This month’s newsletter focuses on good governance, a key input that is needed to get the inclusion mission ahead in India. We lead with a speech by RBI Deputy Governor, K C Chakrabarty, reflecting on the unsatisfactory progress of financial inclusion in the country. The responsibility for this, he says, lies in poor governance of our financial inclusion framework and lack of accountability at the highest level in the banks. The second lead story takes this theme forward through a note by MicroSave on the government’s decision to suspend the Aadhaar-enabled Direct Benefits Transfers scheme. Calling Aadhaar a first-world solution in a third-world environment, the authors conclude that lack of coordination between local government, banks and business correspondents has led to the under-performance of Aadhaar-enabled DBT. Clearly, good governance that brings all stakeholders on board is a tough challenge, one that must be met for India to succeed in its financial inclusion goals.
In this speech, the outgoing Deputy Governor of the RBI, K C Chakrabarty, has outlined the financial inclusion framework in the country. While admitting to the progress being unsatisfactory, he notes, “a fair share of the collective failure of the stakeholders can be attributed to poor governance of our Financial Inclusion framework and lack of accountability at the highest policy level i.e. Board and at the level of senior management.” In his opinion, banks continue to view inclusion as a social/regulatory obligation, with half-hearted efforts that have not extended full support to Business Correspondents at the ground level. Good governance and accountability at different levels of bank management, he concludes, form the key to success of the financial inclusion programme.
In a MicroSave India Focus Note, Mukesh Sadana and Lokesh Singh look at the reasons behind the under-performance of the Aadhaar-enabled Direct Benefits Transfer programme : in many cases, beneficiaries never received their Aadhaar card, bank staff were not adequately trained in seeding protocols and processes, leading to considerable confusion, different practices were followed across the country for the actual crediting of the payment in the account, beneficiaries could not access their account to withdraw the money credited etc. As Sadana and Singh note, “The combination of implementation challenges highlighted above left a lot of genuine beneficiaries unable to receive their benefits. This led to widespread discontent. The government could ill afford to have such large numbers of discontent individuals in an election year. So it took the easy option to discontinue DBT.” In certain locations where a supportive eco-system was provided, e.g. East Godavari district, Aurangabad district, etc., the Aadhaar-enable DBT brought in significant efficiencies and savings. They conclude that for the Aadhaar-enabled DBT to succeed, the infrastructure, readiness of key stakeholders and delivery systems must be in place.
Section I: Policy – the latest from India’s policymakers
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. http://www.indicus.net/icfi