Sucheta Dalal :Banks want crutches to hobble towards financial inclusion
Sucheta Dalal

Click here for FREE MEMBERSHIP to Moneylife Foundation which entitles you to:
• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal

 

MoneyLife
You are here: Home » What's New » Banks want crutches to hobble towards financial inclusion
                       Previous           Next

Banks want crutches to hobble towards financial inclusion  

September 7, 2010

Confidence levels among bankers seem to be at an all-time low about carrying out the financial inclusion plan; some even call for non-banking entities to be roped in for the effort

The optimism among the banking fraternity about achieving financial inclusion seems to have waned. Head honchos of several leading banks have raised concerns about the current situation on this front and have also admitted to their inability to do the job themselves.

On the occasion of the FICCI-IBA Conference on 'Global Banking: Paradigm Shift' held in Mumbai today, some bankers expressed their views on the role of banks in the coming decade, of which financial inclusion is a key function being performed by banks. A tinge of exasperation and restlessness was fairly evident in the discussion as the bankers spoke about the 'progress' being made in this regard. Clearly, the confidence and optimism of a few years ago has given way to a sort of uneasiness, as bankers are being forced to rethink their strategies.

Saurabh Tripathi, partner and director, BCG India highlighted that bankers are not confident of being able to find a solution to serve the financially excluded in a profitable manner. "The possibility of creating a low-cost model for financial inclusion cannot be done with incremental changes in the existing models. 'No-frilling' is not going to work. The industry needs to think differently about creating a business model from scratch for this business, which has very low ticket size."

Mr Tripathi feels that this will not happen without the government supporting the effort in a significant manner. "Financial inclusion is not the solution to inclusive growth. It is just one of the ingredients. While the spotlight is on the banking industry to find a solution to financial inclusion, more efforts are required from the government to create rural infrastructure and livelihoods."  

Chanda Kochhar, CEO, ICICI Bank said, "It is a fact that very little has been done in terms of financial inclusion, compared to the needs of the country. Every one is still trying to find models that make this activity more economically viable. Can things be done very differently and on a much larger scale? I think they can be, because there is a tipping point for everything. Now that we have the requisite technology and the regulations in place, there is enough scope to get more things done."

Commenting about the need to get non-banking entities involved in the process, Ms Kochhar said, "My strong belief is that it essentially has to be a bank-led model. But the bank needs to work with all entities in the ecosystem. For instance, banks and telecom companies need to operate together to facilitate the remittance part of financial inclusion. True financial inclusion means covering every need - saving, lending, insurance, remittance etc."

Rana Kapoor, managing director and CEO, Yes Bank believes that banks themselves cannot create a viable model around financial inclusion. "I believe financial inclusion efforts have to be based on market principles. I don't think that banks will ever be able to compete in this business unless there is an architecture which is somewhat subsidised. For banks, it will be very difficult to be able to create an economically-viable financial inclusion model. But if we are allowed to set up NBFCs and different cost structures and electronic interfaces, some of these things can be achieved."  — Sanket Dhanorkar


-- Sucheta Dalal