NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

The Nachiket Mor committee report has recommended a new banking structure in India. This, however, will not necessarily be one that will serve the aim of inclusion best.

The committee must be applauded for meeting the deadline given with such a comprehensive report that is liberally sprinkled with suggestions for avoiding micro-management. For example, the distance between bank branch and the banking correspondent should be set by the bank according to its own operational convenience and not by rules set by the Reserve Bank of India (RBI).

Yet the inherent contradictions in the existing system remain. To give one example, the report shows the discord in the flow of priority sector credit: agricultural credit is bunched up in March to meet the targets set by RBI, but the rush does not match the needs of the farmer. Hence, the report recommends tracking the outstanding amounts on a daily basis rather than at the end of the fiscal.