The high-level committee on financial inclusion, headed by C Rangarajan, chairman of PM’s economic advisory council (EAC), has proposed creation of separate category of micro finance-non banking finance companies (MF-NBFCs) without relaxation on start-up capital and subject to the regulatory prescriptions applicable to NBFCs. At least 80 per cent of the assets in MF-NBFCs should be in the form of microcredit up to Rs 1.50 lakh per individual borrower whether given through group mechanism or directly. It recommended MF-NBFCs should be allowed tax concessions upto 40 per cent of their profits, as a proportion of their business portfolio in excluded districts as identified by national bank for agriculture and rural development (Nabard) without attracting tax. It called upon the Centre to constitute a National Mission for Financial Inclusion (NMFI) to achieve universal financial inclusion within a specific timeframe. It has urged regional rural banks (RRBs) to extend their services to non-banked areas and increase their credit to deposit ratio. It said a national rural financial inclusion plan (NRFIP) may be launched with a target to provide access to comprehensive financial services, including credit, to minimum 50 per cent of financially excluded households by 2012 . The remaining households, with such shifts as may occur in the rural/urban population, have to be covered by 2015. “Semi-urban and rural branches of commercial banks and RRBs may set for themselves a minimum target of covering 250 new cultivator and non-cultivator households per branch per annum, with an emphasis on financing marginal farmers and poor non-cultivator households,” Rangarajan said while releasing the report in Mumbai on Tuesday.The committee observed that 51.4per cent of farmer households are financially excluded from both formal/informal sources and of the total farmer households, only 27per cent access formal sources of credit, one third of this group also borrow from on formal sources. Overall, 73 per cent of farmer households have no access to formal sources of credit. Exclusion is most acute in central, eastern and north-east regions having a concentration of 64 per cent of all financially excluded farmer households in the country. Marginal farmer households constitute 66 per cent of total farm households and only 45 per cent of these households are indebted to either formal or non-formal sources of finance. Only 36 per cent of scheduled tribe farmer households are indebted mostly to informal sources. Targeting uncharted terrain• Give tax breaks to microfinance NBFCs• Each rural branch should offer financial services to 250 financially excluded households every year• Creation of credit guarantee fund as risk mitigation mechanism • 73% of farmer households have no access to formal sources of credit
