Reserve Bank of India Moves to Open Up Access to Financial Services

Date Published 1/17/2014
Author Marja Hoek-Smit
Theme Retail Housing Finance, Funding Housing Finance, Housing Finance Policy
Country India

Reserve Bank of India Moves to Open Up Access to Financial Services

January 17, 2014

The Committee on Comprehensive Financial Services for Small Businesses and Low Income Households, set up by the Reserve Bank of India (RBI) in September 2013, under the leadership of Nachiket Mor, published its final report on 12-31-2013. The committee was tasked to outline plans to promote financial inclusion in India, where only one third of adults have access to a bank account. The Committee outlined six vision statements for full financial inclusion and financial deepening in India and made detailed recommendations based on four design principles of Stability, Transparency, Neutrality, and Responsibility.

The committee set out a list of for-reaching recommendations including the following selected issues: 1) all mobile phone companies be mandated to provide USSD connectivity as priority SMS services with reasonable rates and to be made available to the banking system – (this may be the most transformative recommendation); 2) consider licensing, with lowered entry barriers but otherwise equivalent treatment, more functionally focused banks such as Payments Banks (entities that would focus on ensuring rapid out-reach with respect to payments and deposit services), Wholesale Consumer Banks, and Wholesale Investment Banks; 3) universal reporting to credit bureaus be mandated for all loans including individual and SME loans; 3) restoring the tax-free status of securitization SPVs as pass-through vehicles for tax treatment; 4) partial convergence of Non-Bank Financial Companies’ and Bank regulations; 5) measures to improve universal access to investment and risk management products; 6) measures related to customer protection.

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