RBI's HR Khan for freedom to banks for financial inclusion goals

NEW DELHI: Banks should be given some freedom to determine their financial inclusion strategies as making such obligations mandatory has its own distractions, RBI Deputy Governor H R Khan said today.

"The problem is that too much of mandating in financial inclusion programme creates its own distraction...banks need to be given some kind of freedom to determine their own financial inclusion strategies and pursue their commercial activity," Khan said in his valedictory address in a National Seminar on Rural Finance organised by NABARD here.

Khan said RBI is committed to provide a conducive regulatory environment to ensure hassle free financial services by financial entities.

"On the RBI side, we are committed to provide a conducive regulatory environment where financial entities can ensure hassle free financial services."

He said the Reserve Bank has recently removed some restrictions in its business correspondent (BC) model and have allowed Non-Banking Financial Companies (NBFCs) to act an BCs.

Apart from this payment banks can also act as BCs, he said.

He said micro finance institutions are doing commendable job in providing rural finance and with entry of couple of new financial service providers such as small banks and payment banks the landscape of rural banking is going to be expanded.

Also, the foreign banks now have the priority sector obligation.

Earlier in the morning session of the seminar, Finance Minister Arun Jaitley said that the country has miles to go to improve investment flow into farm sector, rural infrastructure and housing in villages.

Praising National Bank for Agriculture and Rural Development (Nabard), Jaitley said it has played key role in development of rural India which comprises of largest percentage of India's population.

"Nabard has become pivotal organisation doing work for different fields of in the rural areas which are all included under the larger umbrella of rural development. It's perhaps the most challenging field of the economic activity which has been assigned to Nabard," Jaitley added.