Swaminathan J: Bridging gaps to build futures - the key role of State
Level Bankers' Committees ( SLBCs) in driving inclusive development
Speech by Mr Swaminathan J, Deputy Governor of the Reserve Bank of India, at the
Conference of Convenors of State Level Bankers' Committees, held in College of
Agricultural Banking (CAB), Pune, 19 June 2024.
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Mr. V G Sekhar, Principal, CAB, Convenors of SLBCs, my colleagues from RBI, ladies
and gentlemen. A very good afternoon to you all.
I am delighted to address you all today, the conveners of all our SLBCs. I understand
that you all had a very purposeful engagement over these two days, dwelling upon
various strategies and approaches that we plan to adopt in achieving our goal of
strengthening credit delivery for an inclusive and sustainable growth. Having been once
the Convenor for the SLBC in Telangana in my earlier role as a commercial banker, I
can first-hand attest to the immense personal satisfaction it gives to make a difference
in people's lives through the SLBC forum. Indeed, over the years SLBCs have emerged
as important instruments of change by catalysing synergies among stakeholders.
Through the efforts made under the aegis of SLBCs across the country, commendable
strides have been made in furthering the penetration of banking services to cover
remote, unbanked and underbanked areas and to reach the marginalised sections of
the population. More recently, SLBCs have spearheaded initiatives to promote digital
payments, paving the way for all sections of the population to participate actively in the
formal economy by facilitating financial transactions with ease and efficiency. These
efforts have undoubtedly served to promote financial inclusion in various dimensions.
The topic of this conference 'strengthening credit delivery for inclusive and sustainable
growth' is very relevant. Inclusive growth is crucial for several reasons. It helps reduce
disparities in economic opportunities, employment and income levels across regions
and population groups. When growth benefits everyone, it leads to broader well-being.
A more inclusive economy promotes social stability and creates a sense of shared
progress. Inclusive growth is in fact a sine qua non if we want to achieve our aspirations
of becoming a developed country by 2047.
In this context, I would like to acknowledge and appreciate the leading role SLBCs play
in providing solutions. Let me now enumerate some priorities that we may pursue with
regard to inclusive growth.
Strides made in access, but work remains to be done on usage and
quality
The Financial Inclusion Index developed by RBI measures the progress achieved in
financial inclusion across the three dimensions of access, usage and quality of financial
services. A review of the underlying parameters indicates that while several strides
have been made in building access, much work remains to be done in improving usage
and quality.
Let me explain this with an example. As per reporting by SLBCs, banking access has
been provided to every village (or hamlet of 500 households in hilly areas) within a five
km radius, barring a few. Data also indicates that it is the Business Correspondent (BC)
model which has been leveraged in expanding such access. However, a recent survey
undertaken by the Reserve Bank indicates that BCs largely provide only a limited set of
services viz. cash-in/cash-out services and populations in far flung areas may still not
have access to the full bouquet of banking services as would normally be available at
bank branches.
Persisiting Credit gaps
Despite significant penetration of credit in India, there is still ample scope for reducing
credit gaps that can promote economic inclusivity and development. While credit
delivery to the priority sectors has indeed improved, we still have a long way to go to
1
meet the credit needs of the MSMEs . Similarly, nearly half of Self-Help Groups (SHGs)
still remain to be credit linked while a considerable section of small and marginal
2
farmers are yet to be covered under bank credit . Addressing these credit gaps
demands a multi-pronged effort in which SLBCs have a crucial role.
Expectations of SLBCs
I would like to cover four key areas where I believe SLBCs can make an immensely
positive contribution.
(i) Effective coordination with Government and NGOs
Firstly, effective coordination with government agencies and non-governmental
organisations is imperative. Being a collective forum, SLBCs must foster strong
partnerships with various government bodies to align banking initiatives with
developmental programs. This includes working closely with local administrations to
ensure that banking services reach underserved regions, facilitating the implementation
of government schemes, and addressing region-specific issues through collaborative
efforts.
There is a need for sensitising the District administration on the scope of the Lead Bank
Scheme and the role of banks under it. Besides this, staff at the operational level for
both banks and government agencies associated with implementation of the Lead Bank
Scheme must be aware of the latest developments and emerging opportunities. Better
coordination can enhance the efficacy of financial inclusion initiatives and ensure that
benefits trickle down to the grassroots level, thereby supporting the broader goal of
inclusive growth.
(ii) Proper planning
My second point is about adopting a scientific approach to the preparation of annual
credit plans. This is crucial. SLBCs should undertake detailed analyses to identify the
root causes of the lack of growth in credit seen in certain jurisdictions. This involves
using data analytics and field surveys to understand regional economic activities, local
credit needs, and barriers to credit access. By pinpointing specific issues, whether they
are related to infrastructure, borrower awareness, or banking processes, SLBCs can
develop more targeted and effective credit plans. This approach will not only enhance
credit flow but also ensure that it reaches the sectors and regions that need it the most,
thereby supporting sustainable economic development.
Regular monitoring and evaluation should be integral to this planning process. By
setting clear benchmarks and performance indicators, SLBCs can track progress and
make necessary adjustments to their strategies. This iterative approach ensures that
credit plans remain dynamic and responsive to changing economic conditions and local
needs.
(iii) Leveraging technology
Thirdly, leveraging technology can be a game-changer in enhancing financial inclusion
and credit delivery. SLBCs should promote the use of fintech solutions to streamline
banking operations and improve customer service. Technologies such as mobile
banking, tech driven customer support, and digital loan processing have significantly
reduced turnaround times and increased accessibility. Additionally, deploying advanced
data analytics can help in better risk assessment and credit scoring, thus facilitating
more informed lending decisions. Embracing technological innovations will improve the
efficiency of banking services, extend their reach to remote and underserved areas and
make them affordable.
Digital loan processing platforms have revolutionised the way credit is being disbursed.
These platforms have automated the entire loan application and approval process,
making it faster and more efficient. By utilising machine learning algorithms, these
platforms can assess the creditworthiness of applicants more accurately and fairly,
ensuring that credit is extended to those who truly need it. This can be particularly
impactful for both agri-loans as well as micro, small, and medium enterprises (MSMEs),
which often face hurdles in accessing timely and adequate credit.
The Public Tech Platform for Frictionless Credit by the RBI Innovation Hub is one of the
initiatives in this direction. It has an open architecture, open Application Programming
Interfaces (APIs) and standards and operates in a plug and play model to which all
financial sector players can connect. Recently, NABARD has collaborated with RBI
Innovation Hub to integrate its e-KCC loan origination system with the Public Tech
Platform with the potential to reduce the turnaround time for agri-loans from weeks to
minutes. This is just one example of how technology can revolutionise this sector. I
would encourage SLBCs to explore more avenues to look for innovative approaches to
improve credit delivery.
The programme of expanding and deepening the digital payments ecosystem is being
implemented across the country under the aegis of the SLBCs. As on March 31, 2024,
179 districts are 100 per cent digitally enabled. Under this programme, five states,
namely, Kerala, Telangana, Andhra Pradesh, Tripura and Tamil Nadu have made all
their districts fully digitally enabled. I hope that SLBCs of other states will also gear up
and achieve 100 per cent digitalisation of all districts under their jurisdiction soon. In
States where 100 per cent coverage has been achieved, the emphasis needs to be on
monitoring usage of digital payment modes as well as on sustained efforts to promote
digital financial literacy.
(iv) Financial Literacy
This brings me to my fourth and perhaps most important point which is on financial
literacy, especially digital financial literacy. Despite the availability of digital banking
services, a large section of the population remains hesitant or unaware of how to utilise
these services effectively. Apart from basic financial services, SLBCs should also
promote financial education programs that focus on the benefits and usage of digital
banking. By enhancing digital financial literacy, SLBCs can empower individuals to
manage their finances better, participate in the formal economy, and benefit from the
full range of banking services available to them.
As you may be aware, today we have Centres for Financial Literacy (CFL) that cover
nearly all blocks in the country. It is imperative that these centres, through their
outreach to local communities and target segments, become conduits of tangible
change, effectively bridging the gap between awareness and action. Therefore, at the
SLBC level, monitoring should focus not merely on the number of camps conducted but
on tangible outcomes, such as the number of beneficiaries linked with formal financial
systems as a result of these financial awareness camps and programmes.
Emphasis should be placed on targeted awareness campaigns tailored to local
conditions and needs to effectively spread financial literacy. This involves
understanding the unique financial behaviours, needs, and challenges of different
communities and designing educational content that resonates with them. For instance,
in agricultural regions, financial literacy programs could focus on digital tools for
agricultural financing, crop insurance, and efficient market linkages. By customising the
approach to fit the local context, SLBCs can ensure that financial literacy initiatives are
not only informative but also engaging and actionable.
RBI@100 goals
As we celebrate 90 years of the establishment of the Reserve Bank of India this year,
we have also outlined our aspirational goals for RBI's centenary, referred to as
RBI@100. Among these goals are deepening financial inclusion and expanding credit
availability.
Deepening financial inclusion is not merely about increasing the number of bank
accounts but about ensuring that every individual has access to a comprehensive range
of financial services tailored to their needs. This includes savings, credit, insurance, and
investment products that can enhance their economic well-being. Expanding credit
availability, particularly to underserved sectors such as micro, small and medium
enterprises (MSMEs), agriculture, and marginalised communities, is crucial for fostering
inclusive growth and sustainable development.
While these may appear as part of RBI@100 objectives, they are, in fact, the goals of
every stakeholder in the financial ecosystem aligned with national interest. Achieving
these aspirations requires a collective effort involving government agencies,
nongovernmental organisations, financial institutions, and the banking community. The role
of SLBCs in this journey is pivotal, as they are the linchpin connecting various
stakeholders and ensuring that the financial system works seamlessly at the grassroots
level. I would therefore request your active cooperation and engagement in this mission.
Conclusion
In conclusion, the role of SLBCs in fostering inclusive and sustainable growth is both
crucial and multifaceted. From enhancing financial literacy to leveraging technology,
SLBCs can drive significant progress in bridging the gap between financial services and
the underserved populations. By focusing on effective coordination with government
and NGOs, adopting a scientific approach to credit planning, and emphasising digital
financial literacy, SLBCs can create a more inclusive financial ecosystem.
As we move forward, it is essential to monitor and measure the tangible outcomes of
our efforts, ensuring that the benefits of financial inclusion reach every corner of our
country. By tailoring initiatives to local conditions and needs, and by fostering a culture
of financial literacy, we can empower individuals to actively participate in the formal
economy, thereby contributing to the broader goal of inclusive and sustainable
economic development which are essential for a Viksit Bharat 2047.
I urge all stakeholders to continue working collaboratively, leveraging the strengths of
each sector, and harnessing the power of technology to create a financially inclusive
society. Together, we can build a resilient and prosperous future for all, ensuring that no
one is left behind in our journey towards economic growth and development.
Thank you.
1
The overall credit gap in the MSME sector is estimated to be 20 - 25 trillion by the
Expert Committee on Micro, Small and Medium Enterprises (Chair: Shri U K Sinha)
2
As per the Report of the Internal Working Group to Review Agricultural Credit, 2019
nearly 60 per cent of small and marginal farmers were yet to be covered under bank
credit.