Banking Inclusion

8/3/2019 Banking Inclusion

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THE CONTEMPORARY STATE

OF AFFAIRS OF BANKING

INCLUSION IN INDIA

Submitted by: Krishnashis Chakraborty

Roll: 40911, No: 0603434

A Study on


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CONTENTS

Objective of the study, Sources of information, Limitations.

Status of Banking Inclusion in India.

Indicators for India and their interpretation.

Recent initiatives taken by RBI

Recommendations.


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Key Objectives of the Study:

To explore the present state of affairs of Banking Inclusion in India.

To evolve strategies devised to achieve Banking Inclusion.

Research Methodology:

The study is descriptive in nature.


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Source of Data:

For the particular study secondary data has been used. The

secondary data has been collected from internet, magazines,

periodicals etc related to the Indian banking sector.

Limitations:

The study might have certain limitations owing to

Time constraint.

Lack of requisite study materials and data associated with the

study.


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Banking Inclusion:

Banking Inclusion means bringing the population of a country

under the purview of banking. The primary motive of bankinginclusion is to extend the reach of the financial sector to all those

sections of the society which were ignored in the past and also to

the various geographical regions which were overlooked.


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STATUS OF BANKING INCLUSION IN INDIA

RBI studies show that only 54 per cent adults in India have a bank account.

Of the 6,00,000 villages in India, approximately only 50,000 have access

to finance.

India has the highest number of households (145million) excluded frombanking.

Only 40 percent of Indians have access to banking facilities.

44.9 per cent of the Indian earners had bank account in the year 2007. Ofthis, only 38 per cent of paid workers in villages had accounts comparedto 62 per cent of those in urban space.


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Though the total number of bank branches have increased from 8,700 atthe time of nationalisation in 1969 to 85,300 now, rural areas have only32,000 branches.

According to the data from the National Sample Survey Organisation,45.9 million farmer households out of a total of 89.3 million, do notaccess credit.

Technology and MGNREGA have combined to boost financial inclusionin rural areas. According to the Ministry of Rural Development, 69 per

cent of over Rs 75,000 crore released to the state governments underMGNREGA has been paid to workers through banks.

The scheme has resulted in the financial inclusion of more than 8.6 croreworkers who have opened bank or post office accounts.


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At end-March 2010, 50.6 million no-frills accounts were opened by thebanking system.

By November 2008, out of the 342 districts identified, 155 districts inthe country were declared to have achieved 100% financialinclusion.

Recently, 431 districts have been identified by the State-Level BankersCommittee (SLBC) for 100 per cent financial inclusion across variousStates / Union Territories (UT) and the target has reportedly been met inrespect of 204 districts of 21 States and 7 UTs.


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People Who Are Excluded:

The financially excluded sections largely comprise marginal

farmers, landless labourers, urban slum dwellers, migrants, socially

excluded groups, senior citizens etc. While there are pockets oflarge excluded population in all parts of the country, the North

East, Eastern and Central regions contain most of the financially

excluded population.


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Reasons for Exclusion: In remote, hilly and sparsely populated areas with poor infrastructure,

physical access itself acts as a deterrent.

Lack of awareness, low incomes/assets, social exclusion, illiteracy act as

barriers. Distance from branch, branch timings, cumbersome documentation and

procedures, unsuitable products, language, staff attitudes etc.

Lack of legal identity like voter id, driving license, birth certificates,employment identity card etc. acts as barriers especially for migrants and

slum dwellers.

The idea of poor people that banks are only for the rich people.


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INDICATORS FOR INDIA


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Branches per 100,000 people:

6

6.1

6.2

6.3

6.4

6.5

6.6

6.7

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008


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Interpretation:

The number of branches per 100,000 people in India from the year2001 to 2008 has been hovering around 6.42 to 6.6. The number of

branches has increased over the years but the rate of growth is very

slow. India in order to achieve financial inclusion vis--vis banking

inclusion needs to increase the number of bank branches and

should try to reach near the OECD benchmark for high incomecountries.


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Bank branches per 1000 sq km:

20

21

22

23

24

25

26



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Interpretation:

The number of bank branches per 1000 sq km was 22.18 in the year

2001. Since then the number of bank branches per 1000 sq km has

seen an increase and in the year 2008, the number of bank branches

per 1000 sq km has reached to 25.49. The growth in the number of

bank branches per 1000 sq km over the last 8 years show that both

the RBI and the Govt. of India are taking initiatives to achieve

banking inclusion.


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Population per Bank Branch:


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Interpretation:

The total population per bank branch has come down from 16000 in

the year 2007 to 14000 in the year 2010. In rural areas the population

per bank branch has come down from 17,800 in the year 2007 to16,100 in the year 2010 while in urban areas the population per ban

bank branch has come down from 12,700 in the year 2007 to 10,400

in the year 2010. The population in each bank branch irrespective of

whether in rural or urban areas has shown a steady decrease. This is

due to the fact that more and more bank branches are now being

opened in both rural and urban areas.


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Deposit accounts per 1000 people:

390

400

410

420

430

440

450

460

470

480



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Interpretation:

The deposit accounts per 1000 people in India have been hovering

around 41.6% in 2001 to 46.74% in 2008. In fact it has seen anincrease from 41% to 46% but is still very low. This is the main

indicator of banking inclusion and this data clearly depicts the

picture of banking inclusion in India. In order to achieve banking

inclusion India will have work really hard on this aspect alone and

at this moment India is really lagging behind.


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ATMs per 100,000 people:

0

0.5

1

1.5

2

2.5

3

3.5

FY2005 FY2006 FY2007 FY2008


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Interpretation:

The number of ATMs per 100,000 people in India was 1.63 in the

year 2005. Since then the number of ATMs per 100,000 people hasseen an increase over the years and in the year 2008 the number of

ATMs has increased to 3.28.According to RBI, the number of

ATMs in the country as on May 31, 2009, stood at 44,857. This is a

healthy addition of about 10,357 ATMs compared to FY 08 and has

translated into a 30% growth in units.


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ATMs per 1000 sq km:

0

2

4

6

8

10

12

14

FY2005 FY2006 FY2007 FY2008


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Interpretation:

The number of ATMs per 1000 sq km rose from 5.93 in the year

2005 to 12.68 in the year 2008. The growth of ATMs per 1000 sq km

has been a steady one and this is yet another area which needs lotsof improvement to achieve banking inclusion. This step of

increasing the number of ATMs is indicative of the fact that RBI is

seriously looking forward to achieve banking inclusion. More and

more people will be inclined to open bank accounts when they will

find that there are ATMs available in their place to facilitate

withdrawal of money. More and more number of ATMs in various

locations will tempt people to open bank accounts.


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Population per ATM:


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Interpretation:

The total population per ATM has come down considerably over

the years. The total population per ATM has come down from

43000 in the year 2007 to 19,700 in the year 2010. In rural areas thepopulation per ATM has come down from 1, 25,600 in the year 2007

to 43,500 in the year 2010 while in urban areas the population has

come down from 15,900 in the year 2007 to 8,100 in the year 2010.

This clearly depicts the increase in the number of ATMs over the

years in both rural and urban areas and this increase in ATMs is

very much instrumental in achieving banking inclusion.


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Percentage share of ATMs at different centres:


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Interpretation:

The percentage share of ATMs over the last 4 years have increased

both in rural and semi urban areas while it has decreased in urbanand metropolitan centres. This gives a clear indication that the

Govt. and RBI is giving due importance to the rural people and

trying them to bring under the umbrella of banking. By increasing

the number of ATMs, RBI is definitely trying to lure the rural and

semi urban people to open bank accounts.


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Recent Initiatives by RBI: Banks have been asked to voluntarily make available a no-frills account.

Banks have been asked to provide the printed bank materials in regionallanguages.

Very recently, RBI has asked banks to ensure that the people they recruithave compassion for the underprivileged and are willing to work in ruralIndia as its focus is now on achieving 100% financial inclusion. Banksshould not only select the best person but also the appropriate people forthe job.

In case of PSU banks, it is now mandatory that all employees are postedin rural branches at least for two years.


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Know Your Customer (KYC) procedures have been simplified for lowincome groups.

Introducing technology based products and services.

Mobile banking.

Organizing Financial Literacy Programme.

Use of intermediaries etc.


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Recommendations: In order to achieve banking inclusion, more and more number of bank

branches should be opened all over India and more emphasis should begiven to the rural and semi urban areas because majority of the unbankedpopulation reside in those areas.

The banks in order to open new branches in rural and remote areas andto tempt the people living therein to open bank accounts should forgelinks with the local community, the Gao Panchayats and also with the SelfHelp Groups.

Banks should open more and more numbers of no-frills accounts.

Banks should give wide publicity to the facility of no frills account.

More emphasis should be given on the use of technology.


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Banks should organize more and more number of financial literacyprograms to impart financial literacy to the people.

The number of ATMs should be increased throughout the country.

The forms of opening savings accounts, withdrawal and pay-in-slipsshould be printed in local language. This will render understanding to therural people as they are not proficient in any other language.

Banks should take special care in recruiting people who are willing towork in the rural areas and are compassionate to the poor and

unprivileged.

Banks should increase the number of Business Correspondents in orderact as intermediary between them and the rural people.


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THANK YOU

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Banking Inclusion