Traders pitching for financial inclusion as core banking sector fails to serve small traders

New Delhi, April 6, 2014: Amid electioneering, the traders of the Country are actively engaged in setting up of their economic agenda for the incumbent Government and as such after demanding a clear cut no to FDI in Retail, they have now pitching for financial inclusion by making a strong demand for an alternate financial mechanism for small traders of the Country.

On April 2, a delegation of the Confederation of All India Traders (CAIT) met Deepali Pant Joshi, Executive Director of Reserve Bank of India at RBI Headquarters at Mumbai and while submitting a detailed memorandum, the CAIT delegation demanded strengthening of Cooperative Bank system and Non Banking Finance Companies (NBFCs) which are already primarily catering to the financial needs of small traders.

The CAIT delegation was comprised of its National Chairman Mahendra Shah, National President B.C.Bhartia and Secretary General Praveen Khandelwal along with other senior CAIT leaders. Beside Pant other senior RBI officials including Udgata, Chief General Manager, Ajay Mishra, General Manager and Aridaman Kumar, Deputy General Manager were also present at the meeting.

In its memorandum the CAIT regretted that the Core Banking Sector has failed to provide sufficient and efficient financial assistance to small traders and low income group resulting into a major hindrance in smooth business activities being conducted by the above section. Small Retailers, Traders, Wholesalers, and people closely associated with trade sector such as small transporters, farmers, labourers etc. always face the liquidity crunch. It is this sector which is cash starved and though it contributes to GDP more than corporate sector still, when the question of finances comes, this sector is almost ignored by mainstream financial institutions. In such scenario, a vast majority of population has to arrange finances from own sources mainly friends and relatives, mortgage their assets and belongings, private money lenders on hefty interest charges.

In this context, the CAIT also referred recent report of Dr. Nachiket Mor Committee constituted by Raghu Ram Rajan, Governor, Reserve Bank of India which has observed that 90% of small traders and low income group do not have any link with the present Banking system whereas nearly 60% small traders in urban and rural areas do not have any functional Bank account. The Nachiket Mor Committee has recommended creation of “Specialized Banks” to cater to the financial needs of small traders and low income group.

For ensuring effective and adequate financial inclusion for small traders, the delegation demanded the RBI to strengthen the working of Cooperative Banks with a well defined guidelines and on the other hand it has also called for creation of a separate category of NBFCs which are serving the small traders sector and accordingly a 'small banking finance companies" under the NBFCs should be created-suggested CAIT. To further strengthen the thread of small NBFCs, the CAIT has suggested that the current NPA provisioning norm of 180 days. The capital adequacy requirements for NBFC- SME not be increased.  Additional restrictions on deposit funding of NBFC - SME should not be imposed. The recently imposed restrictions on Securitization and restrictions for raising retail debentures should be removed for NBFC – SME.  To exclude NBFC- SMEs from the recently issued guidelines on NCD private placement as it reduces availability of funds to this sector. There should not be any restriction on Bank financing to the SME sector and such bank funding should be considered as “Priority Sector Lending” for the Banks.