Moneylenders should be out of the system: Dr K.C. Charabarty, Deputy Governor, RBI

The Reserve Bank of India's broad goal for financial inclusion is to ensure that there are only two players in the money-lending spectrum – banks and non-banking financial companies (NBFCs) – in the long term, Dr K.C. Chakrabarty, Deputy Governor, RBI, told Business Line, indicating that moneylenders should be out of the system. “Our broad goal is that NBFCs must capture the moneylenders' customers, and banks should capture NBFCs' customers,” he said. Banks must look at financial inclusion as a viable business, and should cover the six lakh villages that are still un-banked. Though banks have not made a spectacular progress, “there is a definite progress; every day something is happening,” he pointed out. The RBI is working out the eco-system, and “there is still a long way to go,” he added. According to him, 72,000 villages will be covered in the first phase of the financial inclusion, and the rest in the next phase. This will be done through brick and mortar branches and business correspondents (BCs) with the help of technology. “Through BCs, banks should provide four services — savings bank, pure deposit product, immediate/emergency credit and entrepreneurship credit. Each household must be given a kisan credit card or a general credit card. For those who do not deserve credit, start a financial educational programme, involve the society and the State governments and make them creditworthy so that everybody links with the bank,” said Dr Chakrabarty. Explaining the role of microfinance institutions (MFIs), he said though they were intermediaries, their role was important as they bring in people going to the moneylenders to the banks, he said. “Our focus is to bring in real competition. MFIs should reduce their interest rate, and commercial banks and RRBs must enter this field. That is the purpose of financial inclusion. On the present crisis in the MFI sector, Dr Chakrabarty said that there are some MFIs with good practices. “We have to identify good MFIs and encourage them, and also those who are not good and penalise them.” The Malegam Committee is already examining the grey areas, and “we will come out with the recommendations,” he said.