........ It is hoped the RBI takes note of the views of Dr CD Datey, who sacrificed his career to oppose the establishment of RRBs in 1975. The small banks may not serve the purpose of financial inclusion. The Centre should rather think of having small branches of the commercial banks with all facilities of core banking solutions (CBS) which may ensure cent per cent financial inclusion.
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Lot has changed from 1975 to now in banking sector from the way it works to the way it perceives the future. Small private banks have proved their proximity to the customer much better than the larger banks. Large public and private sector banks had huge HR problems in deploying their personnel to the rural areas and many branches in such places in the upswing of profit motive were closed down. Even later given preference they would stay off these areas. It is the small banks and the cooperatives that the author talked of that came to the rescue of the small and marginal farmers and tenant farmers, several small businesses, artisans and micro enterprises. It became a herculean task initially in the mid-1990s to take the SHGs to the commercial banks and NABARD struggled a lot. Instead of strengthening the existing rural cooperative infrastructure which the Nabard ceremoniously neglected, without even introducing a common accounting system until Vaidyanathan Committee insisted and with a vast contributory negligence, to plead today for large banks in the name of capital would tantamount to ignoring financial inclusion. Further, to say that small banks would suffer from capital is also not correct. Once they have build trust capital would flow. The size of Capital we are seeking today as buffer is to insure the interests of the depositors on one side and on the other larger side, failings of the banks in risk management. There are also more number of UCBs that outperformed their peers than those that failed. This is one of the reasons to permit the UCBs also as prospective clients in the new bank licensing policy regime.
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