Chennai: The Reserve Bank wants larger banks to come out with customer-friendly interest rate policies following the deregulation of savings bank rate like their smaller counterparts in the private sector. The central bank also asked banks to develop cost effective village branch model in order to promote financial inclusion.
Since the deregulation of the rate last year, said RBI Governor D Subbarao on Wednesday, seven relatively small private banks have raised it and "expectedly improved their share of this market segment".
"The big banks have yet to respond to this...Reserve Bank looks forward to more active play in the Saving Bank segment with banks coming out with some customer friendly innovations especially aimed at attracting low income households, presently outside the banking sector," he said.
Subbarao stated this at IOB Platinum Jubilee Oration Series in Chennai.
While the banks were allowed to decide interest rate on deposits and lendings in early 1990s, the saving bank segment continued to be regulated as there were apprehensions that deregulation would hurt the asset-liability management of banks and also militate against financial inclusion.
However, Subbarao said belying earlier apprehensions, the adjustment to the deregulation has been fairly smooth.
He said it is expected that whenever big banks respond to the deregulated regime, "...the adjustment will be smooth".
While deregulating the rate in the segment, RBI mandated the banks to provide a uniform rate for accounts upto Rs 1 lakh while enjoying flexibility in the rates and charges for accounts over Rs 1 lakh.
This was done to protect small customers whose knowledge levels and bargaining power are low, Subbarao said.
The RBI chief also stressed on inclusive financial activity by developing cost effective village branch model
"Indeed, I think there is a strong case for a much larger effort on innovating a cost effective village branch model," Subbarao said.
"As I have said on several previous occasions, banks should look upon financial inclusion not as an obligation but as an opportunity to build fortune at the bottom of the pyramid," he said.
Unless banks are convinced that reaching out to the common man is not just a forced regulatory imperative but a potential business opportunity, the numbers will remain without life, he said, adding RBI looks forward to competition among banks to develop business models for such small, low staff and low-cost branches.
In 2010, a roadmap was drawn up to provide access to formal banking to every village with a population over 2,000. Under the roadmap, about 74,000 villages with population above 2,000 were identified as unbanked.
These villages were allocated to various banks, including regional rural banks, for providing banking services by March 2012.
Most of the banks have achieved the target and the latest figures indicate that there are over 110,000 Business Correspondents deployed across the country as of now.
He also stressed upon the need to train Business Correspondents about technology, knowledge of bank products and processes.