Financial inclusion is important for bringing the poor and under-privileged sections of society within the banking fold and thereby generating and sustaining equitable growth.

Let me now turn to the various measures initiated by the Reserve Bank for promoting financial inclusion.

First, the Reserve Bank for long has instituted a mechanism called ‘priority sector lending’ through which credit is channelled to certain preferred sectors, which, inter alia, include small-scale industry, small businesses and agriculture.

In the post-reform period, the priority sector has been expanded to include advances to retail trade, educational loans, micro-finance and low-cost housing. This has helped in furthering the cause of financial inclusion.

Second, the Union Finance Minister announced in the Budget 2010-11 that every village in the country with over 2000 population must have access to banking services by March 2012.

In order to operationalise this process, commercial banks have prepared financial inclusion plans which have been submitted to the Reserve Bank.

As brick-and-mortar branches will not be viable in very small centres, the approach is to meet this challenge through the business correspondent (BC) model and by leveraging communication technology.

Under this model, banks appoint agents who provide basic banking services at the door-step of a client on behalf of banks.

Third, the Reserve Bank has asked banks to open no-frills accounts.

These accounts have no or very low minimum balance requirement and have provisions for small loans by way of overdrafts.

This is a very convenient account for small depositors, especially in rural areas.

Fourth, a major impediment for a common person to open bank account is the ‘Know Your Customer’ (KYC) norm.

The norm has been relaxed for small accounts, viz., deposits up to Rs.50,000 and credit up to Rs.1 lakh.

A simple introduction by an existing account holder in a bank should be adequate to open an account.

In this regard, Aadhar, the Unique Identification Number (UID) Project of the Central Government, which aims at providing a unique ID number for everyone in the country, will help the poor to establish their identity to meet the banks’ KYC norms.

Fifth, farmers can get credit from banks conveniently through Kisan Credit Cards (KCCs) and General Purpose Credit Cards (GCCs).

Sixth, while several banking facilities are available, a common person may not be aware of them.

Hence, financial literacy becomes critically important.

Accordingly, the Reserve Bank has initiated a ‘Project Financial Literacy’ with the objective of disseminating information regarding the central bank and general banking concepts to various target groups.

RBI's ‘Financial Education’ website link offers basics of banking, finance and central banking for children of all ages.

Finally, there is also a learning process for the Reserve Bank.

Accordingly, our Governor, Dr. Subbarao initiated the outreach programme last year as a part of our Platinum Jubilee celebrations.

Under the outreach programme, the top management of the Reserve Bank visits at least one village in every state and union territory with state government officials and commercial banks to give focused attention on financial inclusion.