For nearly a decade we have been talking about financial inclusion. Ever since the Dr. Rangarajan Committee asserted that financial inclusion is no more an option, but a compulsion, banks have been announcing their achievements in reaching out to the unreached. In claiming their successful sojourn into the unchartered areas, they are not comparing their data with the benchmark data. There is the thoughtfully framed slogan ‘Step into a bank and step out of poverty.’ But the banking sector has to travel a long distance to enable the aam aadmi to step into the nearest branch. True, many steps have been taken to facilitate access to banking. Account opening norms have been diluted and accounts can be opened with zero balance. Branch licensing policy has been liberalised to enable banks to open branches in unbanked areas. Better still, branchless banking has been accepted.
The RBI appointed a Committee on Comprehensive Financial Services for Small Business and Low Income Households, with a mandate for framing a clear and detailed vision for financial inclusion and financial deepening in India. The report has six stellar statements to achieve full financial inclusion and financial deepening. One of them is having Universal Electronic Bank Account (UEBA).
While this is salutary, the target dates suggested are over-ambitious. Under the UEBA, by 1 January 2016, every Indian above 18 years of age would have an individual, full-service, safe, and secure electronic bank account. It is certainly possible, as many developing countries have already achieved this goal.
According to the IMF Financial Access Survey: 2012, developed countries have about 3000 deposit accounts per 1000 adults. Comparative figure for India is 1042 per thousand adults. Japan has a high 7285 deposit accounts per 1000 adults, while mainland China has an unbelievably low figure of 35.
The Indian scenario…
For a population of 125 crore, commercial banks in India have 90 crore deposit accounts. Despite KYC data being religiously collected and updated by banks, no estimates of the actual number of depositors are available. Bank customers, who have savings bank deposit accounts, invariably have a fixed deposit account also.
By the way, the Committee has not given any indication of the number of new accounts to be opened before the target date. It is not clear as to whether the zero balance accounts have to be converted into UEBA. New numbers have to be given to them, which already have 14 digits.
The census does not have information on the number of adults of 18 years and above. No estimates are readily available as to how many of them are already bank depositors as on date.
Ensuring every adult in India has electronic bank account within the next 22 months would be difficult. Although mobiles have penetrated into thousands of villages, where neither electricity nor telephones could reach, banks may not reach out to the target groups in 660 days. Target dates may be fixed more realistically on a region-wise basis, taking into consideration the inadequacies of the necessary infrastructure facilities.