Deepak Mohanty Committee On Medium Term Path On Financial Incluison

Deepak Mohanty committee was constituted with the objective of working out a medium-term (five year) measurable action plan for financial inclusion.
Salient recommendations

• More focus on opening female accounts along with main focus on welfare schemes for women like Sukanya Shiksha yojana.
• Unique biometric identifier such as Aadhaar should be linked to each individual credit account and the information shared with credit information companies to enhance the stability of the credit system and improve access.Same should be done for MSMEs.
• Recommends use of low-cost solution based on mobile technology for ‘last mile’ delivery
• To increase formal credit supply to all agrarian segments, digitization of land records should be done.
• Phase out of interest subvention scheme and ploughing the subsidy amount into a mandatory crop insurance scheme for small and marginal farmers
• 'Gold KCC' scheme for good borrowers.
• Recommends commercial banks to open specialized interest-free windows with simple products.
• Recommends RBI to take lead in creating a geographical information system to map banking access points.
• Integration of Business correspondents with bank branches.
• Introduction of a system of online registration of BCs, their training and monitoring their activity including delinquency, and entrusting more complex financial products such as credit to trained BCs with good track record.
• A geographical information system (GIS) to map all banking access points.
• To step up the self help group (SHG)-bank linkage programme (SBLP) initiated by NABARD with the help of concerned stakeholders including government agencies as a livelihood model.
• Corporate should be encouraged to nurture SHGs as part of their Corporate Social Responsibility (CSR) initiatives.
• Provision of credit history of all SHG members by linking with individual Aadhaar numbers to check over-indebtedness
• To restore tax-exempt status for securitization vehicles for efficient risk transfer.
• More ATMs in rural and semi-urban centers
• Levying a surcharge on credit card transactions by merchant establishments should not be allowed.

Analysis of report(With focus on vision of financial inclusion)

• The financial inclusion initiative envisaged by the Committee is much broader in scope, going beyond the traditional domain of the Reserve Bank.
• The Committee recognized that substantial progress has been made in terms of access of financial products and services especially after the launch of the Jan Dhan Yojana. However, there were significant gaps in terms of usage, inadequate ‘last mile’ service delivery, and exclusion of women as well as small and marginal farmers and very low formal link for micro and small enterprises.
• There were also systemic issues of stability of the credit system, over-indebtedness and agrarian distress.
• Against this background, the Committee set a much wider vision of financial inclusion as “‘convenient’ access to a basket of basic formal financial products and services that should include savings, remittance, credit, government-supported insurance and pension products to small and marginal farmers and low-income households at reasonable cost with adequate protection progressively supplemented by social cash transfers, besides increasing the access of small and marginal enterprises to formal finance with a greater reliance on technology to cut costs and improve service delivery, such that by 2021, over 90 per cent of the hitherto underserved sections of society become active stakeholders in economic progress empowered by formal finance.”
• The Committee was of the view that a meaningful financial inclusion is not feasible without government-to-person (G2P) cash transfer.

By: Vishal