Enough homilies have been given on financial inclusion for the past eight years. We have entered the eighth year since NSSO Survey laid the foundation of formal financial inclusion initiatives in the country. Reports, committees, announcements, commitments, budgetary allocations and campaigns – we have seen it all. By any yardastick, backed by political will and leadership support, financial inclusion should have been complete. Alas! It has not even made a significant start.
With focus on committees and speeches by the regulators and on committees and purchases by the department of financial services, we have faltered somewhere. The importance of livelihood linkages, credit, financial literacy and capacity-building in amelioration of poverty has largely been put on the back burner, while opening of no-frill accounts have hogged the limelight, where only about 2 per cent of total these accounts opened have an overdraft facility. In the meanwhile, we have graduated from appointing mere committees to appointing high-level committees with essentially the same constituents and plans that do not work.
Consider a few facts during the last two years: 25 per cent decline in the growth rate of self-help groups; deceleration of priority sector lending to 12.9 per cent from 13.5 per cent; decline in micro-credit from 23.4 per cent to -14.7 per cent; decline in education loans from 18.7 to 12.2 per cent. Even cooperatives are dying a slow death, having registered a negative demand at -6 per cent. These are but a few findings of the third state of the sector report that was released by SKOCH recently.
Domestic credit provided by the banking sector in India stands at abysmally low even compared to several other Asian economies. There is poor linkage between real and the banking sector as shown by a recent World Bank report on cross-country analysis of financial inclusion. It says per 100,000 adults, we have 10.64 branches versus Brazil that has 46.15. We have only 8.9 ATMs compared to 119.63 in Brazil. This amplifies the fact how poorly penetrated the whole system is.
We urgently need to bring the focus back on credit and developmental banking, rather than over emphasising technologies. The poor of India need handholding. Financial literacy has to be given importance. The business facilitator model that has been junked by various banks needs revival, as it is the only change agents who could educate people on the importance of banking. Article 21 of our Constitution mandates compulsory education for all till the certain age – financial literacy should be made a compulsory part of school curricula across the education system. Savings as a habit has to be inculcated and not dictated. One of my gurus on financial inclusion, K C Chakrabarty, Deputy Governor of RBI, had said ‘financial inclusion is about passion and not about fashion.’ We have now seen enough passion and need to mature financial inclusion into action.