non-bank networks as well:
Several initiatives have been undertaken to expand banking services to remote areas of the country. The branch
authorisation policy has recently been rationalised, with commercial banks directed to open not less than a quarter of their
total branches in hitherto unbanked areas. Given the challenges involved in opening brick-and-mortar branches at a rapid
pace due to resource and time constraints, banks have been encouraged to avail of Business Correspondents (BCs)/
Business Facilitators (BFs) to further their inclusion efforts. Further, the Reserve Bank has now removed some of the
major restrictions on use of BC model; it has allowed for-profit NBFCs to work as BCs and the requirement of BC
touch-point being within 30 km radius of the bank branch has been dispensed with. Banks have been persuaded to switch
over to Core Banking Solutions (CBS) and leverage technology to the maximum extent possible. The growing focus on
mobile technology to deliver banking services is a manifestation of this initiative. Similarly, importance being attached to
non-banks and quasi-banks (payment banks, which are in the offing, can also function as BC of other banks), is also to
be seen in the context of efforts to expand financial inclusion through technology based payment system products. With
the cloud over Aadhar based unique identity being cleared, the pilots sponsored by the Reserve Bank for remittance
related cash-outs using pre-paid instruments are expected to gather momentum and could turn out to be a major initiative
in financial inclusion without the necessity of having bank accounts.

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