Mumbai: A high-level committee headed by C Rangarajan, chairman of Economic Advisory Council, has called upon the Centre to constitute a national mission for financial inclusion (NMFI) to achieve universal financial inclusion within a specific timeframe. The committee has also called for setting up of a financial inclusion promotion and development fund and financial inclusion technology fund with the National Bank for Agriculture and Rural Development (Nabard) with an initial corpus of Rs 500 crore. It has urged regional rural banks (RRBs) to extend their services to non-banked areas and increase their credit to deposit ratio.
Further, in order to encourage selp-help groups (SHGs) in excluded regions, the committee has recommended that state governments and Nabard set aside specific funds out of budgetary support and the Micro Finance Development and Equity Fund (MFDEF), respectively, to promote SHGs in regions with high levels of exclusion. The committee has recommended the creation of a credit guarantee fund as a risk mitigation mechanism and also for providing comfort to banks for lending to joint liability group.
The committee, which had submitted the committee report to the Centre early January, will release it on February 5.
According to the committee, there is a need to recognise a separate category of micro finance-non banking finance Companies (MF-NBFCs) without any relaxation on start-up capital and subject to the regulatory prescriptions applicable to NBFCs. At least 80% of the assets of MF-NBFCs should be in the form of microcredit of up to Rs 1.50 lakh per individual borrower whether given through group mechanism directly. It has recommended that MF-NBFCs be allowed tax concessions to the extent of 40% of their profits, as a proportion to their business portfolio in excluded districts as identified by Nabard without attracting tax.
The financial inclusion promotion and development fund would focus on financing farmers’ service centres (FCS), promoting rural entrepreneurship, SHGs, developing human resource while the financial inclusion technology fund would help make available technology applications for greater financial inclusion.
The committee observed that 51.4% of farmer households are financially excluded from both formal/informal sources and of the total farmer households, only 27% access formal sources of credit, one third of this group also borrow from on formal sources. Overall, 73% of farmer households have no access to formal sources of credit. Exclusion is most acute in central, eastern and north-east regions having a concentration of 64% of all financially excluded farmer households in the country. Marginal farmer households constitute 66% of total farm households and only 45% of these households are indebted to either formal or non-formal sources of finance. Only 36% of scheduled tribe farmer households are indebted mostly to informal sources....
