Banking on all sections

The Union Budget is a clear articulation of national priorities, with a range of focused measures targeted at stimulating growth in various ...

The Union Budget is a clear articulation of national priorities, with a range of focused measures targeted at stimulating growth in various sectors of the economy. Within these, the measures for rural India and other under-served segments of our people could potentially have the most far-reaching impact on the India of tomorrow.

The Finance Minister has articulated a well-defined and holistic approach towards engaging more and more people in the economic mainstream and tapping rural India8217;s vast potential as an engine of growth. The Budget highlights a number of measures to improve agricultural productivity and enable rural economic activity, such as development of irrigation, rural electrification, infrastructure and telecommunications. This is backed up by a focus on education and healthcare, two areas critical to nurturing the immense talent, initiative and will to succeed that our people possess.

The Budget recognises the role of financial services in catalysing economic activity. The key challenge here has always been the cost of meeting the needs of rural and low-income groups through the traditional delivery model. This can be met only by leveraging technology and establishing partnerships with third parties who have a deep presence in the target areas and close linkages with the well-being of the target population.

The Budget articulates the need for a new paradigm for making these services available to underserved segments of the population. By encouraging delivery of financial services through partnership models, kiosks, agents and banking correspondents, particularly micro-finance institutions, the Budget makes it possible for banks to leverage the social mobilisation skills of these intermediaries to effect meaningful economic change. Banks would now be able to focus on capacity building using their technology and financial skills, while third parties embedded in the local environment could efficiently manage delivery of services.

Related important measures for the financial sector include the amendment of legal provisions to facilitate securitisation. This could emerge as an important tool for channelising resources from mobilisers of savings, through banks and other intermediaries with the requisite origination capabilities, to individuals, households and small businesses with micro-credit needs.

Micro-finance intermediaries have been permitted to raise external borrowings; given the complexities of access to international debt markets and the relatively small size of individual intermediaries, channelising these borrowings through the banking system may be examined. India8217;s competitiveness in services and manufacturing is recognised; what this Budget seeks to do is realise the hidden growth opportunities in the rural and agricultural sector to ensure that all sectors of the economy move forward on the same trajectory.

The writer is managing director and CEO, ICICI Bank