Financial inclusion will reduce corruption, says Raghuram Rajan 12/08/2014

Financial inclusion will reduce corruption, says Raghuram Rajan
12/08/2014 07:25
RBI Governor Raghuram Rajan said the financial inclusion drive, likely to be announced by Prime Minister Narendra Modi on August 15, will break the link between poor public services, patronage and corruption, reported PTI. "It can break a link between poor public service, patronage, and corruption that is growing more worrisome," Rajan said, delivering 20th Lalit Doshi memorial lecture in Mumbai. The drive is likely to include identifying the poor, creation of unique biometric identifiers, opening bank accounts linked to these identifiers and eventually transferring government subsidies to these accounts. "When fully rolled out, I believe it will give the poor the choice and respect as well as the services they had to beg for in the past," Rajan said, adding that financial inclusion will be an important part of government's and Reserve Bank's plans for the coming years. He also said profitability for banks is very crucial for the success of the scheme, and mentioned ideas like government paying the bank commission for transfers. Coming out against the hazard of transfers making one addictive, Rajan stressed the need to use cash transfers as a tool to build capabilities in education and health-care, rather than using the resources only for inessential consumption. Still, if data on misspending emerges, we can look at alternatives such as giving some of the benefit in the form of electronic coupons which can be used by specified individual for a narrow purpose like food, education or health-care, Rajan said. Additionally, RBI is also working with the government to expand the financial literacy, he said.