The Economic Survey 2013-14 has expressed concern over most households being cut off from large parts of the financial system as well as the rising bad loans of public sector banks (PSB).
Though the government has tried to prioritise financial inclusion to extend financial services to the large unserved population to unlock its growth potential, the survey noted that bank-centric notions of financial inclusion have limited value.
The statement comes at a time when the RBI has indicated that the country would soon get its first payments bank in place. Such a bank would not extend credit, but will provide deposit and payment services. An RBI panel, headed by Nachiket Mor, had proposed the payments bank concept. As against a full-service bank, needing an initial capital of `500 crore, payments banks need just ` 50 crore entry capital to begin operations. India Post, with its nationwide reach, is among the main entities being considered for the payments bank route.
On financial inclusion, the survey noted that PSBs opened 7,840 branches in 2013-14 compared to 4,432 in 2012-13. They had a total of 96,853 ATMs by January 2014 against 69,652 at the end of 2012-13.
The survey said asset quality deterioration, particularly that of PSBs, was a major concern. While there has been an across-the-board increase in non-performing assets (NPAs), it has been particularly sharp for the infrastructure sector, with NPAs as a percentage of credit advanced increasing from 3.23% in March 2011 to 8.22% as in March 2014 (provisional).
Gross NPAs of PSBs have shown a rising trend, increasing by almost four times from March 2010 (`59,972 crore) to March 2014 (`2,04,249 crore) {provisional}. As a percentage of credit advanced, NPAs were at 4.4% in March 2014 (provisional) compared to 2.09% in 2008-09, the survey said.