Finance Minister, Shri Pranab Mukherjee has emphasized the need for strengthening of movement of Self-help Groups for financial inclusion so that small and marginal farmers could get access to higher doses of credit in taking out productive land based activities.  He was addressing a meeting with the Chief Ministers of South Zone States and Administrators of Union Territories (UTs) & Chairmen and Executive Directors of Banks in Hyderabad, today. This was the last meeting in the series of regional meetings with the Chief Ministers of the States and Administrators of UTs organised by the Department of Financial Services, Ministry of Finance in different parts of the country during the last one month to review various developmental schemes and efforts being made by the public sector banks in developmental programmes.  The Finance Minister said that we have to use new technologies to make banking services available and within reach of rural people through the services of business correspondents, mobile banking, no-frill accounts etc. Mentioning about Unique Identification Programme, Shri Mukherjee called upon the State Governments to ensure that residents of rural habitation are enrolled by the banks for opening of ‘no-frills’ accounts during the campaign. Finance Minister also highlighted the need for close monitoring of farm credit flow to small and marginal farmers at the micro level.  The meeting was attended by Chief Minister of Andhra Pradesh, Ministers and officials of Southern States.

Introductory and Concluding Remarks of Finance Minister during the meeting are as follows:

INTRODUCTORY REMARKS

“Hon’ble Chief Ministers, Minister of State for Finance Shri NamoNarain Meena, Ministers of State Governments, Senior officials of the Central and State Governments, Chairmen and Executive Directors of Banks, ladies and gentlemen. This is the last in the series of regional meetings I have been holding in the last one and a half months.  In these meetings, we focus on your experience on functioning of banks in your State and also to ensure that various development schemes are implemented in letter and spirit.  I am happy that you have all spared your precious time joining in this effort to review the schemes to make them effective.  I wish to thank especially the Chief Minister, Andhra Pradesh and his team of officials for arranging this meeting.

I am aware that the Southern Region has very successful tradition of operating Self Help Group (SHG) movement, especially of women. I am conscious of addressing participants from a region with a strong tradition of successful self help group movement of women. Hearing about your success in formation and nurturing of these SHGs makes me wish for similar development in all other regions of the country, as well. I am told there are about 25 lakh SHGs which are credit linked with the banks in the seven States and Union Territories present today in this meeting. Similarly the figures on financial inclusion show almost 57 lakh accounts opened through the business correspondent model. These figures are very impressive and show the way to other States and UTs in the country, as well. With many more below the poverty line women being financially included, a strong SHG movement and the continuous training to which they are exposed, one would like to conclude that the women in this region are more empowered. Perhaps this experience in SHG formation could be leveraged to benefit development of the villages in agriculture through formation of Joint Liability Groups of farmers, as well. The small and marginal farmers could then find greater strength in accessing higher doses of credit in taking up productive land based activity.

In this region, I am able to see a good growth in micro credit to the SHGs, NGOs and Microfinance Institutions (MFIs) from the Public Sector Banks.  Some issues have surfaced on lending rates by some of these institutions.  I understand RBI is examining the issue by constituting a working group. Meanwhile, accessing funds from the public sector banks and appropriate use of technology can help bring down lending and administrative costs for the MFIs and these savings must be passed on to the BPL SHGs while extending microcredit to them. At the same time, the Banks have to expand their financial outreach through use of business correspondents’ model and also by ensuring they are more accessible to the SHGs. It is my desire that microcredit models combine the ease of accessing credit at the door step, as offered by the MFIs, with the facility of low interest rates as offered by the PSBs. I note the Government of Andhra Pradesh has launched a unique programme, ‘Pavvala Vaddi’, under which interest paid above 3% by an SHG group to a Bank is reimbursed to the Self Help Group by the State Government.

A number of steps have been initiated to improve credit delivery of the banks and financial inclusion. These include permitting banks to engage banking correspondents (BCs), formulation of Financial Inclusion Plan (FIPs) and mandating banks not to insist on collateral securities in case of loans up to Rs.10 lakhs as against the present limit of Rs.5 lakhs extended to all units in the Micro and Small Enterprises sector. Given the proactive functioning of theSouth Zones States and Union Territories, I am sure that total financial inclusion in this region could occur much earlier than the rest of the country.  I also hope the Micro and Small Enterprises will receive the encouragement required in order to boost the growth and employment in the economy.

You are aware that the Unique Identification Authority of India (UIDAI) has begun enrolling citizens with the active support of the State government machinery. I would request the Chief Ministers to make use of this opportunity to ensure that the residents of rural habitations are also enrolled by the banks for opening of ‘no frills’ accounts during this UIDAI campaign. The State Level Bankers Committee (SLBC) convenor banks shall coordinate with the UIDAI to ensure that data for the ‘know your customers’ norms are fulfilled. For this I advise the CMDs of the SLBC convenor banks of South Zone to direct their officers accordingly.

In the field of Agriculture, the efforts of our farmers have led to consistent increase in food production and there has been record production of food grain in the country.  At the national level, the credit flow to agriculture is satisfactory and has exceeded the set targets.  However, the need for timely and adequate credit delivery to the small and marginal farmer cannot be over emphasized.  I request the State Governments present here and the CEOs of the SLBC convenor Banks to undertake close monitoring of agriculture credit flow to small and marginal farmers at the micro level.

Agriculture credit flow must also adequately cover activities under animal husbandry and fisheries.  The South Zone has great potential for fisheries on account of the long sea coast as well as it being well endowed with rivers and ponds. Marketing potential for agriculture produce as well as for fisheries needs to be developed through the State and District Rural Development Agencies.  This will bring increased earnings to the farmers and the fishermen.

Credit to weavers and rural artisan under the priority sector lending also needs to be carefully monitored through the State level and District level Bankers’ Committees.  Timely assistance for delivery of working capital requirements needs to be taken care of without giving scope for repeated visits by the clients to bank branches.  I urge the Banks to actively participate in the District Level Consultative Committee Meetings and implement the credit plan prepared by the Districts. The SLBC convenor banks need to ensure the Lead Bank Manager is effective and prompt in  monitoring the credit plan.

The Banks, in collaboration with the Ministry of Rural Development, are setting up Rural Self Employment Training Institutes (RSETIs) in each District of the country, to tap the potential of the BPL youth from the rural hinterland. These Bank-led Institutes will be managed and run with active cooperation from the State Governments.  I request that the District Collectors be asked to effectively utilize these institutes for skill upgradation of the rural artisans, the unemployed youth, farmers and Self Help Groups.   In many places where the RSETIs have started functioning, training has been given to young boys and girls in various income generating activities. Such trainings have the exciting potential of leading to establishment of micro enterprises at the village level under areas like agro food processing, handicrafts, etc.

I thank all of you once again for your presence today and look forward to your active participation in today’s agenda items.”

CONCLUDING REMARKS

“Regional meetings with the Chief Ministers of States and Administrators of the Union Territories have been organised by the Department of Financial Services, Ministry of Finance in different parts of the country in the last one month with a view to getting feedback on various developmental schemes and to review the efforts being made by the Public Sector Banks in developmental programmes. Based on the deliberations in these meetings, certain decisions have been taken, which are:

Ø     The banks have been directed to increase Kisan Credit Cards by 20%              (in number ) and 20% (in amount) for the current Financial Year, 2010-11.

Ø     All banks with licenses have been advised to open branches this year.

Ø     The Chief Ministers have been advised to closely monitor the Financial Inclusion Plans of the SLBCs for coverage of all habitations with population above 2000 with banking facilities by March, 2012.

Ø     The Chief Ministers have been requested to ensure that residents of rural habitations are enrolled by the banks for opening of ‘no frills’ accounts during the UIDAI campaign.

Ø     It was informed in the meetings that the limit for collateral free loans to the MSE has been increased from the present level of  Rs 5 lakh to Rs 10 lakh by the Reserve Bank of India. Further, the RBI has decided that banks may waive margin/security requirements for agricultural loans from the existing level of Rs.50,000/- to Rs. 1,00,000/- wef June, 2010. This has been a frequent issue raised by the Chief Ministers in the meetings.

Ø     States have been asked to utilise the State Level Bankers Committee (SLBC) forum to achieve adequate and timely disbursement of loans under the various schemes of Government and thereby improve the C/D ratio.

Ø     The SLBC meetings must be chaired at a senior level, and State Chief Ministers have been advised to chair atleast one SLBC meeting annually.

Ø     Under the Aam Aadmi Bima Yojana (AABY), implementing States have been advised to speed up coverage and the other States have been advised to consider being part of the Scheme, which provides death and disability cover for  the benefit of rural  landless households in the country.

Ø     With respect to the Co-contributory Pension Scheme by States forunorganised sector workers (Swavalamban), the States have been requested to consider making co-contribution along with Government of India.

Ø     Bankers have been asked to actively associate themselves with State Government Programmes, including complaint redressal.”