Revamping The Financial System (Providing Finance Where it Matters)

This Article based on the global banking system, which faces new challenges in the coming years. The Indian financial system is not really discharging its responsibilities. Banks must follow prudent lending norms. But prudence should not make them swing to the other extreme and pursue what has come to be known as ‘ lazy banking’. As far as the borrowers are concerned, the formal banking system is unattractive because it does not provide flexible products and services in line with their income and expenditure patterns. Corruption is another problem. Clients often have to play hefty bribes to access loans. So the ultimate cost to borrowers is very high. Indian financial system wants to deliver finance to the poor, a new mindset is required. Most banks consider serving the rural poor to be a high-risk, high-cost proposition. There is considerable uncertainty about the repayment capacity of poor rural borrowers.