ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Bank Preference for Financial Inclusion in Rural Punjab

The Nachiket Mor Committee favours regional banks for meeting the goal of financial inclusion in rural areas, but a survey of two villages in Punjab points to the fact that small branches of commercial banks are the preferred option of villagers.

The Reserve Bank of India’s (RBI)Nachiket Mor Committee (2014) has recommended a banking design wherein regional banks, also sometimes referred to as “small banks or community banks”, are to play a leading role in financial inclusion of the weaker sections. The report points out that the traditional banking system (i e, commercial banks – CBs) is neither an effective nor an efficient channel for directly serving low-income households and small businesses for their basic payments and savings needs. This short article, based on a household survey of two villages in Punjab, examines the implementation of financial inclusion through the traditional banking system over the last eight years. The preference of villagers for the type of bank was specifically ascertained from the actual account opened by them.

Financial inclusion, as a direct approach, was launched by RBIin 2005 by making available “no frills”accounts with nil balance-requirement for the weaker sections, relaxing know-your-customer (KYC) norms and allowing banks to engage business correspondents/facilitators. DuringApril 2010 to March 2013 a special financial inclusionplan was implemented by all banks to expedite financial inclusionby making the banking facility available at every village with a population of 2,000 and above. All these efforts of the RBIthrough the banks enabled the Government of India to implement its direct benefit transfer (DBT) policy since January 2013.

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