Rural poor still depend on moneylenders: RBI survey

Mumbai: A survey the Reserve Bank of India (RBI) conducted in 300 districts has revealed that people from the lowest strata of society continued to depend on local money lenders for small loans at exorbitant interest rates.

Disclosing this, RBI deputy governor Usha Thorat said that in order to check this trend, the apex bank has drafted a concept plan on which public opinion is being sought.

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She was addressing a symposium on "Financial Inclusion - Sharing Indian and UK Experience," here Wednesday where Lord Mayor of London Alderman David Lewis was also present.

"Financial literacy and credit counselling are a must and that is one of the reasons why we are concentrating on banking penetration in the remotest rural parts of the country," she said.

Talking about the role of micro-finance and self-help groups (SHG), Thorat said that SHGs have a lot of penetration into hinterlands. However, since they lacked legal status, they were not allowed to open savings accounts in banks.

"Now we have allowed the leader of a SHG to open an account. This, in turn, has brought about a massive change in the rural banking sector," she pointed out.

In a break from the past, the RBI has simplified procedures for migrants, who have no identification papers, to open bank accounts.

"This step will help push banking presence in rural areas. Also, with the introduction of biometric smartcards, state governments have been compelled to address issues pertaining to banking in rural areas," Thorat said.

On the issues of local financial agencies like co-operative banks, regional rural banks, micro-finance institutions and others, she said that strengthening them would generate employment and setting up small and medium business enterprises in all remote corners of the country.

Concurring with Lord Mayor of London's view that the expansion of banking sector reach and financial inclusion are the key to a country's economic growth, Thorat said that the RBI's recent changes in certain banking norms have been carried out with the aim of allowing penetration of banking activities to the un-banked rural areas.
Source: IANS