Promoting Financial Inclusion - United Nations Development ...

accounts with public sector banks with
sanction limits aggregating `193,250 crore
by March 2009. KCC accounts accounted
for 33.7% of the total indicating that these
make a significant contribution to financial
inclusion since a large proportion (80-85%)
of farmers tend to be otherwise unbanked.
However, it is impossible to quantify the
contribution of KCC to financial inclusion
since information, disaggregated by size of
account, is not available. Evidently those
with smaller KCC limits, certainly those
with limits less than `25,000 are the ones
most likely to be otherwise financially
excluded.
…BUT THE SHARE OF SMALL BORROWAL
ACCOUNTS IN PRIORITY SECTOR LENDING
IS QUITE SMALL
The contribution of the priority sector to
financial inclusion can be assessed from the
information in Table 3.2. Of the lending
to agriculture, some 8.0% (3.1% of the total
for the priority sector) is in loans of less than
`25,000 whereas another 36.3% (14.1% of
priority sector lending) is in loans of up to
`2 lakhs, making a contribution of 17.2%
to the total. Based on data on the size of
credit limit of the banks’ loan accounts, it is
reasonable to assume that 30% of the lending
to small enterprises, 10% of the lending for
housing and 30% of that for other purposes
is to otherwise financially excluded persons.
This means that the contribution of the
priority sector to financial inclusion is
a little over 31% of the total for priority
sector loans outstanding (see table). Since
the priority sector constitutes 41% of all
lending, the contribution of the banking
sector to financial inclusion amounts to
a little under 13% of all the commercial
banks’ loan portfolio.
…AND TINY ACCOUNTS NOW ACCOUNT
FOR LESS THAN ONE-THIRD OF THE REAL
SHARE OF AGRICULTURAL LENDING SUCH
ACCOUNTS HAD 15 YEARS AGO
Yet, while the growth of the priority
sector is good news to the extent that it
makes a significant (but not substantial)
contribution to financial inclusion, the
news is still tempered. RBI data shows that
over the 15 year period from 1995 to 2010,
the contribution of tiny borrowal accounts
(