Nachiket Mor Committee

The Nachiket Mor Committee was a high-level expert committee constituted to examine and propose a comprehensive framework for financial inclusion in India. Its recommendations marked a significant shift in India’s approach to banking access, financial intermediation and regulatory architecture. In the context of banking, finance and the Indian economy, the Committee’s work laid the foundation for major institutional reforms aimed at providing universal access to financial services.

Background and Constitution of the Committee

The Nachiket Mor Committee, formally known as the Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households, was constituted in 2013 by the Reserve Bank of India. The Committee was chaired by Nachiket Mor, a prominent banker and financial sector expert.
The Committee was tasked with examining the gaps in India’s financial inclusion framework and recommending measures to ensure that every individual and small business had access to a full suite of formal financial services.

Rationale and Need for the Committee

Despite significant expansion of the banking network, a large segment of India’s population remained either unbanked or underbanked. Access to savings accounts, credit, insurance and payment services was uneven, particularly among low-income households, small businesses and rural populations.
The Committee recognised that financial exclusion constrained economic participation, increased dependence on informal finance and limited the effectiveness of monetary and fiscal policies. Its work aimed to address these structural challenges in a sustainable and market-oriented manner.

Core Objectives of the Nachiket Mor Committee

The Committee articulated a clear vision of universal financial inclusion. Its key objectives included:

• Providing every individual with a basic bank account
• Ensuring access to credit, insurance and risk management tools
• Building efficient and low-cost payment systems
• Promoting competition and innovation in financial services

The Committee emphasised that inclusion should go beyond account opening and focus on meaningful usage of financial services.

Key Recommendations on Banking Structure

One of the most influential contributions of the Nachiket Mor Committee was its recommendation to differentiate banking licences based on functions rather than size. It proposed the creation of specialised banks to address specific financial needs.
Major recommendations included:

• Introduction of payments banks to provide safe savings and payment services
• Introduction of small finance banks to focus on credit delivery to small businesses and low-income households
• Allowing greater entry of non-bank players to enhance competition

These recommendations reshaped India’s banking landscape by promoting diversity and specialisation.

Universal Electronic Bank Account

The Committee proposed that every Indian resident should have a Universal Electronic Bank Account. This account was envisaged as a basic, low-cost account linked to digital payment systems and government benefit transfers.
This recommendation directly influenced later financial inclusion initiatives by integrating banking access with technology and public service delivery.

Emphasis on Payments and Digital Infrastructure

The Nachiket Mor Committee highlighted the central role of payments in financial inclusion. It argued that affordable, reliable and ubiquitous payment systems were essential for reducing transaction costs and encouraging formalisation of the economy.
The Committee supported the development of interoperable digital payment infrastructure, which later became a cornerstone of India’s digital financial ecosystem.

Credit Access for Small Businesses

Small businesses often face significant barriers in accessing formal credit due to lack of collateral and documentation. The Committee recommended reforms to enable cash-flow-based lending, improved credit information systems and specialised institutions focused on small borrowers.
These recommendations aimed to integrate small enterprises into the formal financial system and support entrepreneurship and employment.

Regulatory Philosophy and Approach

The Committee advocated a shift from a bank-centric to a customer-centric regulatory framework. It emphasised proportional regulation, where regulatory requirements are aligned with the nature and risk profile of institutions.
This approach sought to balance financial stability with innovation, ensuring that inclusion efforts did not compromise systemic resilience.

Impact on Banking and Financial Reforms

Many of the Committee’s recommendations were subsequently adopted or influenced policy direction. The licensing of payments banks and small finance banks reflected its vision of differentiated banking.
The focus on digital payments, basic accounts and competition transformed the delivery of financial services and accelerated financial inclusion across the country.

Significance for the Indian Economy

By expanding access to formal financial services, the Nachiket Mor Committee’s recommendations contributed to:

• Greater savings mobilisation
• Improved efficiency of government transfers
• Reduced reliance on informal finance
• Enhanced participation of households and small businesses in economic activity