Promoting Financial Inclusion - United Nations Development ...

feature that was thought to characterize the
cooperatives. RRBs, it was expected, would
combine this with the professionalism and
large resource base of commercial banks.
Starting with just 6 RRBs covering
12 districts in December 1975, the RRBs
expanded through the 1980s into a network
of 196 such banks covering 525 of the
roughly 600 districts in the country through
some 14,500 branches. In the event, as the
earlier discussion shows, RRBs have been
relatively successful at mobilizing deposits
but much less so at enhancing the credit
flow to the rural poor – at least not in a
professional manner. If the poor governance
and financial weakness of the cooperative
credit system turned it into the subject of
official patronage, it was their proximity to
the rural poor (not much less than that of the
cooperatives), combined with government
ownership that turned the RRBs into an
instrument of ‘policy lending’, extending
subsidized credit to large numbers of people.
As a result, in the words of the latest RBI
working group on the RRBs, ‘Since their
inception the financial health of the RRBs
has been indifferent.’ 11
CONCLUSIONS – A LONG WAY
TO GO…
While the banks have made some efforts to
reach the financially excluded sections of
the population, there is still a long way to go
before they can achieve their first target of
covering 55.8 million excluded households
and all villages with >2,000 population by
2012. So far, progress towards achieving
this goal has been relatively limited and
government efforts to promote financial
inclusion in an intensive manner will need
an additional impetus in order to help attain
the necessary results.
11
RBI, 2005. ‘Report of the Internal Working
Group on RRBs’, Mumbai: Reserve Bank of India.
16 PROMOTING FINANCIAL INCLUSION