Fast forward>> Financial Inclusion and Financial Deepening - Mor Committee makes its recommendations What the need now is to draw an elaborate yet granular implementation plan spread over a realistic time frame? Multiplicity of policies and frameworks without addressing the target segment in a very focused manner may not yield the desired results. Else it will remain an unfinished process or turn into an "on the paper inclusion". There is need realign some of the policies or even dovetail the various policies aspiring to achieve "inclusive growth" for our country? This may surely be a step forward to achieve “true & lasting financial inclusion” and may contribute to creation sustainable food and nutritional security for the country. While there are quite a few areas which needs to addressed especially from implementation point of view and creating synergy amongst the various policies and institutions, the Mor Committee on “Comprehensive Financial Services for Small Businesses and Low Income Household” has put forth many forward looking ideas. Implementation remains the key. In brief the terms of committee on “Comprehensive Financial Services for Small Businesses and Low Income Household” was to frame and articulate a clear and detailed vision for financial inclusion and financial deepening in India, establish a set of design principles; and to address the specific barriers to ensure full achievement of the vision. The report packs a lot of recommendations for fast forwarding financial inclusion and financial deepening.

1. Fast forward>> Financial Inclusion and Deepening?
2014
1 Manoj Rawat | Head Agribusiness RBL Bank, Mumbai | mkrawat@gmail.com
Manoj Rawat, Head- Agribusiness
RBL Bank, Mumbai
mkrawat@gmail.com
Fast forward>> Financial Inclusion and Deepening
What the need now is to draw an elaborate yet granular implementation plan spread over a
realistic time frame?
In brief the terms of committee on “Comprehensive Financial Services for Small Businesses and
Low Income Household” (popularly known as Mor Committee) was to frame and articulate a clear
and detailed vision for financial inclusion and financial deepening in India, establish a set of design
principles; and to address the specific barriers to ensure full achievement of the vision. The report
packs a lot of recommendations for fast forwarding financial inclusion and financial deepening.
Few observations
1. Broad philosophy and Larger Financial Sector reforms
The report “provides a larger philosophy”, gives good ideas “which are thought provoking” and
envisages a “fast forward approach to inclusion”.
While the report has presented an “ambitious plan”, it seems has also tried to suggest a larger
agenda of financial sector reforms in the country.
2. Financial Inclusion Obligation versus Opportunity
The biggest push that needs to be made is to ensure that “Financial Inclusion & Financial
Deepening” is seen by all the stakeholders especially the Financial Institutions as a “Commercially
viable” proposition rather than regulator driven “obligation”.
3. Have we again propelled across Ideas?
Interestingly and rightly so the report notes that “As one examines the financial inclusion landscape
in India, the sheer energy that has been put behind the effort and the seriousness with which
providers and regulators have pursued this goal is impressive. However, it is possible that it is this
very energy that has been its key weakness as well, because it has propelled highly engaged
regulators and policy makers to move from one big idea to another, each time convinced that they
have finally found the key to financial inclusion, whether it be cooperative banks, nationalisation of
banks, self-help groups, regional rural banks, or business correspondents”.
Does this report and recommendation will also propel the policy makers to move from “earlier big
ideas” to “newer ideas” or “provide a comprehensive framework which includes existing policies
and new ideas to address the barriers”?
4. Robust and micro implementation plan will be key?
The report has not made elaborate discussion on “how” this is going to be implemented and what
kind of elaborate and granular plans financial institutions will need to do make this happen swiftly
in line with “articulated vision”

2. Fast forward>> Financial Inclusion and Deepening?
2014
2 Manoj Rawat | Head Agribusiness RBL Bank, Mumbai | mkrawat@gmail.com
Some of the challenges- Need for granular planning
1. Universalization of bank Accounts
Committee’s proposal for universalization of bank accounts by January 1, 2016 with the
“Aadhaar” as the prime driver, is certainly a good idea but for this to work we will need to
address few of the following.
a. “Aadhaar” as single identity to be free of glitches and should have legislative
approval
b. Poor seeding of “Aadhaar” numbers into bank accounts ( <10%)
c. Realistic timeframe
2. Setting up Differentiated Banks
The idea of setting up differentiated banks is not new. There have been many such
institutions conceived and set up in past. Previous attempts at creating differentiated banks
such as the regional rural banks and local area banks failed. Their commercial viability
needs to thought for or worked out at the outset.
3. Creating a Payment Bank
Creation of a payment bank (PB) to provide payment services and deposit products to the
target segment is good idea. However, the overall objective is to provide access to a
complete bouquet of financial services including credit, insurance etc which would not be
possible through PB framework. It will need to be ensured that a holistic framework which
provides a complete bouquet of services is created.
4. Priority Sector Lending – Need for equitable
The report has suggested on providing equitable distribution of credit across defined sector
and also across geographical reach.
a. Geographical spread: Higher weightage on less penetrated areas – More branches in
unbanked/penetrated areas
b. High emphasis on lending to marginal farmer and landless labourer- Will need to
have large trained manpower
c. PSL target to be reported on quarterly basis-Implementing PSL targets in two crop
or Single crop area on quarterly basis may become a challenge
5. “Farmers” to be at the heart of Financial Inclusion Framework
“Financial Inclusion” in India can truly be delivered through a framework which has
“Farmers” at its heart. More than 2/3rd of India’s population is dependent on Agriculture
and allied agriculture activities. Bulk of our farming community belongs to Small and
marginal category who own 83 % operational holdings with 63% of farmers being marginal
and having landholding <1ha. Any Financial Inclusion framework which is not aligned to

3. Fast forward>> Financial Inclusion and Deepening?
2014
3 Manoj Rawat | Head Agribusiness RBL Bank, Mumbai | mkrawat@gmail.com
these facts and ignores to genuinely take care of the interests of agriculture and of the small
& marginal farmers, may never deliver the real “Inclusion”.
A sound financial inclusion policy primarily needs to primarily focus on increasing
productivity, viability and bringing lasting improvement in the economic condition of the
small, marginal and tenant farmers and sharecroppers and wagers. We may need to realign
the framework to focus on this?
6. Multiplicity of policy frameworks
Multiplicity of policies and frameworks without addressing the target segment in a very
focused manner may not yield the desired results. Else it will remain an unfinished process
or turn into an "on the paper inclusion". There is need realign some of the policies or even
dovetail the various policies aspiring to achieve "inclusive growth" for our country? This
may surely be a step forward to achieve “true & lasting financial inclusion” and may
contribute to creation sustainable food and nutritional security for the country.
While there are quite a few areas which needs to addressed especially from implementation
point of view and creating synergy amongst the various policies and institutions, the Mor
Committee on “Comprehensive Financial Services for Small Businesses and Low Income
Household” has put forth many forward looking ideas. Implementation remains the key.
Manoj Rawat
----------------------------------------------------------------------------------
The views expressed in this article are purely personal.
Email: mkrawat@gmail.com | Blog : http://mkrawat.blogspot.com