Govt proposes to include loan products in financial inclusion program

The government and Reserve Bank of India has been pushing public sector banks to adopt financial inclusion program in order to reach out to the unbanked segments in the country. Earlier under financial inclusion program banks were to provide basic banking facilities like opening accounts, issuing smart cards for transactions, now government is planning to include loan products. This was stated by Department of Financial Services Secretary R Gopalan. Around 10 PSU banks in the South including Indian Bank, Andhra Bank, Corporation Bank, Canara Bank, Indian Overseas Bank, Syndicate Bank, Vijaya Bank, State Bank of Mysore, State Bank of Tranvancore and State Bank of Hyderabad are carrying out financial inclusion program which was reviewed by Gopalan.

He said, “Corporation Bank is already undertaking such initiatives by opening credit lines to unbanked segment customers to start small businesses like saloon and cycle shops by granting small value loans of Rs 10,000 to Rs 15,000. This can be replicated by all banks after the ministry approves it at the national scale. It works somewhat like a kisan card.”

He said as per the finance ministry’s budget proposal to reach out to 72,300 habitats having population of 2,000 people, up till now the review of FIP implementation in Western and Eastern region has been done. He added in south, approximately 30,000 habitat locations were identified for FIP implementation.

“We are focusing on providing facilities including deposits, withdrawals, remittances, micro-pension, micro-insurance in the identified FIP pockets.”

He told the projected regulatory framework on microfinance institutions is in final stage and the department has getting feedback from public and other stakeholders. However, he said, regulation will not include interest rates as in the Indian financial markets the interest rates are deregulated.

He said, the banking sector is prepared for huge HR challenge as about 3-4 lakh staff is expected to retire in the next three to four years. He added, “New age banking workers has to reorient themselves for new situation. In the modern day banking, more work will be handled at the back offices with conventional banking adopting Business Process Re-engineering at the front-end to stay relevant. We need people with indepth skills in areas like Risk Management, Forex management, Treasury Management, Credit appraisal, etc to meet the demands of the modern era banking."