Finance Minister, Shri Pranab Mukherjee has emphasized the need for strengthening of movement of Self-help Groups for financial inclusion so that small and marginal farmers could get access to higher doses of credit in taking out productive land based activities. He was addressing a meeting with the Chief Ministers of South Zone States and Administrators of Union Territories (UTs) & Chairmen and Executive Directors of Banks in Hyderabad, today.
This was the last meeting in the series of regional meetings with the Chief Ministers of the States and Administrators of UTs organised by the Department of Financial Services, Ministry of Finance in different parts of the country during the last one month to review various developmental schemes and efforts being made by the public sector banks in developmental programmes. The Finance Minister said that we have to use new technologies to make banking services available and within reach of rural people through the services of business correspondents, mobile banking, no-frill accounts etc.
He said that the southern India has been successfully operating Self Help Group (SHG) movement, especially of women. Figures on financial inclusion show almost 57 lakh accounts opened through the business correspondent model. He said that “experience in SHG formation could be leveraged to benefit development of the villages in agriculture through formation of Joint Liability Groups of farmers, as well. The small and marginal farmers could then find greater strength in accessing higher doses of credit in taking up productive land based activity.”
Although south has good growth in micro credit via the SHGs, NGOs, Microfinance Institutions (MFIs) and PSU Banks; RBI is examining on lending rates by some of these institutions.
The FM said “accessing funds from the public sector banks and appropriate use of technology can help bring down lending and administrative costs for the MFIs and these savings must be passed on to the BPL SHGs while extending microcredit to them. At the same time, the Banks have to expand their financial outreach through use of business correspondents’ model and also by ensuring they are more accessible to the SHGs. It is my desire that microcredit models combine the ease of accessing credit at the door step, as offered by the MFIs, with the facility of low interest rates as offered by the PSBs.” He noted that the Government of Andhra Pradesh has launched ‘Pavvala Vaddi’ program, under which interest paid above 3% by an SHG group to a Bank is reimbursed to the Self Help Group by the State Government.
He also informed that in south, a number of steps have been taken to improve credit delivery of the banks and financial inclusion. The measures include permitting banks to engage banking correspondents (BCs), formulation of Financial Inclusion Plan (FIPs) and mandating banks not to insist on collateral securities in case of loans up to Rs.10 lakhs as against the present limit of Rs.5 lakhs extended to all units in the Micro and Small Enterprises sector.
Mentioning about Unique Identification Programme, Shri Mukherjee called upon the State Governments to ensure that residents of rural habitation are enrolled by the banks for opening of ‘no-frills’ accounts during the campaign. Finance Minister also highlighted the need for close monitoring of farm credit flow to small and marginal farmers at the micro level. The meeting was attended by Chief Minister of Andhra Pradesh, Ministers and officials of Southern States.
Based on the deliberations in these meetings, certain decisions which have been taken are:
1.The banks have been directed to increase Kisan Credit Cards by 20%(in number ) and 20% (in amount) for the current Financial Year, 2010-11.
2.All bank license holders have been advised to open new branches this year.
3.The Chief Ministers have been advised to closely monitor the Financial Inclusion Plans of the SLBCs for coverage of all habitations with population above 2000 with banking facilities by March, 2012.
4.The Chief Ministers have been requested to ensure that residents of rural habitations are enrolled by the banks for opening of ‘no frills’ accounts during the UIDAI campaign.
5.It was informed in the meetings that the limit for collateral free loans to the MSE has been increased from the present level of Rs 5 lakh to Rs 10 lakh by the Reserve Bank of India. Further, the RBI has decided that banks may waive margin/security requirements for agricultural loans from the existing level of Rs.50,000/- to Rs. 1,00,000/- wef June, 2010. This has been a frequent issue raised by the Chief Ministers in the meetings.
6. States have been asked to utilise the State Level Bankers Committee (SLBC) forum to achieve adequate and timely disbursement of loans under the various schemes of Government and thereby improve the C/D ratio.
7.The SLBC meetings must be chaired at a senior level, and State Chief Ministers have been advised to chair atleast one SLBC meeting annually.
8.Under the Aam Aadmi Bima Yojana (AABY), implementing States have been advised to speed up coverage and the other States have been advised to consider being part of the Scheme, which provides death and disability cover for the benefit of rural landless households in the country.
9.With respect to the Co-contributory Pension Scheme by States for unorganised sector workers (Swavalamban), the States have been requested to consider making co-contribution along with Government of India.
10.Bankers have been asked to actively associate themselves with State Government Programmes, including complaint redressal.”