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Budget 2010: FM proposes boost
March, 05th 2010

Financial Inclusion Fund (FIF) and Financial Inclusion Technology Fund (FITF) are perhaps the two most talked about funding vehicles for promoting financial inclusion. In Budget 2010-11, the finance minister has proposed a further boost to the initiative with additional Rs 100 crore each, enhancing the size of corpus Rs 600 crore each.

But in reality, there is hardly any takers for both the funds, which remained almost un-utilised
even after a couple of years of their existence.

Sample this. Merely Rs 8 crore has been disbursed from FIF. The scene is even worse for FITF usage -- just about Rs 1 crore! The funds are targeted at offering support to business facilitators, business correspondents, self help groups, micro finance institutions, NGOs, joint liability groups among others involved in the financial inclusion drive.

Surprisingly too, the government has contributed just about Rs 10 crore each for FIF and FITF so far. The National Bank for Agriculture & Rural Development (Nabard) has contributed Rs 26 crore for FIF and Rs 38 crore for FITF. Most interestingly, the Reserve Bank of India has not put in any funding support so far to the corpus, which is being maintained with Nabard.

However, according to bankers in the know, the schemes haven t taken off so far largely due to absence of awareness and lack of knowledge in project preparation.

For instance, Bandhan managing director Chandra Shekhar Ghosh said: The MFI sector is mostly unclear of the use of the fund. This unawareness deepens in rural pockets.

So, eyebrows were raised at senior banking levels when finance minister Pranab Mukherjee stepped up the corpus by another Rs 100 crore each. The finance minister seems to have played to the gallery, one senior banker said, requesting anonymity.

When contacted, Nabard chairman UC Sarangi said: We ve been trying to emphasise on projects submitted by financially weak entities like regional rural banks and cooperative banks, or projects coming from areas where banking infrastructure is completely lacking. We are also trying to establish uniform standards for disbursing the financial grant.

According to the Nabard chairman, the government will soon inject another Rs 40 crore each for FIF and FITF. The schemes have now come to the take off stage, Mr Sarangi said.

The government had set up FIF and FITF with Nabard in early 2008 to take banking services to the unbanked areas. The initial funding was to be contributed by the government, RBI and Nabard in a ratio of 40:40:20.

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