Financial Inclusion- News and Views - February 2014


February 2014


This month’s lead stories centre around the Report of the Committee on Comprehensive Financial Services for Small Businesses and Low Income Households that was released by the RBI in January: a) the Report’s recommendations include providing a universal bank account to all Indians above the age of eighteen years and a Vertically Differentiated Banking System with Payments Banks for deposits and payments with relaxed entry point norms and Wholesale Banks for credit outreach, and b) a blog post by Daniel Radcliffe and Rodger Voorhies that lauds the Committee recommendations for their potential to catalyze a big increase in financial inclusion in India, and flags two possible risks that could undermine the Committee’s objectives.


Lead Stories


Report of the Committee on Comprehensive Financial Services for Small Businesses and Low Income Households

The Committee, headed by Dr. Nachiket Mor, set out six vision statements to achieve by 1st January 2016: a) Universal Electronic Bank Account (UEBA), b) Ubiquitous access to payment services and deposit products at reasonable charges, c) Sufficient access to affordable formal credit, d) Universal access to a range of deposit and investment products at reasonable charges, e) Universal access to a range of insurance and risk management products at reasonable charges, and f) Right to Suitability (each low-income household and small businesses would have a legally protected right to be offered only “suitable” financial services). The four design principles that would inform financial inclusion and deepening strategies discussed in the Report are: Systemic Stability, Balance-sheet Transparency, Institutional Neutrality, and Responsibility towards the Customer. The framework to understand various types of banking system designs uses the functional building blocks of payments, deposits and credit and constructs two broad designs. These are the Horizontally Differentiated Banking System and the Vertically Differentiated Banking System. Across these, ten existing and potential banking designs were identified. These are: National Bank with Branches, National Bank with Agents, Regional Bank, National Consumer Bank, National Wholesale Bank, National Infrastructure Bank, Payments Network Operator, Payments Bank, Wholesale Consumer Bank, and Wholesale Investment Bank.

A Big Step Forward in India’s Financial Inclusion Deliberations

In this blog post, Daniel Radcliffe and Rodger Voorhies highlight several promising elements in the Report’s recommendations as well as two risks that warrant further attention, when it comes to regulating non-banks. To begin with, the Report correctly establishes the importance of electronic payments in India’s financial inclusion strategy, and wisely separates the risks created by payment and deposit activities from those posed by credit, by creating “Payments Banks,” which can offer payments and deposits but not provide credit. The report also acknowledges the critical role played by non-banks in extending electronic payment networks into poor communities, recommending that mobile operators, consumer goods companies, and other non-banks be allowed to apply for Payments Bank licenses. While these recommendations promise to catalyze a big increase in financial inclusion in India, the blog post flags two possible risks that could undermine the Committee’s objectives: First, there is a risk that the Payments Bank licenses will have compliance costs that impair the business case for serving poor customers; the concern stems from the recommendation that Payments Banks should “comply with all RBI guidelines relevant for scheduled commercial banks (SCBs).” Second, the recommendation that all pre-paid instrument (PPI) providers be required to convert to a Payments Bank or become a Business Correspondent could create an unnecessarily high entry barrier for providers wishing to test new business models in this nascent sector. The authors suggest that an alternative may be to allow PPIs to operate (with cash-out functionality) until they reach a certain threshold deposit balance or customers base, at which point they must convert to a Payments Bank. This would create a more gradual path for payments and deposit providers to pilot different business models without establishing a full-fledged Payments Bank at inception.

Section I: Policy – the latest from India’s policymakers

Indian Banking: the New Landscape

Dr. K.C. Chakrabarty, Deputy Governor, RBI, January 31, 2014

Strategy adopted for Financial Inclusion

Dr. Deepali Pant Joshi, Executive Director, RBI, January 24, 2014

Mapping of Gram Panchayat and Planning for BCA/CSCs for Direct Benefit Transfer-Sub Service Area Approach-Partial Amendment of guidelines-regarding

Department of Financial Services, Ministry of Finance, January 20, 2014

Section II: News and Views Digest – the latest from India and abroad


India’s Unique ID Could Generate Big Boost in Financial Access

Smita Aggarwal: No more bank clones

Financial inclusion: The march of banks

Postal banks globally effective as payment banks: Nachiket Mor

Payment Banks for inclusion

Financial inclusion: Statistical illusions do not make a reality

'Debit, pre-paid cards can be used for financial inclusion'

Karnataka fares well in financial inclusion

FINO PayTech rolls out products to accelerate financial inclusion

RBI may go beyond lip service to financial inclusion: GS Sundararajan, Shriram Group

Financial inclusion push may mean bank licence with less capital

India’s progress on financial inclusion

Exploring feasibility of Nachiket Mor panel's road map for financial inclusion by 2016

Our ideas on banking system are extensions of what's already happening, says Nachiket Mor

StatsGuru-13-January-2014:Making sense of the Nachiket Mor panel's suggestions

Non-legislative suggestions of FSLRC can be implemented: UK Sinha

Slice the banking system vertically: Nachiket Mor

Same old banking

Subsidy payout via Aadhaar accounts can save 1.2 per cent of GDP: UBS

Why the Nachiket Mor committee report on financial inclusion disappoints

Form unified agency to redress all financial complaints: RBI

Have bank accounts for all by January 2016: Nachiket Mor panel

Crisil: Financial inclusion picked up pace in 2012


Mobile Money in Afghanistan: An Uphill Battle

The Case for Branchless Banking in Thousand Islands, Indonesia

Private Sector Stepping Up Leadership in Financial Inclusion

Understanding Smallholders' Financial Needs is Key First Step

Smallholder Financing: Meeting Demand Between Harvests

Reinventing the Wheel: “Pass Through” Deposit Insurance coverage for Mobile Money in Kenya

Working with The Poorest Women in Pakistan

Can Voice Corridors be Used to Predict Mobile Money Hotspots?

10 Useful Data Sources for Measuring Financial Inclusion

10 Things You May Not Know About Postal Networks

Beyond making payments: Managing payments

Section III: Research – surveys and studies on expanding access to financial services

The Curious Case of Missing Agents in Rural India

Akhand Tiwari, Lokesh K Singh, Mukesh Sadana and Puneet Chopra, MicroSave Focus Note 105, January 24, 2014

Optimising Commissions and Payout Mechanism For G2P Payments Under Electronic and Direct Benefit Transfer

Puneet Chopra, MicroSave Policy Brief 11, January 20, 2014

Building Viable Agent Models in India

MicroSave, January 16, 2014

The Emerging Global Landscape of Mobile Microinsurance

Camilo Tellez-Merchan and Peter Zetterli, CGAP Brief Note, January 14, 2014



Regulatory Trends for Financial Inclusion: Lessons from Brazil

Policy Brief January, 2014

Serving the inclusion goal profitably

Policy Brief November, 2013

Digital payments and inclusion - Part I: Building a cost-effective robust infrastructure

Policy Brief October, 2013

Digital payments and inclusion - Part 2: Facilitating mobile payments

Policy Brief October, 2013

In the media

‘Payments banks’ raise more questions

Financial Express, 24 January 2014

A shaky vision for financial inclusion

Mint, 16 January 2014


A Big Step Forward in India’s Financial Inclusion Deliberations: Daniel Radcliffe and Rodger Voorhies

Views on the Recommendations of the Mor Committee on Inclusion

Financial inclusion – the Mor Committee Vision

Viability at the last mile of inclusion



Editor: Sumita Kale can be contacted at

The Indicus Centre for Financial Inclusion was launched in 2011 to distil and disseminate information on accelerating the poor’s access to high-quality financial services. The Centre is supported by the Bill & Melinda Gates Foundation.

© Indicus Centre for Financial Inclusion. All rights reserved. 31st January 2014.


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