Huge scope for industry in financial inclusion: Rangarajan
New Delhi – Dr. C.Rangarajan, Chairman, Economic Advisory Council to the Prime Minister, said on Wednesday that there is a dire need for a robust and efficient banking system to efficiently fulfill the needs of all the sections and sectors of the economy to fill the existing gap, especially in rural India.
Addressing the third Finance and Investment Summit organized by Confederation of Indian Industry (CII), here today,Dr. Rangarajan further said that, with appropriate financial products, innovation, change in mindsets, technology and partnerships, financial inclusion is a viable business model and should not be treated as a CSR obligation.
Various new entrants in the financial sector can indeed reap huge profits due to the immense potential, huge demand, rising rural purchasing power and low penetration in the rural areas, with the insurance penetration being as low as 4.4 per cent,he added.
According to a NSS Survey, about 50 per cent of India’s farm households do not have access to any credit services. Hence RBI is encouraging entry of private sector in banking sector and has highly relaxed norms for banks to open branches in Tier 1- Tier 6 cities to push financial inclusion.
Banks can now open branches in such centers without RBI’s prior permission and use the huge opportunity available for both private as well as public sector banks. It is however possible, if they more than just provide credit to people, they should also act as advisors.
He also called for better marketing management and effective provision and disbursement of credit to small and marginal farmers and Self Help Groups on behalf of Government instead of subsidies or low cost loans.
“Accelerated growth and development is a pre requisite to financial inclusion. If the economy is not growing at a good growth rate, no rural development schemes can be implemented. Further, Poverty is directly proportional to financial exclusion. To remove poverty, we need to provide financial services, insurance, pension schemes, credit to the vulnerable lot. In addition to availability of credit and other facilities to farmers, its cost is also a critical factor, and to reduce costs, we need to invest heavily in infrastructure – both physical and social infrastructure,” Dr. Rangarajan said.
Regarding banking regulations and guidelines, he said that there should be a proper balance struck, too little or too much of stringent regulations will both defeat the purpose.
He also released the CII – Deloitte Theme Paper on Financial Inclusion for Reviving Growth: Success Stories, Challenges & The Road Ahead.
“Financial inclusion is new paradigm of economic growth which plays a major role in driving away the poverty. Without financial inclusion, banks cannot reach the un-banked. Government has also encouraged banks to leverage technology to attain greater reach and penetration while keeping the cost of providing financial services to the minimum. There is a need for banks to develop new products and design new delivery models that are customized to the unique needs of the financially excluded population, both in the rural and urban areas,” shared Mr Jayant Davar, Chariman, CII NR & Co-Chairman & Managing Director Sandhar Technologies Ltd.
Emphasizing the importance of inclusiveness in the growth agenda and the role of financial inclusion, Mr Rajesh Srivastava, Summit Chairman and Chairman & Managing Director, Rabo Equity Advisors Pvt Ltd observed that the financial integration was necessary for sustainable development. The wide gap that exists in the penetration levels of financial services including Insurance and Pension schemes, especially in the rural areas, provides a huge opportunity for financial institutions, added Mr Srivastava.
Delivering the Theme address, Deepak Haria, Partner, Leader of India Financial Services Practice Deloitte Touche Tohmatsu India Pvt. Ltd, said that rural India is growing rapidly and lends itself to developing viable business models. Some of the sectors like telecom & FMCG have tapped the rural markets successfully and the same can be done for the financial services as well. What is required is greater understanding of the needs of the market, innovation, entry of pvt corporates, easy entry & license norms, better infrastructure and a change in mindset and accordingly creating products and services. Deloitte Touche Tohmatsu India Pvt Ltd was also the knowledge partner for the Summit.
The inaugural session was followed by panel discussions on Financial Inclusion for Reviving Growth: Success Stories, Challenges & the Road Ahead, New Private Sector Banks and their Potential Role in Promoting Financial Inclusion, Tapping Rural Market – Role of Insurance & Pension Fund Industry, Financing the Infrastructure Development – Extending Infrastructure to the Last Mile.
The panels were addressed by leading luminaries of the financial sector including Mr R K Dubey, Chairman & Managing Director, Canara Bank, Mr B B Joshi, Executive Director, Bank of Baroda, Ms Padma Iyer Kaul, Executive Director, Pension Fund Regulatory & Development Authority, Mr Raja Gopalakrishnan, Group Managing Director, Asia Pacific, Chief Operating Officer, International, FIS, Mr Serge Devieux, Director- South Asia, International Finance Corporation,Dr N Kamakodi, Managing Director & CEO, City Union Bank Ltd, Mr Joseph Plappallil J., Chairman & Managing Director, Agriculture Insurance Company of India Ltd.
