Indian Agrarian Crisis now moved to www.agrariancrisis.in

Farmer-the most endangered species

Banks set up financial counselling centres to help distressed farmers

Posted by Ramoo on March 26, 2007

HEMA RAMAKRISHNAN

TIMES NEWS NETWORK[ MONDAY, MARCH 26, 2007 12:11:20 AM]

SATARA: Several Indian banks are on course to set up financial counselling centres to help distressed farmers, particularly in states such as Maharashtra and Andhra Pradesh, that have witnessed a spate of suicides. RBI is sensitising banks to have such centres, said Usha Thorat, deputy governor, Reserve Bank of India.
The move follows the government’s decision to set up a Financial Inclusion Fund with Nabard for meeting the cost of developmental and promotional interventions. It also plans to set up a Financial Inclusion Technology Fund to meet the costs of technology adoption. Each fund will have an overall corpus of Rs 500 crore, with the initial funding to be contributed by the centre, RBI and Nabard.
Financial counselling centres may, however, not be a commercially viable proposition for banks. One of the options could be for the banking regulator to provide financial support to banks for setting up these centres.
Policy makers reckon that farmers need to diversify their risks instead of depending on just one crop. Finance is only one of the inputs and turn around in the farm sector hinges on a host of other factors including higher investments and an improvement in the yields.
Bank of India and ICICI Bank have launched credit counselling services. However, most banks in India are yet to have a formal financial system for financial counselling or improving financial literacy. Banks in the US, for instance, are expected to contribute towards educating persons from socially and financially disadvantaged groups on matters relating to their financial needs as per the Community Re-Investment Act.
Financial inclusion is delivery of banking services at an affordable cost to vast sections of disadvantaged and low-income groups. An estimated 600 million rural poor in India are either not served or under-served by the formal financial sector. The concept of financial inclusion was articulated by the RBI in 2005-06. Banks were mandated to make available basic banking “no frills” account either with nil or minimum balances and charges that would make such accounts accessible.
“The concept has caught on. But for real empowerment banks also need to ensure the continuity in use of these accounts by rural households. Such households need access to the entire gamut of financial services — including remittance facilities,” said Thorat. She said the RBI has asked all state-level bankers to identify at least one district in each state for financial inclusion.

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