Insurance companies, pension funds, banks and mutual funds will collaborate to create a common approach to further the government's financial inclusion goals in a targeted manner and based on customer needs.
An inter-regulatory coordination group, plus an outside group of experts (the financial inclusion advisory committee) is busy creating the financial inclusion plan. The first draft is ready and was discussed at a recent inter-regulatory meeting. It would be fine-tuned further, Reserve Bank of India Deputy Governor S S Mundra told Business Standard in an interview.
All financial entities would be directed to coordinate with each other to introduce products in line with the strategy.
All the financial regulators — the IRDAI, Reserve Bank of India for banking, the Securities Exchange Board of India for capital markets, and the Pension Fund Regulatory and Development Authority — have products for those outside the financial fold. But there is currently no common strategy.
The idea is to present a package to a person by understanding the stage of the inclusion journey he or she is in. “Someone opens an account with no job at hand and you try to sell an insurance or pension product to that person … then it’s meaningless,” Mr Mundra said, adding opening an account is just the start of the inclusion journey. “Once an account is opened, there should be some transaction. Then the person should be given some productive credit. Once credit is given and he or she can generate surplus, that surplus should be used to buy some microinsurance, and save some money for a rainy day or for old age. In those stages, pensions and investment products would be introduced.”
The strategy would be determining what kind of credit should be given once an account is opened, and then what kind of products should be offered. There would be changes in how the information technology would be used, and how a customer can be tracked.
The financial institutions will also work together to educate customers about the importance of various products. A national financial education strategy is also being formulated as a corollary to the inclusion strategy.
Financial education would ensure there is a ready demand for the products. “The regulators have done a lot in terms of supply. Now, if customers are not aware of these products, all these supplies have no meaning,” Mr Mundra said, adding demonetisation has increased the supply of these products and demand is also increasing, but more needs to be done.