Focus on mobile tech for last mile delivery: RBI panel to banks

Mumbai: In order to promote financial inclusion, a RBI panel on Monday asked banks to focus more on mobile technology for last mile service delivery, phasing out interest subsidy on farm loans and move towards universal insurance scheme for all crops.

The committee headed by RBI Executive Director Deepak Mohanty also made a case for more ATMs, removal of surchage on card transactions and introduction of simpler registration process for customers to seed their mobile number.

Besides, banks have to make special efforts to step up account opening for women, and the government may consider a deposit scheme for the girl child, Sukanya Shiksha, as a welfare measure, said the Committee on 'Medium-term Path on Financial Inclusion'.

The panel has suggested phasing out the agricultural interest subvention scheme "which has distorted the agricultural credit system" and ploughing the subsidy amount into a technology aided universal insurance scheme for marginal and small farmers for all crops, with a ceiling of Rs 2 lakh at a nominal premium to end agrarian distress.

It further said commercial banks may be enabled to open specialised interest-free windows with simple products like demand deposits and to offer products based on cost plus financing and deferred payment, deferred delivery contracts on the asset side.

"In the event that interest-free banking is allowed in India, the extant regulatory guidelines in respect of capital and liquidity as applicable in the case of commercial banks would have to be made applicable to those as well," the report said, on which RBI has sought comments till January 29.

The Mohanty panel is of the view that given the low penetration of ATMs, installing more ATMs in rural and semi-urban centres will create more touch points for customers. The Financial Inclusion Fund (FIF) may be utilised to encourage rural ATM penetration.

The report said that given the predominance of individual account holdings (94 percent of total credit accounts), a unique biometric identifier such as Aadhaar should be linked to each individual credit account and the information shared with credit information companies to enhance the stability of the credit system and improve access.

The panel felt that "although a quantum jump in banking access has taken place, a significant element of regional exclusion persists that need to be addressed by stepping up the inclusion drive in the north-eastern, eastern and central states to achieve near-universal access".

"This may entail a change in the banks' traditional business model through greater reliance on mobile technology for 'last mile' service delivery, given the challenges of topography and security issues in some areas," it said.

The financial inclusion initiative envisaged by the committee is much broader in scope, going beyond the traditional domain of RBI.

The report further said that in some of the areas, mobile connectivity may not be commercially viable to start with, but

the telecom service providers may be encouraged to use their corporate social responsibility (CSR) funds for this purpose.

The committee is of the view that the State Level Bankers Committee (SLBC) is an appropriate forum to address such infrastructure issues in a collaborative manner. The use of Universal Service Obligation Fund, a non-lapsable fund designed to support a variety of innovation initiatives, can also be explored in this regard.

The report further said that many merchants discriminate against card payment by levying a surcharge on credit card transactions, "which should not be allowed once the merchant has voluntarily agreed to participate in such modes of payments."

In order to increase formal credit supply to all agrarian segments, the report said digitisation of land records is the way forward and "this should be backed by an Aadhaar-linked mechanism for Credit Eligibility Certificates to facilitate credit flow to actual cultivators".

Stressing for digitisation of land records, which secures ownership, the report said cooperative farming should be encouraged at the local level by panchayats.

"This would enhance the use of mechanisation and reduce input costs and prices," it said.

The government may restructure the Agriculture Insurance Company to take up the role of a dedicated 'Crop Insurance Corporation'.

The committee "feels that the use of technology would make the insurance scheme more efficient. Satellite imagery can be used for 'crop mapping' and to assess damage".

It also suggested that RBI should take the lead in creating a geographical information system (GIS) to map all banking access points.

The panel also recommends that bank credit to MFIs should be encouraged. The MFIs must provide credit information on their borrowers to credit bureaus through Aadhaar-linked unique identification of individual borrowers.

Other recommendations, include introduction of a simple registration process for customers to seed their mobile number for alerts as well as financial services and multi-lingual mobile application for customers. It also pitched the RBI Banking Ombudsman at regional offices to make periodic field visits to directly receive customer complaints.

The committee further said the government may phase out the agricultural input subsidy and replace it with an income transfer scheme, which could potentially transform the agriculture sector besides promoting financial inclusion.

"This would first require digitisation of land records for clear titles and credit linkage to establish evidence of cultivation," the report said.

It said that 'one size fits all' approach for financial education might be less than ideal as different target groups need different kinds of financial education. As a result, the content needs to be customised for different target groups.