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Unit 2: Role of Banks in the Development of Economy

Companies, registered NBFCs not accepting public deposits and post offices may act as business Notes
correspondents. Banks may conduct thorough due diligence on such entities to establish their
suitability. Business correspondents are permitted to take up all the activities listed for business
facilitators. Additionally they may be engaged for: Disbursal of small value credit, recovery of
principal/collection of interest, collection of small value deposits, sale of micro-insurance,
mutual fund products, and pension products etc., receipt and delivery of small value remittances/
other payment instruments. Banks are permitted to pay reasonable commission to the business
facilitators/correspondents. RBI has also advised the banks to safeguard against the legal and
operational risks while engaging their services. They have to put in place a Grievance Redressal
Machinery for redressing complaints about services rendered by business correspondents and
facilitators.

Self Assessment

Fill in the blanks:
10. The period of economic reforms has witnessed the key ……………………… role played by
banks in the achievement of high growth in the Indian economy.

11. Banks have been advised to provide small ……………………… in no-frills accounts.
12. Business correspondents are permitted to take up all the activities listed for business
…………………….

13. The Situation Assessment Survey of Farmers was conducted in the year ……………
14. They have to put in place a ………………………… machinery for redressing complaints.
15. In India, financial inclusion was introduced by …………………
16. In January 2006, RBI permitted banks to engage ………………… and …………………………
as intermediaries for providing financial and banking services

Case Study Financial Inclusion – A Huge Challenge

he RBI in its second quarter review of the monetary policy 2012-13 has mandated
the State Level Bankers’ Committees (SLBCs) to prepare a roadmap for provision
Tof banking services in all unbanked villages with less than 2,000 people in a time
bound manner. “Moving towards universal financial inclusion has been a national
commitment,” the RBI has emphasized in its report. The Financial Inclusion Advisory
Committee chaired by Dr K C Chakrabarty will explore viable, affordable and sustainable
banking service delivery models for unbanked population and suggest appropriate
regulatory framework to stabilise financial inclusion.
Over the years, banks have introduced many innovations: ATMs, kissan credit cards,
general credit cards, freedom prepaid cards, biometric cards, phone banking, mobile
banking, electronic clearance services and banking correspondence to achieve financial
inclusion.
Access to Credit

Over the last two decades India has witnessed the world’s biggest micro credit movement
in the world. As on March 31, 2012, nearly 86 lakh SHGs have been bank-linked. So nearly
17.20 crore people get access to banks’ credit to start hundreds of small economic activities:
Contd...

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