Q. Read the following passage carefully and answer the questions that follow:
A Reserve Bank of India panel has submitted a report on financial inclusion. It proposes that priority sector lending by banks be raised and that banks be mandated to open accounts for every adult Indian by January 2016. The recommendations do not challenge the RBI’s basic approach to financial inclusion. This approach, which has been to mandate banks to undertake financial inclusion, might have spread public sector bank branches in rural areas for some years, helped open bank accounts and directed credit, but it has stopped yielding results. What India needs is a new approach, which encourages competition and innovation, rather than more mandates.
India’s approach to financial inclusion has been bank-centric. So far, it has focused on bank nationalization, continued with government ownership of banks and their recapitalization. The way to ensure inclusion has been priority sector lending, which mandates that 40 per cent of each bank’s lending be to weaker sectors – small-scale industries, agriculture and exports – to which the bank might not have lent otherwise. The RBI panel now recommends raising this share to 50 per cent.
The panel’s recommendations are in sync with the RBI’s recent guidelines for the grant of licenses to new banks. These require that the bank have a plan for financial inclusion and that it open 25 per cent of its branches in unbanked rural areas. This approach is similar to the one that required PSU banks to open rural branches. By once again mandating financial inclusion, this time for private sector licence application, instead of focusing on competition and innovation, the RBI is essentially doing more of the same.
Financial inclusion may be defined as access to a range of financial services in a convenient, flexible, reliable and continuous manner from formal, regulated financial institutions. Even though access can be ensured by mandates, the quality parameters of access may be compromised in the process. This is seen in the low usage of accounts and the poor asset quality of priority sector portfolios. Such inclusion confuses ends with means. A bank account is meant to fulfill certain functions – simply opening an account is not enough. The panel proposes to make it mandatory for every Indian over the age of 18 to have a bank account.
An often overlooked consequence of the mandate-driven approach to inclusion, as pursued by the RBI, is that the costs of this inclusion are levied on the investors and consumers of banks. The losses from unused bank accounts and poorly performing priority sector assets are eventually borne by the investors and consumers. If the political objective of opening bank accounts is to be met, or lending to certain sectors ensured, it should be transparent as line item on the government’s budget. Instead, it is done through a cross-subsidy that effectively makes other customers pay for the political goals of a government pushing its agenda through banks.
This approach has been accompanied by a neglect of the other drivers of inclusion – competition and innovation. In the last 11 years, the Indian economy has grown rapidly, but no banking licenses have been given in this time. The trend has been that once a decade, the RBI decides to give a few licenses, but there is no window to get licenses during this period. The incumbent banks feel little or no pressure to reach out to unbanked area and people with their services. This, in turn, necessitates a mandate-driven approach to financial inclusion. Despite decades of RBI mandates, rural customers turn to informal channels and unregulated financial firms.
Chose the word/group of words which is MOST OPPOSITE meaning of the word/group of words as used in the passage:
LEVIED
