Where Angels Prey

Where Angels Prey is a novel by Ramesh S Arunachalam. Please refer to www.whereangelsprey.com for more information

Thursday, September 26, 2013

RBI’s New Financial Inclusion Committee: Bypassing the Parliament?

Ramesh S Arunachalam

There is a Microfinance Bill promoting financial inclusion pending in the Parliament. There is also a financial inclusion committee of the RBI currently live, under Dr KC Chakrabarty. So, how appropriate was it for the new RBI Governor to announce another committee on financial inclusion?

Dr Raghuram Rajan made a brilliant speech, when he took over the as the Governor of RBI on September 4th. TV Commentators were comparing his first day at the RBI as akin to a century on debut (in Test cricket). Dr Rajan was indeed impressive in the way he laid out his plan. One of his moves was to request Dr Nachiket Mor to chair a committee on financial inclusion “that will assess every aspect of our approach to financial inclusion to suggest the way forward. In these ways, we will further the development mission of the RBI”.

The committee headed by Dr Nachiket Mor is a committee on financial inclusion, irrespective of whatever it is called. A look at the terms of reference put out on the RBI website clearly suggests that the committee has a mandate to build a vision for the financial inclusion, set design principles for regulation and suggest a monitoring framework, amongst other things. The focus is to be primarily on poor, vulnerable, marginalised, excluded etc and small businesses. While I applaud this effort, I am worried on several counts and these are articulated in a series of articles, beginning with this one.

We first look at whether the Governor’s (and RBI’s) announcement of the new committee on financial inclusion is a case of pre-empting the Parliament. After all, the Micro-Finance Institution (Development and Regulation) Bill (2012) - MFIDRB (2012) – was introduced in the Lok Sabha in 2012 and has been referred by the Speaker to the Parliamentary Standing Committee on Finance (PSCF). The preamble of the bill  states: A BILL to provide for development and regulation of the micro finance institutions for the purpose of facilitating access to credit, thrift and other micro finance services to the rural and urban poor and certain disadvantaged sections of the people and promoting financial inclusion through such institutions and for matters connected therewith or incidental thereto.” 


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