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Pandemic helped drive the goals of financial inclusion: Debasish Panda

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The pandemic underscored India’s disruptive progress on the touchstone of financial inclusion, with federal welfare payouts directly reaching the intended beneficiaries in a largely fraud-proof ecosystem undergirded by legacy lenders, nimble firms and pertinent digital regulations. “Financial inclusion was actually tried and tested in terms of scale and volume during the pandemic,” financial services secretary Debasish Panda said at the ET Financial Inclusion Summit. Reliance on the digital infrastructure largely cut out the scope of pilferage in the distribution of federal welfare packages, Panda said.

“This is thanks to the vision of our PM, who thought so in 2015,” Panda said. “Today, it’s a reality and during the pandemic, we used it to the full extent.” Panda said that the government has been asking banks to partner with fintechs, as these new-age firms operate in different ecosystems and geographies, carving out innovative solutions.

“What we are doing now is bringing more, new-to-credit micro enterprises in the formal banking channel. We are taking help from fintechs, carving out innovative solutions for segments and geographies,” he said, adding that fintech firms are trying to connect alternative data points. “I don’t have a credit history but I have a spending history; so they collect those sets of data, do an analysis, use technology and then build a dossier for that individual which then becomes comfortable for the bank to lend,” he said, adding that banks and insurance companies also see value here. Panda said that the regulatory arrangement is already there for fintech firms to operate. “The RBI and IRDAI have provided a sandbox kind of an arrangement where fintech or insurance tech can try and test it on the ground and once the proof of concept is established, they can straightway get the licence and carry the work forward,” he said.

The financial services secretary noted that the basic tenets of the financial inclusion plan are banking the unbanked, securing the unsecured and funding the unfunded. “The three pillars have then created a digital pipeline of Jan Dhan accounts, Aadhaar and the Mobile (JAM), which have built a regular flow of benefits and services,” he said. The number of Jan Dhan accounts stand at 420 million, and more than 55% of these belong to women beneficiaries. Panda said that through opening bank accounts, the initial target was to saturate every household.

“The next target was to saturate every adult and that has also happened to a large extent; there are certain pockets where there is a little shortfall and work is in progress,” he said. The government is now identifying districts not matching with the national-level average. The government further aims to ensure availability of a banking touchpoint for any habitat within a radius of 5 kilometres.

Panda noted that micro finance institutions have the connect with the last-mile borrower. “Banks are tying up with MFIs under the co-lending arrangement of the RBI, where the interest gets blended so it comes down also to the end borrower and the credit is flowing,” he said.

Panda said that the transition toward New India is gathering pace. “We are trying to power India toward a $5-trillion economy; so unless we take this population above that threshold, we will be left behind. So efforts are on,” he said.

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