The Reserve Bank of India (RBI) has urged the government to tweak the Money Laundering Act (MLA), making it easier for people without access to organised credit to open no-frills or plain savings bank accounts. The regulator has recommended that an affidavit and a photo should suffice for the opening of such accounts.The MLA subsumes the Know Your Customer (KYC) norms that banks have to follow while opening accounts for customers, and hence the suggestion by RBI. The KYC norms require a customer to give proof of identify or an introduction from an account holder of the branch to open a no-frills account. The banking regulator is of the opinion that new customers may not always find it easy to provide proof of address and letters of introduction.
However, for the implementation of RBI's suggestion of an affidavit and a photo being sufficient to meet the KYC norms, MLA will have to be amended. This was indicated by Usha Thorat, deputy governor of RBI and chairperson of highlevel committee on Lead Bank Scheme.
The Lead Bank Scheme, which has come up for review after 40 years, provides a forum for banks and state governments to work in unison for achieving the public-policy objectives of inclusive growth. The committee is of the view that the scheme will be an enabler in achieving financial inclusion and improving the flow of credit to the priority sector. It will also help in monitoring the subsidy-linked government-sponsored schemes.
Source: Economic Times RBI roots for easier savings a/c norms
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By ugesh sarkar, Section News
Posted on Fri May 22, 2009 at 01:21:41 AM EST
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To make the Lead Bank Scheme more workable, the committee has suggested that state government should ensure roads and digital connectivity to all centres where banking penetration is required. Further, the state government should try to reduce the use of cash and cheques and take initiatives to make their bulk payments like salaries and pensions through mechanisms such as the electronic clearing system (ECS). This will make banking more cost-efficient. Currently, the government is making salary payment under the National Rural Employment Guarantee Act directly through ECS route, which requires the employee to open a bank account.
The committee is also of the view that state government should participate in recovery drives. Wilful defaults and misuse of loans should be treated as an economic offence. The committee has also urged private banks to actively involve themselves in the Lead Bank Scheme and extend their service to underbanked and unbanked areas.
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