Fast forwarding >> Financial Inclusion and Financial Deepening – Mor Committee recommends more…

Sustainable Agriculture, MSME & Green Value Chain Finance | Priority Sector Finance | Manoj Rawat, ValueFin India

Fast forwarding >> Financial Inclusion and Financial Deepening – Mor Committee recommends more…



Fast forwarding>> Financial Inclusion and Financial Deepening – Mor Committee recommends more… 



What the need now is to draw an elaborate yet granular implementation plan spread over a realistic time frame?


 In brief the terms of committee on “Comprehensive Financial Services for Small Businesses and Low Income Household” was to frame and articulate a clear and detailed vision for financial inclusion and financial deepening in India, establish a set of design principles; and to address the specific barriers to ensure full achievement of the vision. The report packs a lot of recommendations for fast forwarding financial inclusion and financial deepening.

Few observations

  1. Broad philosophy as also sets agenda for Larger Financial Sector reforms

The report “provides a larger philosophy”, gives good ideas “which are thought provoking” and envisages a “fast forward approach to inclusion”.

While the report has presented an “ambitious plan”, it seems has also tried to suggest a larger agenda of financial sector reforms in the country.


  1. Financial Inclusion “Obligation” versus “Opportunity”

The biggest push that needs to be made is to ensure that “Financial Inclusion & Financial Deepening” is seen by all the stakeholders especially the Financial Institutions as a “Commercially viable” proposition rather than regulator driven “obligation”.  

  1. Will the policy makers again get “propelled” across Ideas?

Interestingly and rightly so the report notes that “As one examines the financial inclusion landscape in India, the sheer energy that has been put behind the effort and the seriousness with which providers and regulators have pursued this goal is impressive. However, it is possible that it is this very energy that has been its key weakness as well, because it has propelled highly engaged regulators and policy makers to move from one big idea to another, each time convinced that they have finally found the key to financial inclusion, whether it be cooperative banks, nationalisation of banks, self-help groups, regional rural banks, or business correspondents”.

Will this report and its recommendations again propel the policy makers to move from “earlier big ideas” to “newer ideas” or “provide a comprehensive framework which includes existing policies and new ideas to address the barriers”?


  1. Robust and micro implementation plan will “as always” remain the key?

The report has not made elaborate discussion on “how” this is going to be implemented and what kind of elaborate and granular plans financial institutions will need to make this happen swiftly in line with “articulated vision”.

Some of the challenges- Need for micro and granular implementation plan

  1. Universalization of bank Accounts
    Committee’s proposal for universalization of bank accounts by January 1, 2016 with the “Aadhaar” as the prime driver, is certainly a good idea but for this to work we will need to address few of the following.
  2. “Aadhaar” as single identity to be free of glitches and should have legislative approval


  1. Poor seeding of “Aadhaar” numbers into bank accounts ( <10%)


  1. Realistic timeframe for implementation
  2. Setting up Differentiated Banks
    The idea of setting up differentiated banks is not new. There have been many such institutions conceived and set up in past. Previous attempts at creating differentiated banks such as the regional rural banks and local area banks failed. Their commercial viability needs to thought for or worked out at the outset.
  3. Creating a Payment Bank

Creation of a payment bank (PB) to provide payment services and deposit products to the target segment is good idea. However, the overall objective is to provide access to a complete bouquet of financial services including credit, insurance etc which would not be possible through PB framework. It will need to be ensured that a holistic framework which provides a complete bouquet of services is created.

  1. Priority Sector Lending – Need for equitable distribution

The report has suggested on providing equitable distribution of credit across defined sector and also across geographical reach.
a.       Geographical spread:  Higher weightage on less penetrated areas – More branches in unbanked/penetrated areas
b.      High emphasis on lending to marginal farmer and landless labourer- Will need to have large trained manpower
c.       PSL target to be reported on quarterly basis-Implementing PSL targets in two crop or Single crop area on quarterly basis may become a challenge

  1. “Farmers” to be at the heart of Financial Inclusion Framework
    “Financial Inclusion” in India can truly be delivered through a framework which has “Farmers” at its heart. More than 2/3rd of India’s population is dependent on Agriculture and allied agriculture activities. Bulk of our farming community belongs to Small and marginal category who own 83 % operational holdings with 63% of farmers being marginal and having landholding <1ha. Any Financial Inclusion framework which is not aligned to these facts and ignores to genuinely take care of the interests of agriculture and of the small & marginal farmers, may never deliver the real “Inclusion”.

A sound financial inclusion policy primarily needs to primarily focus on increasing productivity, viability and bringing lasting improvement in the economic condition of the small, marginal and tenant farmers and sharecroppers and wagers. We may need to realign the framework to focus on this?

  1. Multiplicity of policy frameworks

Multiplicity of policies and frameworks without addressing the target segment in a very focused manner may not yield the desired results. Else it will remain an unfinished process or turn into an “on the paper inclusion”. There is need realign some of the policies or even dovetail the various policies aspiring to achieve “inclusive growth” for our country? This may surely be a step forward to achieve “true & lasting financial inclusion” and may contribute to creation sustainable food and nutritional security for the country.

While there are quite a few areas which needs to addressed especially from implementation point of view and creating synergy amongst the various policies and institutions, the Mor Committee on “Comprehensive Financial Services for Small Businesses and Low Income Household” has put forth many forward looking ideas. Though Implementation remains the key ??


Manoj Rawat

The views expressed in this article are purely personal.

Manoj Rawat |India  Head- Agribusiness, RBL Bank, Mumbai
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