Financial inclusion beyond a point is bad, says RBI chief

People at the bottom of pyramid do not have capacity to absorb credit, cautions Rajan at a seminar of IMF and World Bank meetings

GN Bureau | October 9, 2015


#Financial inclusion   #RBI governor   #World Bank   #Raghuram Rajan  

As India pushes for big time financial inclusion of the marginalized with schemes like Jan dhan yojana, RBI governor Raghuram Rajan has said financial inclusion should not be pressed beyond a point because beneficiaries may not have the capacity to make use of funds being made available to them.

Rajan made these comments on yesterday while participating in a seminar on 'Financial inclusion: Can it meet multiple macroeconomic goals?' on the sidelines of IMF-World Bank meetings in Lima, Peru.

He felt that pushing financial inclusion beyond a point can have negative impact because people at the bottom of pyramid do not have capacity to absorb credit.

"In my sense, beyond a certain point... (financial inclusion) becomes actually negative," he said, adding that everyone should not be pushed to borrow.

The Indian cabinet has okayed a two-phase financial inclusion scheme under which bank accounts will be opened for 15 crore poor people with an overdraft facility of Rs 5,000 and accident insurance of Rs 1 lakh.

RBI governor also made a case for strengthening the payment mechanism to improve traditional method for delivery of credit.

He further said technology and e-model could be used for improving businesses at remote centres. Giving an example, he said a carpet weaver in Kashmir can benefit immensely by selling his products electronically.

At the same time, Rajan made a strong case for developing capacities to deal with the misuse of technology by criminal elements.

Some unscrupulous elements have been misusing technology to fleece people by sending fake mails in the name of RBI, he said, adding sometimes people do fall into trap and pay the upfront process fee demanded by such persons.

"We have to deal with such problems at RBI... technology has the ability to do harm... we have to worry about that," Rajan added.

Video of the seminar: click here

IMF paper on financial inclusion: click here

Comments

 

Other News

On a personal note: DIVINE

An underground rapper who grew up on Mumbai streets, Divine spins his music around his environment and poverty. His breakout single, ‘Meri Gully Mein’, along with fellow rapper Naezy caught Bollywood’s attention. The Hindi film ‘Gully Boy’ is inspired by their lives and gr

The role model for an IAS officer

Anil Swarup, an IAS officer of Uttar Pradesh cadre who retired in 2018, is a model bureaucrat who retained his optimism right till the end of service and exemplified dedication and commitment. His excitement at the opportunities that a job in the IAS provided is evident on every page of his new book publis

Reform of the civil services: At home and away

The question of reform of the civil services has been debated extensively at all levels at least over the last five to six decades after independence. Indeed, it was soon perceived that the Indian Administrative Service (IAS) may not be well equipped to deal with the problems of an emerging developing coun

The greatest challenge for any government

Shouting vengeance at all and sundry while wriggling out of holes of our own making seems to be our very special national characteristic. Some recent instances are illustrative of this attribute. A number of business tycoons with thousands of crores of unresolved debts have fled abroad with the government

The mysterious case of CBI’s legality

The Central Bureau of Investigation (CBI) came into existence, based on a Resolution of the home ministry, dated April 1, 1963 – a sheer coincidence that it also happens to be April Fool’s day. Over the past few months, we have seen the CBI live up to its founding day with great zeal, being i

The Evolution of Modi

Gujarat was passing through a turbulent phase in the 1980s. The decade began middle class agitations against new reservation policies, and the caste friction turned communal under the watch of chief minister Madhavsinh Solanki, alienating majority of urban population on both counts. The ground was ripe for

Current Issue

Current Issue

Video

CM Nitish’s convoy attacked in Buxar

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter