Financial inclusion's here, no-frill a/cs jump 30 times

MUMBAI: Financial inclusion has gone up significantly after the central bank issued a directive asking banks to open ���no-frill��� accounts. The number of such accounts has gone up by at least 30 times in the past two years, according to the Reserve Bank of India.

RBI will soon release a report based on credit counselling, which will help the unbanked to easily access banking services. Speaking at the launch of National Financial Literacy Drive by the Indian School of Microfinance for Women (ISMW) and Citi, P Bijendran, general manager, the rural planning and credit department of the Reserve Bank of India, said that no-frill accounts have gone up from 0.5 million in 2006 to 15 million in 2008. This is not an apt indicator of financial inclusion, he added.

RBI noted, in a recent report, that the level of financial inclusion may be gauged from the extent of financial exclusion. The All India Debt and Investment Survey dwells on the percentage of unbanked households. Financial literacy has assumed importance in light of the developments in the past two weeks, Mr Bijendran said. Interestingly, many organisations in the United States offered financial literacy programmes to help the youth in handling their personal finances.

All the stake holders, including the government, regulator, banks and the NGOs, can play a complementary role in ensuring financial inclusion. Banks face a major challenge in terms of the high account maintenance costs, according to Mr Bijendran. It is difficult to get collaterals. Lenders need to assess the cash flows and devise products accordingly.
Microfinance institutions can play a major role in this regard.

In its mid-term review of the Annual Policy for 2007-08, the central bank had called for a concept paper on Financial Literacy and Counselling Centres. Speaking on the occasion, Jayashree Vyas, managing trustee of ISMW, dwelt on plans to educate one million women over the next two years.