Govt working with RBI for deeper penetration of banking services

Finance Minister Pranab Mukherjee on Tuesday said that the government in consultation with the Reserve Bank of India (RBI) is trying to reduce the inter-mediation cost to improve penetration of the financial services in the country. “...the cost of banking intermediaries in India is high and bank penetration is limited to only a few customer segments and geographies. The government is trying to address this in collaboration with the Reserve Bank of India, but much more is needed to be done,” Mukherjee said in his pre-budget consultation with bankers and financial services providers. The finance minister emphasized financial inclusion was a key determinant of sustainable and inclusive growth. Access to affordable financial services - especially credit and insurance - enlarges livelihood opportunities and empowers the poor to take charge of their lives. It is critical to connect the banked and the unbanked sectors and enable the unbanked to become vibrant and productive participants in the process of economic growth, the finance minister said. The government has accorded high importance to financial inclusion to cover the entire gamut of financial services pertaining to savings, credit, insurance and transfers, he added. As a part of the financial sector reforms in India, Mukherjee said, an apex-level Financial Stability and Development Council (FSDC) has been set up with a view to strengthen and institutionalize the mechanism for maintaining financial stability. Without prejudice to the autonomy of market regulators, this council would undertake macro prudential supervision of the economy and address inter-regulatory co-ordination issues. It would also focus on financial literacy and financial inclusion, he said. It has also been decided to set-up a Financial Sector Legislative Reforms Commission (FSLRC) to rewrite and clean up the financial sector laws and bring them in line with the requirements of the sector, he said.