India sets up financial inclusion fund for the poor

February 21st, 2008 - 4:59 pm ICT by admin  

A file-photo of Manmohan Singh

New Delhi, Feb 21 (IANS) The Indian government Thursday approved setting up of a financial inclusion fund (FIF) and a financial inclusion technology fund (FITF), with a total outlay of Rs.4 billion ($100 million) for the next five years. FIF aims at economic betterment of the poor, while FITF will invest in information technology aimed at promoting financial inclusion.

A committee on financial inclusion headed by C. Rangarajan had recommended the two funds. Rangarajan is also chairman of the Prime Minister’s Economic Advisory Council.

Prime Minister Manmohan Singh chaired the meeting of the union cabinet of ministers, where the decision was taken.

Finance Minister P. Chidambaram, in his budget speech last year, had announced the government would set up the two funds with a corpus of Rs.5 billion each with initial funding by the government, Reserve Bank of India and National Bank for Agriculture and Rural Development.

Deepak Sandhu, principal director general of media and communication, told the media after the meeting that FIF aimed at supporting “developmental and promotional activities” with a view to securing greater financial inclusion, particularly among weaker sections and low-income groups in backward regions.

“FITF would enhance investment in IT aimed at promoting financial inclusion, stimulate the transfer of research and technology in financial inclusion, increase the technological absorption capacity of financial service providers and users and encourage an environment of innovation and cooperation among the stakeholders,” he said.

According to National Sample Survey Organisation’s (NSSO) estimates, 45.9 million farmer households in the country, out of a total of 89.3 million households, do not access credit at all.

Despite the vast network of bank branches, only 27 percent of total farm households are indebted to formal sources, of which one-third also borrow from informal sources.

Farm households not accessing credit from formal sources as a proportion to total farm households is especially high at 95.91 percent, 81.26 percent and 77.59 percent in the north-eastern, eastern and central regions, respectively.

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