Regulatory Aspects of Universalising Financial Services Access

This paper, while taking stock of the state of financial services access in India, focuses on the regulatory environment and the policy initiatives critical to achieve universalisation. It focuses primarily on the access to finance for the rural and urban poor.

The authors discuss:

• Access to financial services and dimensions of access;
• Importance of designing financial services, other than credit, and making them available to scale;
• Regulatory approach to universalisation in India:
  • Financial sector reforms have not had any impact on the rural and poor segments;
  • Most regulations discourage competition and innovation;
  • Greater domestic de-regulation, which gives existing players incentives to expand through market based mechanisms, would help universalisation.
• The emergence of a large number of local financial institutions to enable universalisation.

The paper concludes that:

• Universalisation of access to financial services calls for a regulatory and policy environment that permits experimentation;
• A key feature of building access is the need for local financial institutions serving in concentrated geographical areas addressing financial services needs of clients in a comprehensive manner;
• Systemic ability will be enhanced through efforts aimed at creating a national unique identifier, credit information sharing and improvement in rural infrastructure.