Emphasising the need to extend banking services to all sections of society, Prime Minister Manmohan Singh on Friday suggested that Finance Minister P Chidambaram constitute a group to promote "financial inclusion" of the poor.
Addressing the valedictory of the centenary celebrations of Canara Bank in Bangalore, the PM said: "I suggest the finance minister to set up a group with representatives from the Reserve Bank of India, Nabard and major commercial banks to formulate policies that will promote financial inclusion by stimulating financial services for the poor, particularly emphasising micro-finance, micro-insurance and new delivery models."
The poor need a range of financial services that are convenient, flexible and affordable and not just loans, he pointed out.
"The focus on financial inclusion comes from the recognition that this can serve the interests of both society and the banking system," Dr Singh said.
The PM is of the opinion that a key requirement of greater financial inclusion will be a reduction of transaction costs.
"The RBI has taken several steps in this direction. I advise the banks to give the highest priority to customer service to lower transaction costs and to eliminate procedural inconveniences," he said.
Noting that there was a vast uncovered gap in extending agricultural credit, the PM exhorted the banks to reach out to every nook and corner of the nation and provide credit solutions to farmers' needs.
"Many regions and many classes of farmers are completely outside the institutional credit delivery system. High interest rates and a serious debt overhang still affects millions of farmers. This cannot be allowed to persist," he stated.
Cautioning domestic banks against showing complacency towards the growth of international banks, the PM said the domestic banks should devise effective global strategies to improve their international presence.
"The roadmap on the extent of foreign investment in banks in India provides guidelines until 2009. The presence of foreign banks in the country has brought about greater competition. However, there is a need to seriously examine the possibilities for consolidation of PSU banks to give them both depth and reach," he added.
The PM commended the efforts of Canara Bank in emerging as the largest PSU bank in the country.
Finance Minister P Chidambaram, in his address, said the growth of economy was propelling the inflation rate.
"However, we will take steps to tame this inflation rate without affecting the economic growth. Even in the past when the inflation rate was ruling at 8 per cent, we were successful in bringing it down," he added.
He asked the banks to be become outward in lending loans. "Otherwise, it may look like certain sections of the society are being deprived of their opportunities to create wealth. I hope the banks realise the need to extend their services and products," Chidambaram said.
Canara Bank Chairman and Managing Director M B N Rao and Karnataka Chief Minister H D Kumaraswamy were also present.
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