RBI pitches for mass banking, wants bank focus on mini loans

Reserve Bank of India (RBI) Governor Y V Reddy has advised commercial banks to concentrate on smaller loans in a move to derive business from mass banking.

Reddy said that looking at smaller clients also makes sense at a time when big corporates are looking beyond banks for their capital requirements.

Terming financial inclusion a compulsion of a sound public policy and mass banking a natural step following the RBI's effort on rebalancing the relationship between the customer and the bank for the past couple of years, Reddy said moving towards masses would be a timely step.

Strong economic growth has enhanced incomes and opportunities, while the technology has provided tools to make the inclusive growth more viable. Combined with policy initiatives, a new business potential has emerged before banks in the form of mass banking, according to the RBI governor.

"Banks have to concentrate on small loans as large corporates are now able to access global funds and domestic capital market," the governor stated while interpreting financial inclusion as the business interest of banking industry whose immediate necessity, he said, is deposit mobilisation.

He drew parallel between cinemas and mass banking, stating that a mass movie earns more money than a class movie.

Explaining in several terms that financial inclusion is a business opportunity and not a philanthropy to the audience at the valedictory session of the two-day Bankers Conference 2006 here, the governor also had a word of caution for banks on their future initiatives in financial inclusion.

"Banks are not expected to be in the business of philanthropy. So evaluate the cost of products and services on a continuous basis. Discontinue any such product or service if found unviable," he said while advising the banks to evolve their own models and follow the spirit of financial inclusion rather than adopting a mechanical approach.

Reddy said RBI would facilitate financial inclusion by removing all the regulatory bottlenecks. He said that financial inclusion would not succeed if state governments and local authorities are not fully committed to the cause.