Fourth Bi-Monthly Monetary Policy Statement, 2014-15 By Dr. Raghuram G. Rajan, Governor, RBI - September 30, 2014 - Full Text

I. Monetary Policy Framework

IV. Access to Finance

29 Expanding access of finance to the small, the poor, the unorganised and the underserved sections of society has been a central tenet of the Reserve Bank’s developmental policies.

30. State-Level Coordination Committees (SLCCs) are being strengthened to focus on financial inclusion for flow of public savings to the formal channels and protection of public deposits mopped up by unauthorised and unscrupulous entities. In line with the recommendation of the Financial Stability and Development Council (FSDC):

the SLCC, which is now chaired by State chief secretaries/ UT Administrators, will meet every quarter instead of half-yearly.

31. With a view to easing difficulties faced by common persons while opening bank accounts and during periodic updating, guidelines on ‘know your customer’ (KYC) will be further simplified with immediate effect so that banks:

do not insist on physical presence of the customer at the time of periodic updating; do not seek fresh proof of identity and address at the time of periodic updating in case of no change in status for 'low risk' customers; allow self-certification; accept a certified copy of the document by mail/post, etc; and

do not seek fresh documents if an existing KYC compliant customer of a bank desires to open another account in the bank.

32. There is a need for banks to complete KYC for all customers including long standing ‘low risk’ customers. Banks should complete documentation, while minimising the effort on the part of the customer to what is strictly needed. In the event that customers are unable to comply within a reasonable time period, ‘partial freezing’ may be introduced in respect of KYC non-compliant customers i.e., credits would be allowed in such accounts while debits would not be allowed, with an option to the account holder to close the account and take back the money in the account.

33. In line with its vision of migrating towards electronic payments and a ‘less-cash’ society, the Reserve Bank has been examining the feasibility of (a) standardisation in the operational processes and procedures involved in extension of mobile banking services, and (b) implementation of a pan-India bill payment system (recommended by GIRO Advisory Group (GAG)) facilitating anytime/anywhere payment of a variety of bills and dues. Similarly, the setting up and operationalisation of a system for uploading, accepting, discounting and settlement of the invoices/bills of micro, small and medium enterprises (MSMEs) is also being envisaged to facilitate faster financing for such entities. In this connection, it has been decided to:

issue policy guidelines for the Bharat Bill Payment System (BBPS), Trade Receivables Discounting System (TReDS) and standardisation of processes in mobile banking services by end-November 2014.

34. Customer protection is an integral element of the endeavour to expand access to finance. Accordingly, a draft Charter of Customer Rights under Consumer Protection regulations was placed on the Reserve Bank’s website in August for comments from the public. For operationalising the Charter of Customer Rights:

necessary instructions will be issued to the banks by the appropriate regulatory departments in the Reserve Bank shortly.

35. Criteria for inviting applications from entities eligible under the Depositor Education and Awareness Fund (DEA-Fund) for registration will be issued on the Reserve Bank’s website by the end of October 2014.

36. Looking ahead, the Reserve Bank’s developmental and regulatory policies will continue to evolve within the five-pillar approach to build a competitive, vibrant and sound financial system that is geared to intermediating the financing needs of a growing economy. Efforts will be made to harness appropriate technology and ensure that financial services are available to all even as customer awareness and protection is reinforced. The Reserve Bank will continue to carry forward banking sector reforms by adapting the best international practices to country-specific requirements.

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