MFIs can't bring about financial inclusion: Chakrabarty

MUMBAI: Microfinance institutions will not be able to bring about financial inclusion, as their cost of lending is high, a top RBI official said on Thursday.

"Microfinance institutions will not be able to bring financial inclusion. Their cost of lending is high," Reserve Bank of India Deputy Governor K C Chakrabarty told reporters here on the sidelines of the inauguration of Bank of India's mobile-based remittance facility for urban financial inclusion.

"The definition of financial inclusion is providing access to appropriate financial products and services to the most vulnerable group of the society in a fair, transparent and cost-effective manner by the mainstream financial institutions," he said.

When banks reach that level, the competition will bring down the cost, he said.

"When financial inclusion happens, banks will replace microfinance institutions. Then microfinance institutions will take the role of money lenders," he said.

The Reserve Bank will not tinker with the monetary policy unless it is absolutely necessary, he said.

"Generally, we will not tinker the (monetary) policy unless it is absolutely necessary. It does not mean that we don't have the authority to touch the interest rates. We have an online real-time policy. If there is a euro problem, or a dollar problem, then we will intervene," Chakrabarty said.

The Customer Service Committee under former SEBI Chief M Damodaran will oversee the banks' dealings with customers, he said.