The Hindu : Business : RRBs asked to offer `no frills' account

Online edition of India's National Newspaper
Wednesday, Dec 28, 2005

Business

Business

RRBs asked to offer `no frills' account

Special Correspondent

Measures aimed at taking banking services to the small man Taking banking services to the small man

Special package for rural areas Banks advised to issue general credit card Simple one-time settlement scheme for small borrowers

MUMbAI: Regional rural banks (RRBs) have been advised by the Reserve Bank of India to offer `no frills' account with zero or low minimum balance requirements (with nominal charges), to make the account available to the vast sections of the population. Further, they have been advised to explore the provision of small clean overdraft facility in such account without linkage to purpose.

"The procedures for opening such account, including `Know Your Customer' (KYC) compliance, will be simple", the RBI on Tuesday stated in a press release. The RBI formulated these measures aimed at taking banking services to the small man (Financial Inclusion), as announced by the central bank in its Annual Policy statement for 2005-06.

In order to make RRBs important vehicles of credit delivery in rural areas, the RBI has announced a special package designed to give a fillip to their resource base. This measure will enable them to avail of lines of credit from sponsor banks at reasonable rates of interest, access to inter-RRB term money/ borrowings and also to repo/CBLO markets.

RRBs have been permitted to set up ATMs, issue debit and credit cards and to handle pension/government business as sub-agents of banks authorised to conduct government business.

Credit card scheme

The RBI has advised scheduled commercial banks and RRBs to introduce a General Credit Card (GCC) scheme for issuing GCC to their customers in rural and semi-urban areas. The GCC will operate like the Kisan Credit Card and there will be no linkage to purpose or end-use of funds or security. The GCC can also be used for withdrawing cash against the limit sanctioned. Fifty per cent of the outstanding amount will be treated as indirect finance to agriculture. Women will be given preferential treatment under the GCC scheme. Banks have been asked to utilise the services of local post offices, schools, primary health centres, local government functionaries and farmers' associations/clubs for sourcing of borrowers for issuance of GCC.

With a view to giving small borrowers an opportunity to settle their non-performing accounts with banks and become eligible for fresh finance, all scheduled commercial banks (including RRBs and Local Area Banks) have been advised to provide a simple mechanism for one-time settlement (OTS) of loans for the principal amount up to Rs. 25,000 and which have become doubtful or loss assets as on September 30, 2005. State level bankers committees will evolve State specific guidelines for loans granted under the government sponsored schemes. This scheme will not cover cases of frauds and malfeasance.

Printer friendly page
Send this article to Friends by E-Mail

Business