Financial inclusion not an option, a compulsion: Rangarajan

JAIPUR: Stressing that "financial inclusion is no longer an option, but a compulsion", Prime Minister's Economic Advisory Council Chairman C Rangarajan today said growth of the bank-SHG (Self Help Group) linkage programme would give a boost to the micro finance sector.

Delivering the key note address at a seminar here on microfinance and financial inclusion, Rangarajan said that expansion of the business correspondents programme would also contribute to growth of the sector.

"Bank-SHG linkage programme and expansion of business correspondents model will constitute the main pillars of the future development of bank-related micro finance, even as other forms of micro finance institution will continue to grow," Rangarajan said.

"The bank-SHG linkage scheme has proved to be an effective way of providing credit to very small borrowers and this needs to be further strengthened. This has worked well and has contributed significantly to financial inclusion, as the financial inclusion attained through SHGs is sustainable and scalable on account of its various positive features," he said.

"One of the distinctive features of the programme has been the high recovery rate. However, the spread of SHGs is very uneven and is more concentrated in southern states. This regional imbalance needs to be corrected," the former RBI Governor said.

He said that in order to increase the outreach of the banking sector, the Reserve Bank has permitted banks to use the service of specified institutions as intermediaries for providing banking services