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A. Santhi Kumari, IAS
Principal Secretary to Chief Minister
Govt of Telangana
Financial Inclusion
1
Definition
“Process of ensuring access to financial services and
timely & adequate credit where needed by vulnerable
groups such as weaker sections and low income group
at affordable cost”.
-RBI
Scope of services
o Bank account/checking account
o Savings
o Credit
o Remittance- payments
o Insurance-
o Mortgage / entrepreneurial credit
o Financial advisory services 2
Who needs it most ?
People below poverty line
Marginalised sections - Disabled, single women,
SC/ST
Agricultural – small & marginal, tenant farmers
Land less agricultural labour.
Industrial – unorganised sector
Old people
Unemployed
Slum dwellers/ migrant population
3
Why Financial Inclusion ?
Macro perspective
Economic Objective
oMobilisation of Savings
oLarger financial Market.
Social Objectives
o Sustainable Livelihood
Individual perspective
oAccess to financial services on fair terms – cost,
repayment , transparent processes.
oCredibile / reliable institutions –guaranteed service.
4
What Financial Products for Poor ?
5
Govt Initiatives so far 1955 State Bank of India created
1969 19 Commercial Banks Nationalized,
1970 Lead Bank Scheme introduced
1975 Regional Rural Bank set up
1980 6 more Commercial Banks nationalized
1990 Micro finance institutions
1992 SHG - Bank Linkage Programme
2001 Kisan Credit Card (KCC) introduced
2010 Swabhiman Program
2013 Pradhan Mantri Jan Dhan Yojana (PMJDY)
2015 Specialised banks – payment banks & SFB
2015 MUDRA BANK
However, efforts to achieve financial inclusion met with limited success.
6
Key features of Micro financial service
Zero balance , No frills accounts
Simplified KYC.
Loan is given to an unregistered group ( SHG ).
Upto Rs 5 Lakhs; SHG loans are without collateral.
They are uniquely coded to facilitate monitoring.
Interest subvention schemes – central Govt/ state
govt.
MUDRA bank for- small entrepreneurial loans
Refinance to Micro finance companies, RRBs &
MUDRA by NABARD & SIDBI.
7
India’s performance
among emerging nations
FI – Performance Comparison
8
FI – Performance Comparison
9
FI – Performance Comparison
10
FI – Performance Comparison
11
Domestic scenario
13
Number of bank branches opened
12
FI in India – Bank penetration
14
15
Banking penetration –key analytics
Rural population in India – 83.3 cr 69%
Bank branches in rural areas 37,953 37%
Urban population -37.7 cr 31 %
Bank branches in urban areas - 64,390 63 %
Trends
No of branches added in Metros, Urban and Semi
urban areas ( 2006-13 ) – 26,281 .
This represents about 80 % of total new branches
opened in that period.
No of branches added in rural areas – 7,381 20 %
17
18
19
FI in India – Census 2011
16
FI in India – CRISIL Inclusix Index
21
FI in India – NSSO Survey
20
National scenario in a nut shell
120 cr population.
1 lakh bank branches & 1.14 lk ATM network.
1.4 lk villages penetrated by FI s.
18 + 20 cr bank accounts & 43 % dormant accounts
50 % people financially included.
About 50 % of credit needs being met by formal lending sources.
Rural – Urban service coverage has wide disparities.
Spread banking network more extensively, take up massive financial literacy , enhance credit delivery through FIs– so as to ensure that more and more people participate in mainstream economy .
Recent models in India
1. SHG bank linkage
2. Microfinance companies – NBFCs and NGOs
Many models prevalent in India
SHG Bank Linkage;
Streenidhi Credit Cooperative Federation Ltd
3. PMJDY
22
SHG - Bank Linkage
SHGs are being
provided with credit by
service area banks as per
Micro Credit Plans of
SHGs.
Vaddi leni runalu (VLR)
scheme - Telangana
23
SHG Bank Linkage
24
SHG – Bank Linkage
25
Streenidhi Credit Cooperative Federation
–AP & Telangana
Promoted by the Government and the Mandal Samkahyas to supplement credit flow from banking sector
Loan application through IVRS at the SHG level; disbursement through e-FMS module directly to the SHG account. Faster loan disbursement (with 48 hrs)
Lower interest rate of 13% compared to 26 % & above of MFIs Lower operating cost upto 1% of the working capital
Other Government funds like SCSP / TSP disbursed using this
system.
26
Streenidhi Bank
S.
No Particulars 2014-15 2015-16
Cumulative
as on
25.10.2016
a. Loan Amount disbursed (Rs. Cr.) 702.34 1152.20 2909.64
b. No of MSs/TLFs availed loan 443 456 473
c. No of VOs/SLFs availed loan 9242 12,064 15,426
d. No of SHGs availed loan 88,034 1,27,091 2,35,434
e. No of SHG members availed loan 3,36,631 4,55,189 13,45,022
27
Microfinance Institutions
Institutions offering micro
credit to the areas where
there is very less / no access
to commercial banks.
223 MFIs exist in India.
28 MFI has clientele of
more than 2.5 lakhs; 45 b/w
50,000 to 2.5 lakhs and rest
less than 50K
28
Growth of MFI
29
PMJDY - Benefits
Launched in Aug 2014
Interest on deposit.
Accidental insurance cover of Rs.1.00 lac
No minimum balance required.
Life insurance cover of Rs.30,000/-
Easy Transfer of money across India
Accidental Insurance Cover, RuPay Debit Card must be used at
least once in 45 days.
Overdraft facility upto Rs.5000/- is available in only one account
per household, preferably lady of the household.
31
Pradhan Mantri Jan Dhan Yojana - STATUS (All figures in Crores)
Bank Name Number of Accounts
No of
Rupay
Cards
Balance in
Accounts
% of Zero
Balance
Accounts Rural Urban Total
Public
Sector Bank 11.39 8.9 20.28 15.69 36074.62 23.47
Regional
Rural Bank 3.70 0.60 4.30 2.95 7621.64 20.31
Private
Banks 0.53 0.34 0.86 0.80 1606.22 36.20
Total 15.62 9.83 25.45 19.44 45302.48 23.37
32
Challenges
Poverty, illiteracy and vast geography.
Inadequate banking penetration - distance.
Complex procedures for availing financial services.
Not embracing technology based models in a big way.
Lack of credible , proximate institutions – limitations
in Post office/Micro finance institutions
Financial illiteracy.
Politicization – loan waivers
34
FI – way forward
Development of appropriate delivery model for different geographical regions
oEmbrace technology in a big way
o Set up appropriate institutions and network
oDevelop easy to access services/ products, people
friendly service architecture
oNurture repayment culture.
oPromote Financial literacy
35
Thank you !!
36