A Reserve Bank of India (RBI) committee on financial inclusion headed by Deepak Mohanty has suggested that the government should transfer cash directly to persons instead of giving subsidies, and should replace interest subvention on agriculture loans with affordable universal crop insurance scheme. Explain with examples how these recommendations, if implemented, will bring about financial inclusion. (200 Words)

Ans:-The RBI panel has mooted to bring radical changes to the existing policies pertaining to rural farmers. The major recommendations include Direct Benefit Transfer and replacing interest subvention with universal crop insurance scheme. Such moves are expected to further the goal of financial inclusion because:

1)DBT will ensure that farmers have to open bank accounts to obtain the cash benefits
2)Financial gains made from elimination of intermediaries can be used to move into the currently unbanked regions

Transfer of LPG gas cylinder subsidies, the pilot projects in case of Public Distribution systems in Andhra Pradesh , MNREGA payments in Jharkhand and pension distribution in Andhra Pradesh, Tripura, Maharashtra and Chandigarh have already proved the mettle of DBT in the noble objective of financial inclusion.

Similarly, replacement of interest subvention with universal crop insurance scheme will make the farmers open bank accounts for getting the compensation in case of loss of crops. The Modified NAIS has the added benefit that it is available to small farmer holders and not restricted to borrowers only and thus even the marginalized farmers will be able to take benefits. The subsidy amount recovered from rolling back interest subvention can be easily used to provide better insurance facilities and hence deepen the penetration of insurance sector.

Financial inclusion prevents the farmers from clutches of moneylenders and the recommendations are a step forward in this direction.