Poor are much better at loan repayment: K C Chakravarty

MUMBAI: Banks should offer services to the poor with a profit objective rather than a social objective and this is possible by adopting an appropriate business model, said a top RBI official. He also underscored the need of combined efforts by the entire society to achieve financial inclusion.

"The poor is more creditworthy than the rich," said deputy governor KC Chakravarty, while addressing students in a college in Mumbai. "Business for poor is viable provided you have the ability," he said.

The deputy governor called for an integrated approach by involving a combination of brick and mortar model as well as information and communication technology, or ICT model.

He said financial inclusion has failed to take off till now because of the absence of technology, reach and coverage, a proper business model and a viable delivery mechanism, among others.

"Brick and mortar and click and mouse model, both fail independently. We have to use a combination of both. All villages up to a population of 2,000 per village must be provided with banking services either through a branch or a business correspondent," the deputy governor said.

But at the same time he also highlighted that technology makes it possible to produce goods and services at a very low cost.

Chakrabarty advised domestic helps should be paid through banks' "pay your maids and servants bank accounts only". He suggested that some of the payments to the poor such as food & fuel subsidies or NREGA payments could be made through bank accounts.

Source: Economic Times