Recommendations of Deepak Mohanty Committee on Medium-term Path on Financial Inclusion

The Reserve Bank of India (RBI) has released the Report on Medium-term Path on Financial Inclusion submitted by 14-member committee headed by RBI Executive Director Deepak Mohanty. RBI had constituted the committee in July 2015 to examine the existing policy regarding financial inclusion and the form a five-year (medium term) action plan. It was tasked to suggest plan on several components with regard to payments, deposits, credit, social security transfers, pension and insurance. Key recommendations Augment the government social cash transfer in order to increase the personal disposable income of the poor. It would put the economy on a medium-term sustainable inclusion path. Sukanya Shiksha Scheme: Banks should make special efforts to step up account opening for females belonging to lower income group under this scheme for social cash transfer as a welfare measure. Aadhaar linked credit account: Aadhaar should be linked to each individual credit account as a unique biometric identifier which can be shared with Credit information bureau to enhance the stability of the credit system and improve access. Mobile Technology: Bank’s traditional business model should be changed with greater reliance on mobile technology to improve ‘last mile’ service delivery. Digitisation of land records: It should be implemented in order to increase formal credit supply to all agrarian segments through Aadhaar-linked mechanism for Credit Eligibility Certificates (CEC). Nurturing self-help groups (SHGs): Corporates should be encouraged to nurture SHGs as part of Corporate Social Responsibility (CSR) initiative. Subsidies: Government should replace current agricultural input subsidies on fertilizers, irrigation and power by a direct income transfer scheme as a part of second generation reforms. Agricultural interest subvention Scheme: It should be phased out. Crop Insurance: Government should introduce universal crop insurance scheme covering all crops starting with small and marginal farmers with monetary ceiling of Rs. 2 lakhs. Multiple Guarantee Agencies: Should be encouraged to provide credit guarantees in niche areas for micro and small enterprises (MSEs). It would also explore possibilities for counter guarantee and re-insurance. Unique identification of MSME: It should be introduced for all MSME borrowers and information from it should be shared with credit bureaus.