Dr.B.S. Suran: Hearing it from a senior Banker, like Kidwai, I should say it’s a fact. People are just not realising what is at the bottom of the pyramid. The entire SHG Bank linkage, which we started 23 years back, had people saving 10 rupees, 30 rupees… they never expected that they would have a bank balance with them of about ten to twelve thousand crores today. Consider the simple Jan Dhan Scheme which the government started. In around 5 to 6 months alone, it has collected about 26000 crores balance. So people now realise. This is the enormity or capacity, that little drops do make an ocean. But the journey has started and MFI’s also show great promise in this regard.

Dimensions Team: This next question is regarding JAM; ‘Jan Dhan’ bank accounts for all, Aadhar Unique Identity cards, and Mobile Governance”. How should India go about it?

Dr. B.S. Suran: I don’t know whether you are aware about it or not, the Supreme Court had instructed that the Aadhar card was not mandatory… so I think that will be an obstacle to the JAM initiative. Many of the Jan Dhan accounts in initial stages had small balances of Rs.100 to Rs.200, but now the scenario has changed. The transaction costs have declined in these accounts. Along with that, it is important to promote the culture of saving and banking. That will come with financial literacy, of course, but over a period of time.

When banking is enabled through the mobile, it becomes easier to transact. There are practical problems though; Making digital infusion, people should also be literate to use mobile apps, and they should be more comfortable using smartphones. Although the number of people using mobiles are large, only 10% of them use smart phones. It’s only the urban people who do so. In rural areas there are connectivity issues. So overcoming these hurdles is of great importance at the moment.

Dimensions Team: Micro Finance companies now serve even urban people, while NABARD was actually setup for welfare of rural people. Even some major micro finances companies like Janalakshmi are now mainly targeting urban customers. Why do you think such changes are happening?

Dr. B.S. Suran: Rural areas have transaction costs, i.e., you need to travel. In the urban areas you find that aggregation and transaction costs are low. Most MFI’s are now targeting urban people since the RBI has cut down transactional costs in urban areas. NABARD is lending, and at least in my institution, our predominant focus is on reaching all rural-area people. Urban areas are those which we are not touching. Despite that we are going about our activity at margins of 6%. So we do good micro finance in rural areas. Along with low transactional costs, urban areas also have greater financial literacy, which is why this change has taken place.

Dimensions Team: Since the Modi government coming to power, they have done a lot for micro finance institutions, and one of them is the Mudra bank. Do you think one more micro-finance institution in the form of Mudra bank was needed?

Dr. B.S. Suran: Government certainly had few things in mind for Mudra bank, I cannot say anything against it. As such, it is a thin organization; it consists of about five to seven people. , Mudra bank is different. While MFI’s charge an interest rate of 26%, though many MFI’s have really reduced the rate of interest. We have not sourced from Mudra and we do not have constraints of Mudra at all. The Mudra bank has just been around for six months, so right now they are working as National Institute of Banking and Finance (NIBF). It will come up as a separate bank later as they are in contact with Alibaba and a whole lot of other organizations on how you can deliver technology and banking to rural people.

Dimensions Team: You talked about the business of NABARD Financial Services, including Business and Development Correspondents (B&DC) and Self-Help Groups (SHG’s). What is the reason behind including B&DC and SHG’s, although SHG’s serves to same people as NABFINS? What differentiates SHG’s and NABFINS?

Dr. B.S. Suran: SHG’s are our clients, and we reach clients through B&DC. B&DC’s are nothing but civil societies or NGO’s. They have been working with these SHG’s and have built an enormous amount of trust over a period of time. Can we leverage that trust to reach our clients is the main question. We want SHG’s to serve people and continue to do so. What’s the one big problem in the financial area? As you know, it is all about trust. Here, you already have information of clients and the trust. We build on that trust to scale up our financial services; that way, we will be able to reach far.

Dimensions Team: One of the important aspects of financial Inclusion is Financial Literacy, but people in India are not aware of financial products offered by the government of India. Yes, through the Jan Dhan Yojana many bank accounts were opened, but the Dormancy remains still high. How do you think Dormancy can be lessened by NABARD?

Dr. B.S. Suran: Financial Literacy is the critical thing. There has always been a debate on whether Inclusion should be followed by financial literacy or financial literacy by Inclusion. The SHGs actually think Financial Literacy is more important. SHGs help in saving people’s money and this can be regarded as thrift. SHGs help people understand the various nuances of credit. Financial Literacy is not just knowing accounting or the Jan Dhan Yojana, or the pension scheme… it’s all about how to use these services. The economy should benefit from these services. SHGs basically learn with their money, and once they are comfortable, they are given access to external resources. They are then prepared to serve people in a better manner. Financial Literacy is also about knowing what credit is, what are the concepts related to credit, the ethics of credit, etc.