A high-level committee chaired by RBI Deputy Governor Usha Thorat to review the Lead Bank Scheme has recommended that a bank should fully cooperate in opening and operating a weekly banking outlet for ensuring full financial inclusion in villages with a population of over 2,000.
The Lead Bank Scheme, which was introduced around four decades ago, aims at facilitating credit delivery to far-fetched areas of the country. The committee also includes members from state government banks, National Bank for Agricultural and Rural Development (Nabard) Small Industries’ Development Bank of India (Sidbi).
Thorat said full financial inclusion would be complete only if facilities like opening of no-frills accounts is backed by other specialised services like simple overdrafts, savings, insurance, remittance and loan products.
In urban areas, the report has suggested that the know your customer (KYC) norms for opening small value accounts (balances of not more than Rs 50,000 and annual credit of not more than Rs 1,00,000) may be simplified with the help of the state government where there are large settlements of households and obtaining address proof is difficult.
In such cases, credit should be given on obtaining the affidavit of declaration along with photograph given by the entity.
Private sector banks have been urged to involve themselves with district credit committees of the banks where they have a presence and extend their services through permitted channels in unbanked and underbanked areas. This would also help the banks to reduce their priority sector lending targets as well.
To this effect, the banks must take full advantage of the available information technology solutions and funding arrangements of financial inclusion technology fund of Nabard.
It has also been recommended that RBI will review the existing norms of banking correspondent (those who help facilitate banking services in places where there are no branches) to include more categories. In this respect, the central bank may use mature self-help groups (SHG) leaders as banking correspondents as well.
In order to streamline land records of the state for rendering banking services to tenants, it has been suggested that the state level banking committee may undertake detailed analysis of various ownership and tenurial systems so that a comprehensive database on ownership and lease holdings can be made.
This could help in expediting the process of bank leading as the comprehensive database could help create transferable rights on the land or documents that will certify that the borrower has the right of seize the land in case of default.
Lead Banks are expected to open financial literacy and credit counselling centre in every district where they have lead responsibility. An one time comprehensive state level/district level banking sector development plan for all districts may be formulated by the banks indicating the roles and responsibilities of banks, state government and other stakeholders to ensure banking development for inclusive growth.
