The RBI panel report on financial inclusion has attracted criticism from bankers and financial sector experts for its “unrealistic” financial inclusion and priority sector lending (PSL) targets. Many have also questioned the viability of ‘payment banks’, a system designed to help banks achieve financial inclusion targets. In an interview to FE’s Arun S and Arup Roychoudhury, the RBI Central Board member and chair of the Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households, Nachiket Mor defended the panel’s recommendations and said the targets are indeed achievable. Edited excerpts:
Are you confident that banks, which are now finding it tough to meet the PSL target of 40% of adjusted net bank credit (ANBC), can achieve the 'adjusted PSL target of 50%' that the report suggests?
The (PSL) target is still 40% of ANBC. The adjusted number is along with weightages. If a bank achieves 40% today on the basis of its current disbursement, it will achieve 50% adjusted PSL target. If we had kept it at 40% and added weights, it would have amounted to a sharp reduction in PSL requirement.
People are commenting on the issue somewhat casually. They need to look at the actual computation method mentioned in the report. At the end of the day, these percentages are a matter of debate. The core issue is does one think specialization is a good idea or not? In the report, sectors and districts are given weightages on the basis of the difficulties in lending to them. The more difficult ones get a higher weightage and the less difficult ones get a lower weightage. A bank will have to achieve an adjusted PSL value of 50% by following the weightages.
Those lending to a difficult sector in a difficult-to-reach district can benefit from a multiplier value based on the specific district and sector. That's the core idea. The RBI has to decide exactly what that weight should be. We have given some regional weights. Some banks say “I don’t disburse in those areas.” The reality is that we have done this calculation and it is in the report. If you disburse your loans today at 40%, you will get to 50 points. There is no increase in the target.
The report has set a target of January 1, 2016 for each Indian resident, aged above 18, to have an individual, full-service and safe electronic bank account. Do you seriously think this is