Suresh K Krishna, MD, GFSPL
The year 2014 seems to be an interesting year for the financial sector in India. Never before has the country seen such elaborate plans for financial inclusion and greater opportunities for microfinance. Mobile telephone companies, NBFCs, super market chains, microfinance institutions and cooperatives can now set up specialized banks in the real sector. They can do so under the new norms being proposed by RBI, which envisage creation of specialized payment banks and small banks. This will enable the unreached and remote parts of the country have access to better saving and finance options.
Although payment banks need not have a branch network, they will have a widespread network of access points particularly in remote areas, either through their own branch network or through Business Correspondents (BCs) or through networks provided by others. In case of small banks, resident individuals with 10 years of experience in banking and finance, companies and Societies will be eligible as promoters to set up small banks. NBFCs, micro finance institutions (MFIs), and Local Area Banks (LABs) can also opt for conversion into small banks.
These new norms are a positive move towards introducing basic banking facilities to the unbanked population in India, and aim to reach out to the unreached, including migrant laborers to help collect deposits and remit funds. The experience needed to operate as small banks and payment branches are already there with MFIs, as they are already providing credit to unbanked households, especially for urban and rural women from below poverty level (BPL) and low income families. As of yet, geography has been restricted by the RBI to keep the audience and functionality of MFIs homogenous.
The new regulatory guidelines proposed by the RBI can help in integrating cultural and local flavours to make microfinance more inclusive. In a country like ours where the heterogeneity in cultural fabric is so diversified and differentiated, local and colloquial understanding will help small banks to penetrate the deeper audience in society who are far needier and have been neglected thus far.
We at Grameen Financial Services are sure that leaders like us who have been around for some time now will be able to take advantage of the revised regulations, and translate this to small banks or payment banks to further the vision of financial inclusion. However, it all remains to be seen in how actively we can participate and cooperate with the government to make our schemes more achievable.
By Suresh Krishna, Managing Director, Grameen Financial Services Pvt Ltd for Microfinance Focus
About the author: Mr. Suresh K. Krishna has been at the helm of activities at Grameen Financial Services Pvt. Ltd. since its inception in 1999. He has guided the company from the start-up stage as an NGO to a large NBFC with a strong focus on double bottom line, ensuring high social impact and financial sustainability.