Permission to banks for pricing farm loans below base rate should be withdrawn, the Mor report said. It also suggested that Aadhaar card should be used automatically opening a bank account. RBI is currently sifting through the application of 25 companies to get into the banking fray for which one of the key eligibility criteria is their vision for financial inclusion.
The Mor panel report said there is a need for relook at the farm sector credit activities and suggested abolition of interest subventions and loan waivers. The government should rather distribute the benefits directly to farmers, it said, adding that the banks should do away with the system of lending below their respective base rates to the farm sector.
Among the slew of changes on the regulatory front, it has made a case for gradual abolition of the statutory liquidity ratio (SLR), or the percentage of deposits invested in government bonds; raising the priority sector lending limit to 50 per cent, from the current 40 per cent, and allowing non-deposit taking NBFCs to work as business correspondents.
The Mor panel has set January 1, 2016 as the deadline for targets including access to formal credit as well as investment and risk management products at reasonable charges. Financial inclusion has dominated public discourse for the last few years. The exclusion of a large part of population from formal banking services leads them to the unregulated, informal sector.
The panel said that even after the work of the past three years, close to 90 per cent of small businesses have no links with formal financial institutions and 60 per cent of the rural and urban population does not even have a functional bank account.
