Swaminathan J: Reaching the unreached - ensuring last mile
connectivity of banking services
Keynote address by Mr Swaminathan J, Deputy Governor of the Reserve Bank of India,
at the Conference of Lead District Managers and District Development Managers,
Hubballi, 20 September 2024.
* * *
Regional Director of RBI for Karnataka, Smt. Sonali Sen Gupta; Chief General
Manager, NABARD, Shri KVSSLV Prasada Rao; Chief General Manager, Canara Bank
and Convenor, SLBC Karnataka, Shri K.J. Shrikanth; Area Heads of Union Bank of
India and Bank of Baroda, senior executives from banks; Lead District Managers
(LDMs); District Development Managers (DDMs); LDOs and other officers of RBI,
present here. Ellarigu Namaskara and a very good morning to all.
Let me begin by complimenting Bengaluru Regional Office of the Reserve Bank of India
for organising this conference with an apt theme - Reaching the Unreached - Ensuring
Last Mile Connectivity of Banking Services. The theme reminds us that financial
inclusion is an ongoing journey. While significant progress has been made in this
journey, there is still some distance to be traversed. I must also thank the Bengaluru
Regional Office for selecting this place, Hubballi, for this conference, a place where I
served as a young officer of State Bank of India, some thirty years ago - which brings
back lots of nostalgic memories of the basic banking that we used to do over three
decades ago.
India's journey towards inclusive development after independence has been marked by
several initiatives aimed at reducing poverty and improving living standards. Measures
like expanding access to essential services such as education, healthcare and
sanitation, and creating productive employment opportunities for all sections of the
population have seen tremendous progress. Ensuring that the benefits of economic
growth are shared by all segments of society, including marginalised groups has been
the cornerstone of these initiatives. It has been a multifaceted journey with significant
achievements in terms of economic growth, poverty alleviation, improvements in
education and health care, etc.
In the relatively early days of this journey, the Lead Bank Scheme was institutionalised
in 1969 and since then the Scheme has served as an important tool in enhancing credit
flow to the sectors that have been identified as national priority and to the underserved
population of the country, boosting economic growth at all levels, e.g., block level,
district level and state level.
Over more than half a century since its inception, the Scheme has evolved in line with
the development agenda for the country. The Lead Bank Scheme relies on a
coordinated approach at all levels amongst banks, financial institutions and the
government machinery for effective delivery of banking services to all sections of the
economy. This co-ordinated approach has yielded significant results in terms of
expanding banking access and improvement in the flow of priority sector credit.
More recently it has also led to the expansion of digital payments with SLBCs taking the
lead role in the objective of making every district in the country digitally enabled. I am
happy to note that 354 districts are now digitally enabled. Ten states including
Karnataka and six Union Territories have achieved 100 per cent coverage of districts
under this initiative.
Indeed, the Lead Bank Scheme can be a powerful tool to bring about transformative
change. As LDMs, DDMs and LDOs, you are the very pillars on which this scheme
rests, playing a crucial role in driving financial inclusion at grassroots level. Your efforts
in extending banking services and credit access to underserved regions would
undoubtedly bring immense satisfaction to all involved. Having served as the Convenor
for the SLBC in Telangana, I can personally attest to the deep fulfilment that comes
from making a tangible difference in people's lives through the LBS fora.
A common question we face is, are we doing enough? How much more remains to be
done? In 2021, the Reserve Bank introduced the Financial Inclusion Index (FI-Index),
which tracks progress across 97 indicators in three key dimensions: (i) Access (ii)
Usage (iii) Quality. The Index which was at 53.9 in March 2021 now stands at 64.2 for
March 2024 as a testimony to the efforts that has been put in by all of you.
India has made significant strides in enhancing 'access' to banking and financial
services, reaching even the most remote areas. However, there is still considerable
ground to cover in deepening financial inclusion. This requires greater focus on
promoting 'usage' and improving the 'quality' of services. In both these critical areas, the
role of Lead District Managers from the banks and District Development Managers from
NABARD is indispensable.
In this context, I would like to outline a few key expectations.
Know your district well
Firstly, it is imperative that you cultivate a deep understanding of your respective
districts-so, you should truly 'Know Your Districts' well. This knowledge will form a solid
foundation for comprehensive district profiles, covering a wide range of critical data.
Such profiles could include detailed demographic information, agricultural trends,
banking penetration and activities, industrial profiles, and the various performance
metrics under the Annual Credit Plans (ACP).
Knowing your districts well, you can leverage upon data analytics and field surveys to
gain insights into economic activities, local credit needs, and barriers to credit access. A
holistic understanding of your district will enable you to identify gaps in financial
inclusion, assess the credit needs of different sectors, and design targeted strategies
for intervention. It will also help you to identify the root causes of the various issues
observed in your districts. By staying attuned to your districts, you can provide
invaluable feedback to the SLBCs, enabling the formulation of targeted and effective
credit plans, and foster sustainable economic growth and development.
Formulation of targeted and effective credit plans, a bottom up approach
Secondly, building upon your strong understanding of your district, the formulation,
monitoring, and implementation of Credit Plans must follow a granular bottom-up
approach.
The principal phase of credit planning is done by DDMs by preparing the Potential
Linked Credit Plans (PLPs) for all the districts in the State by mapping credit potential
under Priority Sector Lending (PSL). The preparation of PLPs involves assessment of
block-wise and sector-wise potential. LDMs conceptualise the block credit plans at the
grassroots level which aggregate into district credit plans, ultimately converging to
shape the comprehensive state-level Annual Credit Plan. While doing so, target setting
for credit disbursement needs to be aspirational while being realistic. LDMs must take
into account the scope for lending indicated in the Potential Linked Plan as well as the
past record of achievement in credit disbursement while formalising the credit plans for
the blocks and districts under their charge.
Address the gaps
Thirdly, we need to address the remaining gaps. Although credit delivery to priority
sectors has progressed over time, there is still significant work to be done especially
with regard to Micro, Small and Medium Enterprises. Similarly, nearly half of Self-Help
Groups (SHGs) are yet to be linked to formal credit, and a large proportion of small and
marginal farmers still lack access to bank financing. Therefore, we must factor in the
credit requirements of these segments in PLPs as well as in block and district-level
credit strategies.
MSMEs are crucial to India realising her demographic dividend. One of the key
requirements in this regard is increasing the female labour participation rate. Various
1
studies have shown that businesses with at least one women founder have a more
inclusive work culture, employ more women than men and generate more revenue.
However, less than 20 per cent of MSMEs are owned by women. Women
entrepreneurs often encounter major hurdles, such as limited access to funding,
societal barriers, and challenges in obtaining affordable finance.
It is therefore crucial to bridge the gender gap. At the district level, this can be
addressed by offering support to women-led enterprises through
governmentsponsored programmes and tailored banking schemes for women-owned businesses.
Additionally, efforts must be made to raise awareness among potential women
entrepreneurs about these opportunities and provide them with necessary guidance
and support.
Financial literacy
Fourthly, we need to bolster financial literacy. Strengthening the supply-side is crucial,
but holistic financial inclusion also necessitates demand-side initiatives. Financial
literacy stands as a fundamental building block. It is not just about access, it is about
empowering individuals to make informed choices. Financial literacy is the ability of
people to understand and effectively use various financial skills, including personal
financial management, budgeting, and investing.
Members of public should be made aware of various financial products available to
them, be it social security products such as insurance and pension schemes, which will
cover their risks or loan products with significant subsidies that will enable them to
undertake productive economic activities. A special focus needs to be given to Digital
Financial Literacy for improving public confidence in undertaking digital transactions.
This will enable banks to explore avenues for wider adoption of fintech, to provide
seamless and frictionless credit.
At the block level, financial literacy is being promoted through Centres for Financial
Literacy (CFLs), established by NGOs with funding support from the RBI, NABARD,
and banks. The reach of CFLs has expanded significantly, with 2,421 CFLs now
operating across almost every block in the country. In Karnataka alone, 79 CFLs and
177 Financial Literacy Centres (FLCs) are spreading awareness of financial products at
the grassroots level. LDMs must play a crucial role in ensuring that FLCs perform their
functions effectively, supporting CFLs, participating in CFL camps, and facilitating the
linkage of financial services while overseeing the proper conduct of these camps.
In conclusion, I encourage you to give your best, set exemplary standards, and become
pioneers in developmental activities, ensuring continued progress of your districts and
the State of Karnataka.
As you may be aware, the Reserve Bank of India is celebrating 90 years of its
foundation this year. Looking ahead to the next decade, our journey towards RBI@100,
we have formulated strategies aimed at positioning the Reserve Bank as a model
central bank of the Global South. One of our key objectives is to deepen financial
inclusion by enhancing the Accessibility, Availability, and Quality of financial services for
all segments of society. I urge each of you to actively support us in realizing this vision
by contributing to inclusive growth, ensuring that no one is left behind in accessing
essential financial services, and fostering economic empowerment at the grassroots
level.
I would like to leave you with a quote from Rashtrakavi Kuvempu (an extract from his
epic work "Malegaalli madumagau"):
Illi yaaroo mukhyaralla
No one is precious here
Yaroo amukhyaralla
No one is unimportant here
Illi ellakkoo ide artha
Everything has significance here
Yavudoo alla vyartha
Nothing is useless
!
Neerellevoo theertha!
All the water is holy!
In the context of today's gathering, it would mean: All groups of people are equally
important and should be financially included; every effort taken for financial inclusion is
meaningful and nothing goes wasted.
With this I would like to end with my best wishes to each one of you. Thank you!
1
Jaitly, S., Thangallapally, L. S., & MicroSave. (2022). Decoding Government support
to women entrepreneurs in India. In NITI Aayog, www.microsave.net [Report].
https://www.niti.gov.in/sites/default/files/2023-03/Decoding-Government-Support-to-
Women-Entrepreneurs-in-India.pdf (last accessed on September 16, 2024)