MICROCAPITAL BRIEF: Reserve Bank of India Approves State-Run Savings Scheme for Poor People in West Bengal After Collapse of Saradha Group

The Reserve Bank of India, the country’s central banking authority, has approved a savings scheme in the state of West Bengal aiming to provide poor people a safe avenue to save money [1]. The move follows the collapse of the Saradha Group, a private consortium, that collapsed in April 2013 leading to approximately 2 million depositors losing reportedly INR 25 billion (USD 400 million). Under the scheme an individual can invest between INR 1,000 (USD 16) to INR 100,000 (USD 1,600), and a family can invest up to INR 500,000 (USD 8,000) for a period of one to five years. The investments will yield an annual interest rate ranging from 9 to 9.5 percent. The investments will be managed by the West Bengal Financial Infrastructure Development Corporation (WBIFDC), a state-run deposit-taking non-banking finance company (NBFC). The scheme will use 30,000 agents to assist with the opening of accounts with banks. As of December 2013, only United Bank of India, a state-owned bank, has agreed to participate in the scheme.

By Nisha Koul, Research Associate

About Reserve Bank of India (RBI): Established in 1935, the Reserve Bank of India (RBI) undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies (NFBCs). The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in cases of banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. In 1979, the National Bank for Agriculture and Rural Development (NABARD) was formed at the behest of RBI to provide regulatory oversight to regional rural banks (RRBs) and to promote the development of agricultural lenders: tasks that had been the responsibility of RBI. While non-banking financial companies such as for-profit microfinance institutions operate under RBI regulations, the responsibility for inspecting agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD. RBI maintains these responsibilities for for-profit MFIs. Although RBI was originally the parent organization of NABARD and until October 2010 held a 72.5 percent stake in the outfit, RBI owns a one-percent stake in NABARD as of 2011.

Sources and Additional Resources:

[1] The Economic Times, “West Bengal’s savings scheme for poor gets RBI nod,” http://articles.economictimes.indiatimes.com/2013-11-04/news/43658585_1_wbidfc-safe-savings-scheme-shubhalakshmi-panse

The Statesman, “CM launches safe savings scheme for the poor,” http://www.thestatesman.net/news/23678-cm-launches-safe-savings-scheme-for-the-poor.html

MicroCapital Story, May 7, 2013, “Reserve Bank of India Aims to Increase Financial Inclusion in Unbanked Areas; Number of Indian Villages with Financial Access Tripled to 211k, https://www.microcapital.org/microcapital-brief-reserve-bank-of-india-aims-to-increase-financial-inclusion-in-unbanked-areas-number-of-indian-villages-with-financial-access-tripled-to-211k/

MicroCapital Story, March 25, 2013, “Karnataka State Government Launches Mysore City Street Vendors Multipurpose Cooperative Society to Provide Loans to Indian Street Vendors,” https://www.microcapital.org/microcapital-brief-karnataka-state-government-launches-mysore-city-street-vendors-multipurpose-cooperative-society-to-provide-loans-to-indian-street-vendors/

MicroCapital Universe Profile, Reserve Bank of India, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+India+%28RBI%29

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