Rajeshwar Rao: Inclusive credit - the next milestone

Remarks by Mr Rajeshwar Rao, Deputy Governor of the Reserve Bank of India, at the Associated Chambers of Commerce and Industry of India's (ASSOCHAM) 17th Annual Summit & Awards on Banking & Financial Sector Lending, Mumbai, 8 September 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Ladies and Gentlemen,

I thank ASSOCHAM for inviting me to deliver this talk here today. The theme of this summit - "Financial Inclusion & Future of Financial Services in India - Vision 2030" is indeed contextual and relevant given the challenges we face at this juncture. The discussions around the issue at this summit should generate invigorating discussions and productive outcomes during the course of the day.

Financial inclusion has always been an important policy imperative realising its importance in economic development and social well-being of the populace. We have come a long way in our pursuit for financial inclusion which started with promotion of cooperatives, nationalization of banks, institutionalisation of priority sector lending and lead bank scheme, implementation of BC model and more recently with Pradhan Mantri Jan Dhan Yojana (PMJDY).

In this journey, we have adjusted our strategies and policy focus factoring in the changing demographics, economic situation, and social needs. Given the wide geographical spread and the need to include large unbanked population, the policy thrust for a long time had been on providing access to basic financial services. It is quite rightly recognised that access to a bank and a bank account is the first step toward broader financial inclusion since it enables people to carry out basic banking functions such as remittances besides acting as a gateway to access other financial services. In this effort, RBI mandated banks to open branches in underbanked pockets which led to a considerable increase in bank branches and later Automated Teller Machines (ATMs) in the 1990s to early 2000s. A roadmap for having banking outlets in villages with population more than 2000 (in 2009) and less than 2000 (in 2012) was also prepared. Subsequently the banks were advised to open brick and mortar branches in villages with population of more than 5000. To strengthen financial inclusion, the branch authorisation guidelines were relaxed and Financial Inclusion Fund (FIF) with an initial corpus of ₹2000 crore was established to support adoption of technology and capacity building.