In a country with significant sections of unbanked population, financial inclusion ^[1] through microfinance institutions ^[2], self-help groups and a huge rural banking network has figured prominently in the 2009-2010 budget.

By Naagesh N.

MF Focus, July 6, 2009: The budget presented by Finance Minister Pranab Mukherjee ^[3] on Monday reiterated the UPA government’s agenda to empower more rural women and announced its ambitious plans to enrol at least half of them into the network of self-help group (SHG) movement, besides increasing the corpus funding of the Rashtriya Mahila Kosh to Rs 500 crore.
Reiterating the government’s commitment to the Women’s Self Help Group movement which he said is bringing about a profound transformation in rural areas, the government wants to strengthen them by enrolling at least 50% of all rural women in India as members of SHGs over the next five years and link these SHGs to banks, he said, noting that there are over 22 lakh such groups linked with banks now.
Praising the role of microfinance as an instrument of socio-economic change and development, the minister announced in the budget that the Rashtriya Mahila Kosh, which has been working towards the facilitation of credit support or microfinance to poor women and has developed a number of innovative schemes for their benefit, will be rewarded with a corpus of Rs 500 crore from the present Rs 100 crore.
In a country with significant sections of unbanked population and regions, financial inclusion is vital for sustaining long term equitable development, the minister said and announced further relaxation of rules for opening small and rural banking facilities by Scheduled Commercial Banks. As part of the financial inclusion drive, scheduled commercial banks have been opening ‘no frills’ accounts either with ‘nil’ or very low minimum balances, he noted and said these banks have opened 3.3 crore such accounts so far. The RBI has announced a further relaxation in this direction by allowing the scheduled commercial banks to set up off-site ATMs without prior approval, subject to reporting, he said.

TOWARDS INCLUSIVE DEVELOPMENT

The budget, as expected, has underlined the need to strengthen the mechanisms for inclusive growth for creating about 12 million new work opportunities per year, reduce the proportion of people living below poverty line to less than half from current levels by 2014 and to ease the delivery mechanism for primary health care facilities with a view to improve the preventive and curative health care in the country.
Terming it as a challenge, the minister vowed ”to deepen and broaden the agenda for inclusive development; and to ensure that no individual, community or region is denied the opportunity to participate in and benefit from the development process.”
The budget’s rural focus has spelt out several relief measures for the farmers and rural women. While the Accelerated Irrigation Benefit Programme received an additional Rs.1,000 crore, marking an increase of 75 per cent over the allocation in 2008-09, even the Rashtriya Krishi Vikas Yojna (RKVY) is handed out an additional 30 per cent funds over the 2008-09 budget.
Coming to micro-credit and microfinance institutions, he acknowledged that they have been indirectly affected by the global crisis which has lowered the domestic demand.  To support this sector, he proposed easy credit flow at reasonable rates, by providing a special fund of Rs 4,000 crore out of Rural Infrastructure Development Fund (RIDF) to Small Industries Development Bank (SIDBI). This fund of Rs 4,000 crore will help banks and State Finance Corporations (SFCs) to lend to Micro and Small Enterprises (MSEs) by refinancing 50 per cent of incremental lending to MSEs in 009-2010.

RURAL BANKING NETWORK

Providing Rs 100 crore during the current year as one-time grant-in-aid to ensure provision of at least one centre/Point of Sales (POS) for banking services in each of the unbanked blocks in the country, the minister also said a sub-committee of State Level Bankers Committee (SLBC) will identify such areas and formulate an action plan for providing banking facilities to all these areas in the next 3 years.

Underlining the UPA government’s paradigm shift for making the development process more inclusive, Pranab Mukherjee has focused on ‘Aam Admi’ (Common Man) with a stream of funds, including an allocation of Rs.39,100 crore for the year 2009-10 for National Rural Employment Guarantee Act, (NREGA) which marks an increase of 144% over 2008-09 budget estimates. It involves creating entitlements backed by legal guarantee to provide basic amenities and opportunities for livelihood to vulnerable sections, the minister noted.

The National Rural Employment Guarantee Act, (NREGA) first implemented in February 2006, provided during 2008-09, employment opportunities for more than 4.47 crore households as against 3.39 crore households covered in 2007-08. It provides a real wage of Rs.100 a day as an entitlement under the NREGA. To increase the productivity of assets and resources under NREGA, the government has initiated convergence of the scheme with other plans relating to agriculture, forests, water resources, land resources and rural roads. In the first stage, a total of 115 pilot districts have been selected for such convergence, the details of which will be announced later by the Minister of Rural Development. An allocation of Rs.39,100 crore for the year 2009-10 for NREGA is another step in UPA government’s efforts to include the rural people in mainstream development plan.

SELF-HELP GROUP (SHG) MOVEMENT

Empowering weaker sections further by restructuring the Swarna Jayanti Gram Swarozgar Yojna (SGSY) as the National Rural Livelihood Mission to make it universal in application, focused in approach and time-bound for poverty eradication by 2014-15, is another significant announcement made by the minister in the budget.  Stressing on the formation of women Self Help Groups (SHGs), providing capital subsidy at an enhanced rate, the budget has also proposed to provide interest subsidy to poor households for loans up to Rs. 1 lakh from banks.

TAX-FREE ANONYMOUS DONATIONS UP TO Rs 1 LAKH

Since anonymous donations to charitable institutions are presently liable to tax, some organisations are facing genuine problems in complying with the procedural requirements, the minister said and announced relief to charitable organisations by not taxing anonymous donations received to the extent of 5 per cent of their total income or a sum of Rs.1 lakh, whichever is higher.

SOCIAL SECURITY FOR UNORGANISED WORKFORCE

To address the unorganised or informal sector which accounts for 92% of the employment, the minister noted that the Unorganised Workers Social Security Bill, 2007 has now been passed by both Houses of Parliament and action has been initiated to ensure that social security schemes for occupations like weavers, fishermen and women, toddy tappers, leather and handicraft workers, plantation labour, construction labour, mine workers, bidi workers, and rikshaw pullers are implemented at the earliest. The budget, however, did not give details about the schemes meant for them.

SMART BIOMETRIC CARDS

On rural health front, the National Rural Health Mission’s allocation has been raised by Rs 2,057 crore over and above Rs 12,070 crore provided in the interim budget. On Rashtriya Swasthya Bima Yojana (RSBY) which was operationalised last year, the minister said more than 46 lakh BPL families in 18 States and Union Territories have been issued biometric smart cards.  This scheme empowers poor families by giving them freedom of choice for using health care services from an extensive list of hospitals including private hospitals. An amount of Rs 350 crore, marking 40% increase over the previous allocation, has been provided in 2009-10 budget in a move to bring all BPL families under the scheme.

© 2009, Microfinance News ^[4]. All rights reserved. 2008-09