Access to banking for all by 2011: RBI panel

By Naagesh Naaraayana

Microfinance Focus, Aug. 24, 2009: The panel on Lead Bank Scheme constituted by the Reserve bank of India has recommended a sub-committee at the district level to draw up a roadmap to provide banking services in every village with a population of over 2,000, through mobile banking, business correspondents among others, by March 2011.
In states where banking penetration is better, the date may be advanced, said a statement by the central bank. The panel has suggested that the Lead District Manager may convene a quarterly public meeting to create awareness, receive complaints and other feedback.

The High Level Committee, headed by Usha Thorat, was set up by the central bank to examine the scheme with a focus on financial inclusion. The roadmap for financial inclusion specified that a Sub-Committee of the District Consultative Committee (DCC) may draw up a road map to provide services through a banking outlet, such as, brick and mortar branch, mobile banking, extension counters, satellite offices or Business Correspondents — at every village with a population of over 2,000 at least once a week on a regular basis. By March 2010, the Sub-Committee is expected to submit a time frame but not later than March 2011.

The panel suggested that the state governments should ensure road and digital connectivity to all centres where penetration by the formal banking system is required, expedite IT solutions for disbursal of National Rural Employment Guarantee Act (NREGA) and social security payments and extend support to banks in the recovery of their dues.

The panel suggested that the Chief Secretary of the state should co-chair the meetings of the State Level Bankers’ Committee (SLBC), along with the CMD of the convenor bank. The Chief Minister/ Finance Minister may be invited to attend and chair the meetings periodically, say at least once a year, when there are major policy issues on the agenda. The panel said the SLBC can constitute sub committees for specific tasks. Lead District Managers (LDMs) should be strengthened with infrastructural support to implement the Lead Bank Scheme.
Introduced in 1969, the Lead Bank Scheme underwent changes after 1991 and the panel under Usha Thorat was constituted recently to review the scheme with a focus on financial inclusion. Some state chief secretaries, chairmen of major public sector banks and others were also members of the panel, which finalised its report on August 20.

OTHER RECOMMENDATIONS OF THE PANEL:

* Each district Lead Bank should open a Financial Literacy and Credit Counselling centre as per the RBI guidelines.

* Quarterly Public Meeting at District Level for awareness and feedback should be convened by the Lead District Manager.

* For urban areas, banks in each city with more than one million population may take the lead to convene a meeting of bankers and allocate responsibility to different banks, to ensure easier access to banking services.

* Private sector banks should involve themselves more actively by bringing in their expertise in strategic planning and leveraging on information technology.

* The committee suggested implementation of revised Priority Sector Monitoring and Information System (PSMIS) on a pilot basis in one/two States initially and thereafter extending to the rest of the country from April 1, 2010.
* The Committee has also suggested constitution of a small Working Group by the Reserve Bank of India to formulate the modalities and work on implementation of the revised framework.

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