Bhartiya Mahila Bank a welcome step, should work on sound commercial principles

The government is in a rush to set up India’s first women’s bank by November. Speedy action on a Budget announcement is welcome: an expert panel has already prepared a blueprint for the proposed bank. However, it would be naïve to assume that the government will garner more votes through such a move. Credit must be available to any person who qualifies in the credit appraisal process, but women tend to be discriminated against when it comes to bank lending. Now, gender is not a good basis for licensing a bank. So, should we have one more bank that will “mostly”, not solely, lend to women and employ “predominantly” women? The simple answer is we need more banks. Yet another bank makes eminent sense, as many people do not have access to formal credit. The RBI should allow more banks and also innovative forms of banking.

The government has done well to delink the licence for the state-owned women’s bank from new private bank licences to be given by the RBI. However, the need is to ensure that the upcoming bank, to be called Bhartiya Mahila Bank, works on sound commercial principles. It should not show any relaxation in sanctioning loans rejected by a general bank on viability grounds. This will lead to loan defaults, making business unviable.

The global experience has not been encouraging. The US, for instance, had nine women’s banks between 1975 and 1980. However, the numbers dropped as their business became unviable and profits shrank. Reports say the status of some that have changed their features is also in doubt. Pakistan launched its women’s bank in 1989, and with stellar consequences, of course, for the status of women. The least the upcoming bank can do is to have clear commercial goals, as women’s empowerment calls for more than banking.