India must stop chasing the bandwagon of hyped western model of over-sized baking
It’s not believable that worldwide financial crisis is over, as the recovery so far has failed to bring back the sentiment in financial sector of days back to 2008. Though in downturn, the profound importance of finance for the global economy could be easily realised – this effect is visible even when 2.5billion people worldwide still have no access to formal banking services.
This ‘missing segment’ poses question mark over the claim of financial inclusion, which is breathlessly pervasive from all the corners. In India, the situation is much worse, as almost its half of population is unbanked and that blocking their convergence with the global economic model of consumption. The usual cycle (that thrives on limitless consumerism) of consumption is compromised here, and that is an obvious reality.
Atleast in India, the idea of financial inclusion has not travelled beyond the infancy, as the technical understanding of this issue and infrastructure available here does not appear in functional equilibrium, so the deviation is unrelenting. It’s beyond common reckoning that globalisation is not a zero-sum game, so not essentially emerging economies can benefit from the opening of markets for developed world.
Rather if the world’s 2.5 billion unbanked could be included in the fold of financial inclusion, every industry will experience innovation and growth. The empirical evidences suggest that the homegrown policies are more effective than borrowed tailor made ideas from different set of system. A common solution is hard to find for the financial inclusiveness, as factors that are common across countries hardly provide a smooth way forward.
The asymmetric use of technology is the most dampening bottleneck of free and fair operation of institutional financial services in emerging countries. It’s true populations worldwide is embracing technology, especially cell phones but still people throughout the developing world terribly lack the basic identification, formal employment and a permanent address. Such impediments stop a bulk of people to avail the benefits of institutional financial services.
In Indian case, the lapses in perception and action towards the financial inclusion drive generate confusion and deviation from base issues. The government and regulators still lacks to configurate and channelise it as a viable model for business. This overlooks the bright outcome of opening the financial system to the world’s poorest people, which could open their economic and social potential-to the benefit of all.
Presently, financial inclusion campaign in India is erroneously being handled by the banks or other corporate entity like a part of lackluster CSR schemes. This is a serious violation of fundamental conception attached with this plan-recently Raghuram Rajan, who chaired the Committee on Financial Inclusion in past has himself admitted the prevailing unrealistic state of affairs in India’s policy circle, in which the big claims of financial inclusiveness more often surfaced.
It’s not true that efforts have not made in the past as well to promote financial inclusion-in some senses, they were better organised to address the targeted issues then the current policy feeds being issued from RBI. The RBI’s pre-determined policy stances have inhibited the healthy growth of financial institutions and services, which affected the natural course of financial inclusion in the country.
The RBI is maintaining silence over the future growth of India’s financial sector, which has been safe more for its undersized ambition than the claimed ‘prudence’. This is totally ironic watching the curtain down on the future of India’s more than 55 percent unbanked citizens and overall the growth of financial sector at large.
The path India’s banking has travelled so far hardly allows one to part the views between progressivism and ultra-materialism, here the things have to be seen in the right context. Public sector banking was more a hedging intervention, so it would be unfair considering the nationalisation of banks as the complete socialistic manifestation. PSBs/RRBs played their role immensely well and would do more good under the perfect competition around the every nook and corner.
With more than 17,000 branches across the India’s rural heartlands and the small towns, RRBs can be seen as the engine of rural growth in India.
India’s financial policy regime must believe in the certain goodness, which its institutions offer-and for making things better, they must stop chasing the bandwagon of hyped western model of over-sized baking or doubtful idealism of microfinance businesses.
-Atul K Thakur
(Published in Millennium Post,on 19April,2013)