RBI released report of Deepak Mohanty Committee on Medium-term Path on Financial Inclusion

The Reserve Bank of India on 28 December 2015 released the Report of the Committee on Medium-term Path on Financial Inclusion. The committee was constituted on 15 July 2015 by the RBI with the objective of working out a medium-term (five year) measurable action plan for financial inclusion.

The 14-member committee was headed by RBI Executive Director Deepak Mohanty.

Salient recommendations of the committee

• Banks have to make special efforts to step up account opening for females, and the Government may consider a deposit scheme for the girl child – Sukanya Shiksha - as a welfare measure.
• Given the predominance of individual account holdings (94 per cent of total credit accounts), a unique biometric identifier such as Aadhaar should be linked to each individual credit account.
• Account lined Aadhaar and the credit information should be shared with companies to enhance the stability of the credit system and improve access.

• To improve ‘last mile’ service delivery and to translate financial access into enhanced convenience and usage, a low-cost solution should be developed by utilisation of the mobile banking facility for maximum possible G2P payments.
• In order to increase formal credit supply to all agrarian segments, digitisation of land records is the way forward. This should be backed by an Aadhaar-linked mechanism for Credit Eligibility Certificates to facilitate credit flow to actual cultivators.
• A scheme of ‘Gold KCC’ (kisan credit card) with higher flexibility for borrowers with prompt repayment records, which could be dovetailed with a government-sponsored personal insurance, and digitisation of KCC to track expenditure pattern.
• Encourage multiple guarantee agencies to provide credit guarantees in niche areas for micro and small enterprises (MSEs), and explore possibilities for counter guarantee and re-insurance.
• Introduction of a system of online registration of BCs, their training and monitoring their activity including delinquency, and entrusting more complex financial products such as credit to trained BCs with good track record.
• Corporates should be encouraged to nurture SHGs as part of their Corporate Social Responsibility (CSR) initiatives.
• National Payments Corporation of India (NPCI) is advised to develop a multi-lingual mobile application for customers who use non-smart phones, especially for users of national unified USSD platform (NUUP).

• State Level Bankers Committees (SLBCs) are advised to focus more on inter-institutional issues, livelihood models, social cash transfer, gender inclusion, Aadhaar seeding, universal account opening, and less on credit deposit ratio which is a by-product.
• As a part of second generation reforms, the government can replace the current agricultural input subsidies on fertilisers, power and irrigation by a direct income transfer scheme.

The Committee also made several other recommendations to improve the governance system, strengthen the credit infrastructure and augment the government social cash transfer so as to increase the personal disposable income of the poor to put the economy on a medium-term sustainable inclusion path.

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