Access to Bank Credit for Poor- Indian Govt Accepts 8 Suggestions by COVA in New Policy Formulations

Dear Friends

We are happy to share with you that the Government of India (GoI) has accepted 8 of the 12 suggestions made by COVA in its new policy formulations,  that would enable genuine financial inclusion and help petty and small businesses to access credit from banks. Approximately 9 crore (90 million) hawkers, petty traders and micro enterprises across India can benefit if the provisions are implemented properly.

COVA has been striving since 2013 for the creation of an environment conducive to ensure genuine financial inclusion of the poor through a pilot project for financial inclusion. In this regard, several articles, studies and representations have been submitted to Members of Parliament and relevant bureaucrats. Political leaders and policy makers who were approached by COVA and other civil society organisations on the issue have endorsed our suggestions and have offered to forward them to the concerned ministries with their recommendations.

Thanks to the efforts and endorsements from so many quarters, this Campaign is finally bearing fruit. Eight administrative and policy recommendations by COVA that are being considered and incorporated by the Government of India (in different policy formulations) are: 

1) Single Page Application Forms for small loans 

2) Issue of receipt by banks for loan applications-  Single Page Form with Receipt is attached and can also be downloaded from the website of the Department of Financial Services (DFS) at the following link: http://financialservices.gov.in/PMMY%20Form.pdf 

3) Revision of loan limit for petty business under DRI from 15,000 – now the loan limit is up to Rs 50,000 under the Shishu Scheme of MUDRA 

4) Revision of Income Limit of Rs 18,000 for Rural areas and Rs. 24,000 for urban areas to qualify for petty loans-  GoI has now removed the income criteria for availing loans under MUDRA 

5) Over Draft facility of Rs. 5000 to the poor to meet emergencies- OD facility of Rs. 5000 announced under the Jan Dhan Scheme 

6) Assigning and mandating individual bank branches to attain targets 

7) Using Post Offices as Banking Correspondent to enable people to deposit and withdraw funds from their bank accounts 

8) Using mobile phones to enable people – especially petty business persons -to deposit cash in banks is now made possible by the announcement of Payment Banks involving mobile service providers.    

Four more provisions suggested by COVA and that are still to be considered are 

1) Online applications for DRI and MUDRA loans as is available for other loans 

2) Notification and implementation of Turn Around Time for processing of loans 

3) Intimation of reasons for rejection of loan applications and 

4) Waiving of condition to procure No Dues Certificates from 8 to 10 neighbouring banks that is very time consuming and costs the applicants Rs. 1000 to 1500. 

With computerization, all banks can be linked to access lists of defaulters anywhere in the country. Though these four provisions are not critical to ensure financial inclusion of the poor, but they could bring about optimal transparency, accountability and facilitate ease of transactions for the poor in securing credit from banks.     

This success could not have been possible without the endorsement and support for our representations from Ms. Najma Heptulla, Union Minister for Minority Affairs and Ms. Nirmala Sitharaman, Commerce Minister, GoI, Mr. Jitendra Singh, Minister in the PMO, and Mr. Rahul Gandhi, Mr. Salman Khurshid, Mr.Rahman Khan, Dr. Munagekar (Congress), Mr. Sitaram Yechuri and Ms.Brinda Karat (CPM), Mr. S. Sudhakar Reddy and Mr. D. Raja (CPI), Dr. K. Keshava Rao and Mr. B. Vinod Kumar (TRS) and Mr. A.V. B. Swamy Member RS from Orissa. Many civil society organisations and activists from across the country also secured endorsements for the representation from Members of Parliament from different political parties that were addressed to the Prime Minister and the Finance Minister of India.

Personal representations were also made to Mr. Jayant Sinha, Minister of State for Finance and Mr. Hashmukh Adia, Secretary, Department of Financial Services, Government of India who assured favourable consideration and action in the matter.   We are especially indebted to Mr. B. Vinod Kumar, MP from TRS for his critical support for this initiative.       

Copy of the Representations incorporating ten suggestions to ensure financial inclusion and submitted to the government, political leaders and bureaucrats since January 2015 is attached.

Article titled “Can G 20 Summit Deliver?” published in the web edition of EPW on 7^th September 2013 (linkhttp://www.epw.in/authors/mazher-hussain), a Monograph “ Critical Study of Financial Inclusion in G 20 Countries with Focus on India” published in October 2014 and a Concept Note on Mobile Bank Deposit Cards prepared in June 2013 and shared with different ministries, official of Reserve Bank of India and different bankers can be accessed at https://drive.google.com/folderview?id=0B1eA8x5S3mlcXy1QOGlyQ05yUkU&usp=sharing .  Logic for the formulation of the 12 suggestions for a genuine financial inclusion of the poor was worked out in these documents.     

A Caution!

Though the Government of India has successfully enabled opening of over 17 crore (170 million) bank accounts for the poor under the Jan Dhan Yojana and is launching MUDRA scheme to enable the poor and micro entrepreneurs to access loans up to Rs. 10 lakhs, there should be no complacency and assumption that credit would be made available easily to the poor.  In 1974- that is 41years back- Government of India had launched the DRI scheme that stipulated that all banks should give at least 1% of their advances to the poor. Its implementation was abysmal during all the 41 years through the entire country as banks gave only 0.02% of loans to the poor instead of the stipulated 1%. In Andhra Pradesh, in the year 2013-14, all banks together gave just Rs.102.75 Crores (10.2 million) instead of Rs. 4,716.23 (471.6 million) that is just 0.02% again as always!

Policies are being put in place- now implementation has to be ensured by the government, political parties, civil society, media and the banks themselves otherwise MUDRA could easily become DRI.2

Seeking Your Continued Collaboration and Support

Your encouragement, collaboration and support have been critical for COVA in carrying forward our programs and we seek your continued partnership in the years to come.

With Regards

COVA Team