New approaches to increasing rural financial services
The Reserve Bank of India's Internal Group on Rural Credit and Micro Finance have recommended two new strategies for increasing the supply of financial services to the rural and farm sectors.
They propose the use of business facilitators for services such as borrower identification, collection, processing and submission of applications, preliminary appraisal, marketing of the financial products including savings, post sanction monitoring, promotion and nurturing self-help groups and follow-up of recovery.
Business facilitators may be NGOs, farmers' clubs, functional co-operatives, IT-enabled rural outlets of corporates, postal agents, insurance agents, well functioning panchayats, rural multipurpose kiosks, agri clinics and business centers financed by banks.
The second strategy is to allow "business correspondents" to provide services such as disbursal of small value credit, recovery of principal, collection of interest, and the sale of micro insurance, mutual fund products and pension products. They suggest that these services could be supplied at the doorstep of the customer or other convenient location, subject to agreement with the parent bank. Registered non-banking finance companies (NBFCs) with significant rural presence, non-Government organisations, micro finance institutions (MFIs), IT-enabled rural outlets of corporates and post offices are identified as potential "business correspondents".
