Prime Minister Narendra Modi told the Reserve Bank of India (RBI) Thursday to prepare a 20-year road map for financial inclusion and delivery of financial services to all households in the country.
He encouraged banks to build on the success of schemes such as the Pradhan Mantri Jan-Dhan Yojana and Direct Benefit Transfer.
The success of these two schemes, Modi told a gathering in Mumbai to mark 80 years of the RBI, highlighted the enormous potential of the banking sector in ensuring financial inclusion.
“It only because of the success of Jan Dhan Yojana that people in the financial sector have realised its potential. Thanks to this scheme, bankers now know how rich the poor people of this country are. Despite opening a zero-balance account, at least 41 per cent of these
14 crore account holders have collectively deposited Rs 4,000 crore with banks.
This is proof that even the poor of the country can be powerful,” he said.
The big challenge now, he said, was to operationalise these new accounts (under Jan Dhan Yojana). The government had come up with schemes which will be taken forward through the banking route. Citing the example of the LPG subsidy scheme, he said: “In 100 days, we were able to finish the cash transfer programme and we were able to transfer Rs 8,000 crore through direct subsidy transfer. As a result of this, we have been able to check leakages in the government support programme.”
“I want to make financial inclusion a habit, not a programme in banks,” Modi said. He asked banks to take inspiration from the success of women self-help groups while keeping in mind the requirements of the youth who need either knowledge or skills. Referring to the soon-to-be-launched Mudra Bank (Micro Units Development and Refinance Agency) initiative, he urged banks to come up with creative financial inclusion instruments to help prevent farmer suicides.
“As a representative of the poor, I have come to ask the RBI something. Since RBI is now 80, I’m hoping it will not say no to me,” Modi said. “Our farmers commit suicide. The pain of this should not be restricted only to newspapers and TV screens. When a farmer dies, does it stir the heart of the banking sector? Because of taking a loan from a money lender, he has to face death. I don’t believe that by helping the poor, a bank will become insolvent.”
Earlier, RBI Governor Raghuram Rajan said strong national institutions are hard to build. “Therefore, existing ones should be nurtured from the outside, and constantly rejuvenated from the inside, for there are precious few of them.”
Modi, on his part, said that however powerful an idea, unless there is an institutional framework, it will not work or succeed. Finance Minister Arun Jaitley too said that professionalism of the central bank over the last eight decades had helped improve macro economic conditions and served the country well.
On the financial inclusion road map, Modi said “there are four important milestones for us — in 2019, Mahatma Gandhi will turn 150, in 2022 India will turn 70, in 2025 RBI will turn 90 and in 2035, the RBI will turn 100. We can prepare a financial inclusion road map in tandem with these milestones. And we should prepare in a way that throughout the country, whether it is a co-operative bank or a micro finance institution or a regular bank, all of them work in one direction.”
On giving up LPG subsidy, Modi said, “I have found that at least 2 lakh people have given up subsidy. Give up voluntarily. If one crore people give up this gas cylinder subsidy, then the cylinder (subsidy) you give up will reach the house of one crore poor families who burn firewood, which leads to deforestation, carbon emission and who raise their children in smoke.”
He said banks should fund marginal farmers, businesses and entrepreneurs to boost employment and give up fears of bad loans. He wanted banks to fund a second green revolution in east India, looking at the potential of these states with rich natural resources.