10.3.1 Economies all over the world have an amply evident presence of ‘informal sector activities’, which provide employment, occupation and earnings to a sizable number of persons. In developing countries that are undergoing different stages of development, such activities are inevitable. Information on the extent and nature of informal sector provide valuable inputs in policy-making for improving the conditions and growth of these units. In this connection, on the advice of National Statistical Commission, the RBI set up a Committee on Informal Financial Sector Statistics under the Chairmanship of Prof. P. Venkataramaiah with the main objective to critically examine the current status of statistics on the Informal Financial Sector and recommending a statistical system for instituting/improving collection of statistics on the sector.
10.3.2 The Committee identified two purposes for which data are to be collected on various aspects of Informal Financial Sector Statistics namely, (a) to measure the extent of informal credit and to understand the dynamics of informal financial markets, and (b) to facilitate generation of inputs for the compilation of National Accounts.
10.3.3 The Committee deliberated on two interrelated issues: (a) the definition of Informal Financial Sector Statistics, and (b) the type of institutions to be covered in this sector. Although there is no accurate definition of ‘informal sector’, the UN System of National Accounts (SNA) had broadly characterised the informal sector as consisting of units engaged in the production of goods and services with the primary objective of generating employment and incomes to the persons concerned. The production of units of the informal sector has the characteristics of a household enterprise. According to the classification adopted by the UN SNA, the production units owned by a single household or a group of households form part of the household sector as household enterprises or unincorporated enterprises.
10.3.4 For the purpose of identifying the informal financial sector enterprise, the Committee adopted the criterion of ‘incorporation’ as a guiding factor. That is, those that are ‘incorporated’ constitute the formal sector and those that are not so incorporated constitute the informal financial sector. The status of availability of data in respect of the informal financial sector, consisting of ‘unincorporated financial enterprises’, was examined and recommendations made for instituting and improving collection of statistics on this sector.
10.3.5 The structure of the informal financial market is extremely heterogeneous. This sector comprises partnership firms, sole proprietary concerns, own account enterprises, financial auxiliaries such as share broking firms, loan brokers, Non-Governmental Organisations (NGOs) helping Self-Help Groups (SHGs), share brokers and traders, multani shroffs, pawnbrokers, chettiars, etc.
10.3.6 Data on this segment are available neither regularly nor on an ad hoc basis except that certain pieces of information are collected and are available from various sources. Among different sources of statistical information on informal financial sector, the data from All-India Debt and Investment Survey (AIDIS) are available at decennial intervals and provide information on composition of assets, capital formation, and indebtedness of rural and urban households. A distinguishing feature of the AIDIS is the collection of loan-wise details such as credit agency (institutional and non-institutional), rate of interest, duration of loan, purpose, etc. The non-institutional agencies refer to the landlords, moneylenders, traders, relatives and friends, doctors, lawyers, etc. The data collected through AIDIS are used in the compilation of National Accounts.
10.3.7 The NSSO conducts quinquennial Enterprise Surveys in respect of the unorganised sector, covering directory and non-directory establishments and own account enterprises pertaining to the activities such as trade, transport, manufacturing, hotels and restaurants, storage and warehousing. The CSO conducts Enterprises Survey in respect of service enterprises in the unorganised sector. These surveys collect certain details on the number of enterprises, the value of output, the emoluments/wages and salaries paid, the value added, the place of location, and a few others.
10.3.8 Further, certain aspects of the informal financial sector are available from other sources, such as Basic Statistical Returns (BSR) on details of commercial banks credit (BSR-1) and ownership of deposits held with commercial banks (BSR-4). The financial auxiliaries covered under ‘finance activity’ relate to those of the informal financial sector namely, shroffs, moneylenders, stockbrokers, share brokers, dealers in bullion, etc. apart from those of formal sector.
10.3.9 The Non-Governmental Organisations (NGOs) and Self-Help Groups (SHGs) are another category of institutions working in the informal financial sector for implementing special programmes and formulating development policies. Most of these NGOs/ SHGs are credit-linked by banks. These organisations receive funds from Indian financial institutions as also from abroad. There are 1,14,775 SHGs credit-linked by banks as on 31 March, 2000, bringing an estimated 19 lakh poor families within the fold of formal banking services. NABARD publishes certain data on total credit extended by NABARD to these organisations. NABARD also publishes the State-wise number of SHGs being financed by banks.
10.3.10 Data collected in AIDIS, however, relate only to pure households and as such quasi-corporations of business households namely, partnerships, proprietary concerns, etc. in trade; transport and other activities are not covered. The survey collected details on the occupation of the head of the households and “finance, insurance, real estate and business” is one of the occupation groups. This information would provide the flow of funds within the informal sector from the financial to the real sector. But the data classified by this occupation group are not published by the NSSO. These surveys provide a truncated picture of the assets and liabilities and also exclude receipts and payments of the households.
10.3.11 Though the surveys of NSSO/CSO are supposed to have covered informal financial services but no data have been reported separately for this sector. The enterprise surveys do not collect loan-wise details such as interest rate and duration of the loan. As such, it is not feasible to measure the extent of financial accommodation and interest paid on these loans to the informal credit agencies.
10.3.12 The data collected and published by NABARD relate only to a particular aspect namely, the credit disbursed to NGOs and SHGs by banks and NABARD. As NGOs and SHGs intermediate a large amount of funds between banks and financial institutions and households, it is necessary to build a database of these organisations. Data on the operations of SHGs and NGOs are not available although banks submit a “Micro-credit progress Report” to RBI and NABARD providing certain particulars of credit extended by them to these NGOs under different schemes on a half-yearly basis.
Conclusions and Recommendations
10.3.13 The Commission recommends that:
The National Sample Survey Organisation (NSSO) should continue to conduct the All-India Debt and Investment Surveys (AIDIS) at decennial intervals. The coverage of the AIDIS needs to be improved by pooling the estimates of Central and State samples on the one hand and by increasing the sample size on the other. It is necessary that the RBI and the NSSO should have a close collaboration in the conduct of AIDIS.
The Central Statistical Organisation (CSO) should conduct Enterprise Surveys separately for financial service enterprises and provide data needed to derive value-added details as also the details of credit. The RBI should closely liaise with CSO and NSSO on the technical aspects of these surveys and ensure the coverage of all known household financial enterprises like, share brokers, multani shroffs, chettiars, marwari kayas and pawnbrokers and various kinds of moneylenders.
The details collected under various returns of RBI, in particular BSR-1 and BSR-4, should be tabulated against the informal financial sector to understand the extent of linkages between the formal and informal segments.
Financial data in respect of all NGOs and SHGs involved in micro financing should be collected. It is suggested that a sample survey of NGOs and SHGs should be undertaken by NABARD at quinquennial intervals. NABARD should also prescribe a half-yearly return to be submitted by all NGOs and SHGs.
Apart from nation-wide surveys, which provide macro-estimates, it is necessary to promote regional and micro-level studies on the informal financial sector activities considering the diversity across the regions.