Apropos the report "Saradha due to formal financial system's failure: RBI" (May 1), it's clear that the financial system in India has still not reached the unbanked population. One needs to understand this from the viewpoint of the primary stakeholders who put their money in the Saradha schemes. In fact, the scam reveals lesser-known facts about the poor and their financial behaviour. Their need to park their frugal savings in chit funds shows their thirst to save. It's a myth that subsidised credit is needed more by the poor. Allow the poor a safe place to save à la pigmy deposit schemes. Even National Bank for Agriculture and Rural Development's move to allow voluntary savings in self-help groups is a recognition of this fact. Chit funds are not bad in themselves. There are several cases of government-run chit funds, such as the one by the Kerala government, and other funds by people with good intentions, providing yeomen services to the poor. Why must the government take the extreme step of banning chit funds? The issue is about inadequate oversight - what is the Reserve Bank of India doing about it? Merely saying "banks have failed" is an easy way to absolve itself. It's a pity that banks are not enticed by the saving ability of people at the bottom of the pyramid, and it still does not mean business for them.
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B S Suran Mumbai
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number