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A worthwhile mission

The recently submitted report of the Committee on Financial Inclusion headed by C. Rangarajan advocates a holistic view and provides a conceptual framework for incorporating inclusive practices into the mainstream financial system. There is a strong case for stepping up demand side efforts such as enriching human and physical resource endowments, enhancing productivity and mitigating risks. However, the primary focus ought to be on augmenting credit flows to ensure that a range of financial services are available to every individual. According to the official data more than half of farmer households are financially excluded from both formal and informal sources of credit.

All these require innovative approaches and might also call for reviving products and services that were discarded by banks on grounds of profitability. Technology can be harnessed further for extending the reach of the rural credit delivery system and for distributing products such as micro insurance. The scheme of appointing business facilitators and correspondents — basically intermediaries who are outside but supplement the banking system — ought to be extended. Perhaps its most significant recommendation is that financial inclusion should be taken up on a mission mode and a National Rural Financial Inclusion Plan (NRFIP) drawn up. Specifically the NRFIP could aim at providing comprehensive financial services to at least 50 per cent of the rural cultivator and non-cultivator households across different States by 2012 through rural semi-urban branches of commercial banks and regional rural banks. The rest of the households ought to be covered by 2015.

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