7/21/2016 Bankonthepoor|BusinessLine

Bankonthepoor
SAdikesavan

Smallbusinessesremainuntapped
ThelastFinancialStabilityreportoftheRBI(December,2015)hasstatedthatIndiasfinancialsystemremainsstable
andtherelativelystrongermacroeconomicfundamentalslenditresilience.AllthenegativesthatwehearaboutIndian
bankingaremanageable,inamacrosense.
Butonthesubjectoffinancialinclusionanddeepeningandtheroleofbanks,onewonderswhetherbankshave
acquittedthemselveswell,fortherearemillionsofhouseholdsandsmallbusinesseswhichremainoutsidetheambitof
theformalfinancialsector.
Missinglinks

In2014,theNachiketMorcommitteehadpointedoutthat60percentoftheruralandurbanpopulationdonoteven
haveafunctionalbankaccountandthat90percentofsmallbusinesseshavenolinkswiththeformalfinancialsector.
ThePrimeMinistersinterventionhasbroughtinresultsintermsofopeningaccountsbutdoubtsstillremainabout
howmanybankbrancheswouldopenbasicbankingaccountsforanybodywhowalksinwithoutanyproofofidentityor
address.TheRBIhasmandatedthatjustaphotographandphysicalpresenceisenoughtoopentheseaccounts.
Joseph,hailingfromthecoastalvillageofValiathura,picksragsforalivinginKeralascapitalandcouldendupmaking
200300perday.HedoesnothaveanAadhaarcardandthebankheapproachedwantedhimtoproduceone.So
muchforourvauntedclaimsonfinancialinclusion!Surendran,alotteryticketvendor,toodoesnothaveabank
account.
BoththeseareidealcandidatesforloansunderthePrimeMinistersMudraYojanascheme.Butitwouldbetoomuch
toexpectanybanktogivethemloanswhentheywouldnotopeneventheirdepositaccount.Therearemillionsof
peoplelikeJosephandSurendrantowhomtheformalfinancialsectorhasnotyetproactivelyreachedout.
Notforthepoor

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7/21/2016 Bankonthepoor|BusinessLine

Mylocalbarbertoldmehehadapproachedalocalbranchfora75,000loanandhadbeenrefusedassistancebecause
hedidnothaveacorporationlicense.Mygrandfatherstartedthissaloon70yearsagoandeversincewehavebeen
placingknifeandbladetopeoplesheadsandnecks,withoutanylicence,hetoldmewithasenseofhumourwhich
onlythepoorinthiscountryarecapableof.
Andtothinkthatthesamebankswouldlendhundredsofcrorestobigbusinesses,approvingdeviationafterdeviation
fromnorms.Meaculpa,atleast,Iwouldsay.Despiteallthepushingandshoving,letusbeawarethattheMudra
loanshaveaggregatedtoonly1,32,000crore(approximately),includingrenewalsofoldloansofbelow10lakh,
againstatotaloutstandingAllScheduledCommercialBanksnetcreditof66,50,000crore.Retailtradeforinstance
enjoyscredittothetuneofonly2,12,500crorewhilemedium,smallandmicromanufacturingenterprisestogether
enjoy4,86,000croreofloans,asperRBIdataondeploymentofbankcreditbymajorsectors.
Medium,smallandmicroenterprisescontribute37.5percentofIndiasGDP,withanetworkof48millionenterprises
givingjobstoabout110millionpeople,aspertheUnionGovernmentsestimates.
Thereisvastscopeforearninggoodreturnsinprovidingcredittothesesectors.
ThewriterischiefgeneralmanageratStateBankofTravancore.Theviewsarepersonal
(ThisarticlewaspublishedonJune7,2016)

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