All villages to enjoy banking in two years

In another two years, every Indian village is tipped to come into the organised credit fold under an ambitious plan by banking regulator Reserve Bank of India (RBI) to achieve financial inclusion across the country with the help of business correspondents (BCs).

Currently, self-help groups, certain companies and NGOs are allowed to function as BCs in areas without bank branches. Besides enabling opening of accounts for new customers, BCs are permitted to undertake activities such as disbursal of small value credit, recovery of dues and collection of small-value deposits among others.

The access could be through a brick-and-mortar bank branch, mobile banking, extension counters or satellite offices and will be applicable to villages with a population of above 2,000 in the first stage, an RBI-appointed committee, led by the central bank’s deputy governor Usha Thorat, has said in its report.

The key official in charge of executing the plan at the local level will be the lead district manager. The committee has suggested that this official may convene a quarterly public meeting at various locations to generate awareness of banking policies and regulations related to the common man. The official has also been empowered to get feedback and provide grievance redressal for the public.

RBI set up the high-level committee to improve the effectiveness of the Lead Bank Scheme (first launched in 1969) with a focus on financial inclusion in the banking sector.

The committee has marked out the role of state governments for the purpose by stating they should ensure road and digital connectivity to all centres where banking penetration is required. The state machinery is also expected to expedite the use of IT solutions for the disbursal of National Rural Employment Guarantee Act (NREGA) and social security payments and extend support to banks for the recovery of dues.

It also envisages a greater role for private sector banks. “Private sector banks should involve themselves more actively by bringing in their expertise in strategic planning and leveraging on information technology,” the report said.

The committee has also suggested implementation of a revised Priority Sector Monitoring and Information System (PSMIS) on a pilot basis in a couple of states initially and extending it to the rest of the country with effect from April 1, 2010.