MARCH

Even if we bring the 60% of our
population that is still financially
excluded into banking fold by opening
no-frills accounts, nothing is going to
change dramatically in the next five
years as our resources are limited. You
cannot expect huge deposits to flow into
the banking sector from these accounts.
The two primary reasons for this are
their bare minimum per capita income
and their low saving habits. But, the
credit requirement of the economy will
of course go up.
We have to find ways to match this
requirement. One way, the government
can address this issue by managing its
finances well so that regulatory SLR
requirements can be freed. Alternatively,
some other instrument has to come so
the bank can get necessary funds. Bond
markets for corporate requirement
need to be developed so they can raise
resources from market and banks will
have enough room to deploy funds for
needier sections of society.
In financial inclusion, the primary
purpose is to bring unbanked into
banking fold so that all subsidies and
whatever government is transferring,
can be transferred into accounts of
beneficiaries. Three things will happen.
Efficiency will improve because money
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Once common people have
an account with the bank,
they will feel empowered and
they will approach for a credit
product which will help them
to get gainfully employed.
will go directly to the beneficiary of
subsidy. Corruption will be addressed
in the sense that middlemen will go.
Cost of services will also come down
substantially and hence subsidy bill of
the government will be reduced without
reducing quantum of subsidies.
Once common people have an
account with the bank, they will feel
empowered and they will approach for
a credit product which will help them
to get gainfully employed. That way we
will be in a position to move people
from agriculture to business enterprises.
Nowhere in the world has any developed
economy survived simply on agriculture
and services. If we have to move into the
league of a developed economy, we have
to improve our manufacturing sector
instead of being heavily dependent on
services sector. China has shown to the
entire world how manufacturing sector
can drive growth as only manufacturing
sector generates employment. In services
sector one person is employed and
technology acts as workforce multiplier.
Financial inclusion is the collective
responsibility of the society which
includes central government, state
government, local governments and
businessmen and banks. Banks have
created an excellent platform by
opening accounts. But, challenge before
everybody is to activate these accounts
so that some gainful transaction happens
and the account holder gets some benefit
out of it. Passbook should be a weapon
of empowerment in their hands. Getting
that passbook should mean something to
them. We have to create an environment
wherein the money is used for productive
purposes which will generate adequate
cash flows. Lending money is an easy
job but you must have a business to use
it. We need to build an economy and
inclusion will happen on its own.
(The author is CMD of Oriental Bank
of Commerce. He is an astute banker
of repute known in banking circle for
his expertise in matters of credit and
operations)