Right To Banking??

Yes you read it right, coming shortly to a political theatre near you! After the super successful populist agenda on the Right to Education and the work in progress i.e. Right to Food, here comes the much awaited sequel ‘Right to Banking’!! If you thought two additional rights were enough to send you back to your Civics class in school, well here is another one.

Well I am not this hyper always, but the way the government is selling this in the newspapers does deserve such enthusiasm. Almost every other morning, there are articles by civil servants and the who’s who in the govt. pledging their allegiance to the cause of financial inclusion. The day is not far when ‘financial inclusion’ moves to the more populist and sympathetic name of ‘right to banking’.

The hype surrounding financial inclusion has been influenced our minds so much that we cannot even think beyond what is being presented to us. In a classroom discussion, when I raised my hand to put forward objections to the government’s drive to push and force commercial banks to open up more branches and extend services to rural India, I was told to keep quiet. It was as if I had committed a sin and even the slightest leaning towards capitalism in my speech would be enough for them to brand me an arrogant elitist. It came as a rude shock to me, has the issue become totally one sided? And if yes, what happened to our democratic moral of free speech and opposition.

One has to give some credit to the government for making financial inclusion a buzzword in pink papers. The RBI has tried moral suasion to ask banks to extend their services to the unbanked rural population. But now with the fresh issue of banking licenses to be issued by end of this year, the RBI is going to indirectly force more rural coverage by the prospective bidders as an important prerequisite for the license. This should be a source of worry for the existing commercial banks, especially the foreign banks which already having drawn big plans for urban expansion, might have to rework their strategy.

As a part of Manmohan Singh’s government’s pledge towards inclusive growth, financial inclusion is being seen as a separate issue altogether. Financial inclusion is really just one of the many a component of the overall inclusive growth strategy. Other things such as social inclusion, education, healthcare, infrastructure and energy requirements etc. must go hand in hand to make financial inclusion happen. By just simply opening bank branches will not help the cause.

Account Opened, Now What?

Infrastructure is needed in the form of roads connecting bank branches, security and law& order to protect deposits, communication to connect the banks computer networks and housing for the banks staff. Opening an account is not the last step; the average rural illiterate has to be taught how to operate the account, the details of interest and deposits, rules and nomination policies as well as the procedure for consumer grievance redressal.

Just handing out the money to the farmer is not the end of the story. The farmer also has to be supported and encouraged to improve productivity, has to be given access to electricity and meet his other energy needs, has to be part of holistic community development and most importantly, he has to be feel social included. Only then can the bank expect to receive back the principal with interest. Otherwise it would have to wait a few decades for another populist government to come and waiver off its loans.