The report of an RBI-appointed committee on financial inclusion and financial deepening has stimulated a wide-ranging debate on these crucial areas. However, policy measures initiated by the government and the RBI while adding to the numbers of new bank branches, new accounts and so on did not really enhance the quality of such inclusive practices. In September last year, the RBI asked the committee chaired by Nachiket Mor to prepare “a clear and detailed vision document” to lay down a set of “design principles” to guide national frameworks and regulation and to review existing strategies and institutions with a view to removing barriers to inclusion and to the deepening of the financial sector. The report, submitted in just over four months, is rich in detail, but its core agenda is to be seen in a few specific action points. Every Indian above 18 will have to be provided with a universal electronic bank account by January 2016, less than two years from now. Aadhaar will be the basis to open bank accounts. A vertically differentiated banking system with payments banks for deposits and payments and wholesale banks for credit outreach will come up, with few entry barriers.

No one can fault the committee for the lack of ambition or a sense of urgency. It has underlined the urgency by stipulating a distance rule — no one need walk for more than 15 minutes to reach a point of contact to avail a financial service. That has been one of the major areas of dissent within the committee, with two of its members seeking a more realistic timeframe. The committee might have glossed over the huge costs that will have to be incurred in terms of physical infrastructure and human resources. No matter how important technology will be in the emerging financial scene, the role of human resources cannot be discounted. The idea of setting up differentiated banks is not new. Regional rural banks and local area banks which fall in this category did not measure up despite being theoretically sound. Their cost structure moved up in line with those of commercial banks, making them unviable. Despite a much lower capital requirement being stipulated for these banks, there may not be many takers for them. The assumption that Aadhaar will roll out across the country by the end of next year might be an optimistic one. Despite such doubts, the Nachiket Mor report is a truly visionary document that should help the Reserve Bank and the government to initiate specific moves towards complete financial inclusion.