Last week, when the Nachiket Mor committee released its report on financial inclusion, it created a flutter. It was ambitious. In a country which is still struggling to provide banking facilities to most of its poorer citizens, the committee set aggressive targets. By January 1, 2016, it said, every Indian over 18 should have a full-service bank account. By then, the country should also have such a thick distribution of electronic payment access points – where people can withdraw, deposit or transfer money – that every citizen should be within a 15 minute walking distance from one.
Every low income household and small business should also have “convenient” access to formally regulated companies which provide financial products for credit, savings and investments, insurance and risk mitigation. It introduced the notion of ‘suitability’. “Each low-income household and small-business would have a legally protected right to be offered only ―suitable financial services. While the customer will be required to give informed consent, she will have the right to seek legal redress if she feels that due process to establish ‘Suitability’ was not followed or that there was gross negligence.”
As a roadmap towards these goals, the committee made a slew of wide-ranging recommendations. It suggested the creation of new banking models, it suggested new regulatory structures, it argued for the elimination of the statutory liquidity ratio for existing banks, a convergence of rules for banks and NBFCs…
The report was received with some incredulity. Says a rural finance practitioner, “What India could not acheive in 60 years, the Mor committee wants to acheive in two years.”
To understand what the Mor Committee report can mean for India’s unbanked, you have to study five smaller questions. For the vision statement presented by the Mor Committee – or, to take its full title, the “Committee on Comprehensive Financial Services for Small Business and Low Income Households” — to come true, a set of building blocks have to fall in place. Among them: Aadhaar; a new set of financial organisations; the notion of responsible marketing of financial products; a new credit push; and a new model for regulation and oversight.