Source: The Economic Times
In an interview to this newspaper, K C Chakrabarty, deputy governor of the RBI, has said that banks must take up financial inclusion as a viable business, and not as charity. He is right.
In an under-banked country like India, the business opportunity for banks is enormous, but the onus lies with the RBI to revolutionise mass banking through innovative use of telecom services and technology. It should create new kinds of banks with limited functions, such as the payment banks recommended by the Nachiket Mor committee.
Regulatory caution has blocked technology from extending the reach of banking to the poor, who remain dependent on moneylenders. Every banking activity from origination to settlement can be completed using mobile phones, and the software industry can help create platforms to let banks provide low-cost services. This platform can host electronic accounts that banks can access. These accounts can be tied to the unique identity number, or Aadhaar, thereby setting the stage for extending formal finance at a low cost.
But for all this to happen, the RBI should open up bank licences to mobile phone companies that form joint ventures with banks. India needs more banks, and new as well as innovative kinds of banking. The RBI should offer licences on tap or even differentiated licences fast. There also remains the task of unbundling and separating the many functions that now stay intertwined within the RBI.
It sets the monetary policy, regulates banks, gets involved in banking policy, serves on bank boards, has a hand in regulating debt, currency and interest rate markets and manages government debt. The RBI is aware of the need for regulatory evolution. The point is to complete the process and hasten the tasks of financial inclusion.