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FINANCIAL EXPRESS: From Plate to
Plough; Bolsteringसहारा financial inclusion
Financial inclusion is an important policy pillar of Narendra
Modi-led government to ensureसुनिश्चित inclusive
development (sab ka saath, sabka vikas). What it means briefly is to mainstreamमुख्य धारा financial services for massesजनता, especially credit at affordable costs from institutional
sources.
This is not the first time financial inclusion is being given a
policy thrust जोर. In the past,
too, various governments tried to bolsterसहारा it, and that was one of the reasons why bank nationalisation
took place. There have been some successes in this during 1951-1991, when the
share of outstandingबकाया debt of rural
households from institutional sources increased from a meagreअल्प 7.2% to 64%. But, thereafter,
the very period of economic reforms showed a dismalनिराशाजनक performance, with the share of
institutional sources declining from 64% to 56% during 1991-2013. This is one
of the biggest lapsesखामियों of India’s
reforms story. If the Narendra Modi-government can correct this flawदोष, it can be a game-changer by
alleviatingसमाप्त poverty at a
much faster pace than has happened under the reforms undertaken from 1991-2013.
plate
Realising the importance of financial inclusion, the government
took a bold step by introducing the Jan Dhan Yojana. The government deserves
much appreciation for the speed at which these accounts have been opened—the
scheme has already found place in the Guinness Book of World Records. At the
moment, around 20 crore bank accounts have been opened, and more than R30,000
crore of deposits have been received under this scheme. However, the real
challenge, which also underminedकम आंका previous
efforts at financial inclusion, is to prevent these accounts from remaining
dormantनिष्क्रिय.
To ensure that the scheme remains active and relevant in
fulfilling its objective, the prime minister had asked RBI to prepare a roadmap
for financial inclusion. The report of the RBI committee on the medium-term
path on financial inclusion, released December 2015, emphasisedबल दिया the role of a holisticसमग्र strategy involving players like telecom operators, biomentric
verification, payments banks and land registrars for last-mile service
delivery. Some of its major recommendations include linking all credit accounts
with a biometric ID such as Aadhaar; moving away from short-term interest rate
subvention माली मददon crop loans and towards a crop
insurance scheme; and replacing various inputs and output subsidies with direct
benefit transfers (DBT). The report finds that although there has been
significant improvement in access to banking services through expansion in
number of rural branches, banking correspondents and no-frills banking
accounts, a large degree of financial exclusion prevails in East and North East
India. High interest rates (above 20%) charged by the informal sector as well
as micro-finance institutions continue to be a matter of concern. In this
context, let us focus on one of the key recommendations of the RBI committee,
the one on phasing out the interest subvention scheme.
The interest subvention scheme was introduced by the government
in FY07 with the objective of providing substantial and cheap loans, at 7%
interest (with an upper limit of R3 lakh), and if the borrower was regular with
repayment, the interest rate was to be lowered to 4% gradually. Some states
have gone ahead and extendedविस्तृत loans even at
0% to farmers, a large portion of the rural population. This has resulted in a
significantमहत्वपूर्ण increase in
the amount of short-term agricultural credit, with actual disbursementsसंवितरण consistently surpassing targets.
This is hailedमें स्वागत as a grand success and subsidy
on account of this scheme has increased from R3,283 crore in FY12 to R13,000
crore in FY16.
But this could be deceptiveकपटी and a potentialक्षमता agri-credit scam.
There is reasonable evidence that suggests that a significant proportion of
crop loans granted at interest rates with subventionमाली मदद is not reaching the targeted beneficiariesलाभार्थियों. A farmer who receives loans at
a concessional rate of 4% can easily deposit at least a part of it in fixed
deposits at a bank, earning around 8% interest or even become a money-lender,
giving out loans at 15-20% interest rates to those who don’t have access to
institutional sources of finance. You don’t need bigger proof than the fact
that short-term credit from institutional sources reached 110% of the total
value of agricultural inputs in 2014 (Source: NAS-2015), and at the same time,
All India Debt and Investment Survey data shows that 44% of loans were from non-institutional
sources in 2013. This suspicionसंदेह is reaffirmedपुन: पुष्टि की when one looks
at the month-wise disbursementअदायगी of
agricultural credit—this spikedनुकीला to 62% of
annual disbursement in the last quarter of FY14, with no corresponding spike in
agri-production activities at that time.
No wonder, the RBI committee recommends phasing outचरणबद्ध interest subvention scheme—lest
it explodes as a scam—and moving towards universal crop insurance. The latest
crop insurance scheme is expected to cost the Centre around R9,000 crore. This
could easily be financed by releasing funds allocated to interest subvention.
The report also states that meaningful financial inclusion will
be elusiveमायावी without social
cash transfers under the government-to-person (G2P) route. Recognising large
leakagesरसाव in various
welfareकल्याण and
anti-poverty schemes, many countries have moved from price support to income
support. However, India uses price policy (subsidised inputs) to support
farmers and PDS grains for consumers. Such policies are inefficient and, at
times, regressiveप्रतिगामी, as they
promote leakages and sub-optimal use of scarceदुर्लभ resources.
Recent policy interventions utilising DBT in LPG subsidy have
yieldedफल देना good success. Similar efforts are
needed for food and agri-input subsidies. Using the JAM-trinity (Jan Dhan,
Aadhaar and mobile technology) and digitising land records will be significant
drivers of financial inclusion.
The challenges of implementation will remain unless the
government displays same vigour and perseverance as it did in opening accounts
under the Jan Dhan Yojana. Will the government rise to this challenge? Only
time will tell
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