RBI High Level Committee suggests Roadmap for Access to Banking Facility in every Village by 2011

August 24, 2009:

The Reserve Bank of India had, in 1969, introduced the Lead Bank Scheme. Subsequently, several changes took place in the country, especially after 1991 with the beginning of globalisation and liberalisation of the Indian economy. The reforms encompassed all sectors including the financial sector. While policies were in place to facilitate flow of credit to the more vulnerable sectors/sections of society, a need was felt to ensure greater dissemination and implementation of these policies at the grass root level, besides getting timely information and better assessment of outcomes.

Subsequent to the announcement in the Mid-term Review of the Annual Policy Statement for 2007-08, a High Level Committee (Chairperson: Smt. Usha Thorat) was constituted to review the Lead Bank Scheme and improve its effectiveness, with a focus on financial inclusion and recent developments in the banking sector. Chief Secretaries of select States, Chairmen of major public sector banks and others were members on the High Level Committee.

Committee has recommended that a sub-committee of the District Consultative Committee may draw up a roadmap to provide banking services in any form to every village with a population of over 2000 at least once a week on regular basis by March 2011 and in States where banking penetration is better, the date may be suitably advanced.

It has also suggested that the Lead District Manager may convene a quarterly public meeting at various locations in the district where the Reserve Bank, banks having presence in the area and other stakeholders are present to generate awareness of the various banking policies and regulations relating to the common person, obtain feedback from the public and provide grievance redressal to the extent possible at such meeting or facilitate approaching the appropriate machinery for such redressal.

Other major recommendations of the Committee include :

Roadmap for Financial Inclusion: A Sub-Committee of the District Consultative Committee (DCC) may draw up a road map to provide services through a banking outlet (in any form, such as, brick and mortar branch, mobile banking, extension counters, satellite offices or Business Correspondents) at every village with a population of over 2000 at least once a week on a regular basis. By March 2010, the Sub-Committee should come out with a time frame within which this can be achieved and the time frame to cover all villages having population of more than 2000 with a banking outlet should not be later than March 2011. In States where the banking penetration is better, the date may be suitably advanced.

Role of State Governments: State Governments should ensure road and digital connectivity to all centres where penetration by the formal banking system is required, expedite use of IT solutions for disbursal of National Rural Employment Guarantee Act (NREGA) and social security payments and extend support to banks in the recovery of their dues.

Preparation of State Level/District Level Plan: A one-time comprehensive State Level/District Level Development Plan should be formulated for all the districts that should identify the enablers and impeders for banking development and indicate the specific actions to be taken by banks, State Governments and other stakeholders to ensure banking development for inclusive growth.

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