Second Quarter Review of the Monetary Policy for 2011-12
-Announced on the 25th October 2011
Part B. Developmental and Regulatory Policies
IV. Credit Delivery and Financial Inclusion
Financial Inclusion Plan for Banks
86. It was indicated in the Monetary Policy Statement of May 2011 that all public and private sector banks had prepared and submitted board-approved three-year financial inclusion plans (FIPs), containing targets for March 2011, 2012 and 2013, to the Reserve Bank. In order to review the progress of banks in the implementation of FIPs and making way for accelerated progress in future, the Reserve Bank has been conducting annual FIP review meetings with banks. Based on discussions with banks, some action points were conveyed to them.
87. Banks were advised to ensure close and continuous monitoring of BCs. They were also advised to focus, in future, on opening of some form of low cost brick and mortar branches between the base branch and BC locations. Further, banks were required to make efforts to increase the number of transactions in no-frill accounts. There should be seamless integration of the financial inclusion server with their internal core banking solution (CBS) systems and in the case of end-to-end solution, there should be a clear demarcation of the technology related activities and BC related activities of their service providers. Banks should initiate action for registering with the Unique Identification Authority of India (UIDAI) and start opening accounts on the basis of Aadhaar information. Public sector banks should formulate FIPs for all RRBs sponsored by them and develop an effective monitoring mechanism so that targets assigned to the RRBs were also achieved meticulously.
88. The reporting format for monitoring the progress made by banks under FIPs has been segregated under qualitative and quantitative parameters. Banks have been mandated to submit quantitative reports on a monthly basis and qualitative reports on a quarterly basis in future.
Urban Co-operative Banks
Enhancement of Limit and Repayment Period of Housing Loan
89. Based on the representations received from the urban co-operative banks (UCBs) and their associations, it is felt that there is a need to increase the maximum permissible limit of individual housing loans that can be granted by the UCBs, as also to increase the maximum repayment period for such loans. It is, therefore, proposed:
to increase the individual housing loan limit from `25 lakh to `30 lakh for Tier I UCBs and from `50 lakh to `70 lakh for Tier II UCBs, subject to extant prudential exposure limits; and
to enhance the maximum repayment period of housing loans from the present period of 15 years to 20 years.
90. Detailed guidelines in this regard will be issued separately.
Licences for Setting up new Urban Co-operative Banks
91. As announced in the Monetary Policy Statement of April 2010, an Expert Committee (Chairman: Shri Y. H. Malegam) was constituted in October 2010 with representations from all stakeholders for studying the advisability of granting licences for setting up new UCBs. The Committee was also mandated to look into the feasibility of an umbrella organisation for the UCB sector. The major recommendations of the Committee, which submitted its report in August 2011, include (i) minimum entry point capital norms ranging between `50 lakh and `500 lakh depending upon the location and area of operation; (ii) preference to be given to existing co-operative credit societies with a sound track record for grant of licence; (iii) every new UCB to have a Board of Management (BoM) to be appointed by the Board of Directors (BoD) and a Chief Executive Officer (CEO) to be appointed by the BoM; and (iv) setting up two separate umbrella organisations, namely (a) a national level organisation, which will provide payment and settlement services and other services normally provided by central banks as also liquidity support to its member UCBs; and (b) one or more State level organisations or outside agencies to provide information technology (IT), training and other services. The report of the Committee was placed in public domain, inviting comments up to October 31, 2011. After receipt of feedback from the public, the recommendations will be examined and guidelines issued.
92. Recognising the need for revisiting the issue of customer service in banks, a Committee (Chairman: Shri M. Damodaran) was constituted by the Reserve Bank in May 2010. The Committee looked into the banking services rendered to retail and small customers and pensioners, structure and efficacy of the existing grievance redressal mechanism, the functioning of Banking Ombudsman Scheme, and possibility of leveraging technology for better customer service and has recommended steps for improvement. The report was published in July 2011 and placed in public domain calling for comments/suggestions from all the stakeholders.
93. A large number of comments and suggestions were received and examined with a view to translating the recommendations into executable policies. However, on account of a wide range of issues covered and certain recommendations with far-reaching implications, it would require some time to finalise the entire list of implementable recommendations. In the interregnum, 88 recommendations on which a broad consensus has emerged may be taken up for implementation initially. Further, in a recently concluded Banking Ombudsmen conference, in which the Indian Banks’ Association (IBA) together with the Banking Codes and Standards Board of India (BCSBI) participated, 10 action points were identified, which are essential to protect the rights of the customers. Accordingly, it is proposed:
to implement the recommendations of the Damodaran Committee, on which a broad consensus has emerged, as also the action points which were identified by the IBA and BCSBI in the last Banking Ombudsmen conference.
94. The matter will be pursued with the stakeholders in respect of remaining recommendations of the Damodaran Committee.
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