Financial Inclusion : The Task

Gourav Kumar Vani

Financial Inclusion - Definition

Delivery of financial services at an affordable cost to vast sections of disadvantaged and low income groups

“The process of ensuring access to

appropriate financial products and

services needed by vulnerable

groups such as weaker sections and

low income groups at an affordable

cost in a fair and transparent

manner by mainstream Institutional

players.”

No frills account?

An account with ‘zero’or minimum balancewith maximum balance of Rs 50,000/-at any given point in time and total credit in a year not exceeding Rs 1,00,000/-.

Benefits of Greater FI

For the common man–escape from the clutches of money lenders; sending / receiving remittances; no need to hold savings in cash etc.

For the banks–achieving access to a large untapped pool of customers.

For the Govt.-ensuring flow of aid / grants to the targeted beneficiary.

For the RBI -spread of banking culture and extension of the reach of formal financial system.

Continued………

To achieve the growth with equity. Get rid of poverty. To attract global market players to

our country. To increase the employment and

business opportunity. To baring more transparency in the

system.

A few statistics

51.4% of farmer households financially excluded.

73%: Farmer households having no access to formal sources of credit.

64%:Share of Central, Eastern and North Eastern regions in the total financially excluded farmer households in the country

Continued …….. India has currently the second

highest number of financially excluded households in the world.

Approximately, 40% of India’s population has bank accounts , and only about 10% have any kind of life insurance cover, while a meager .6% has non-life insurance cover.

Why Financial Inclusion ?

High transactions costs of borrowers

High transactions costs of savers

High transactions costs of banks

High risk cost

Inappropriate products

Who are excluded ? Marginal Farmers Landless Farmers Self Employed Urban slum developers Migrants Minorities Social excluded groups Senior citizens Women

Measures for promoting financial inclusion

Products

No frill accountKYC norms simplifiedIntroduction of GCCOTS for overdue loans upto Rs.25,000/-KCC

Measures for promoting financial inclusion

Use of intermediaries

Linkage of SHGs with bank

29 lakh SHGs credit linked42 million families covered

Linkage of MFIs with banks

Business facilitators and correspondence model.

Measures for promoting financial inclusion

Others

IT solution for financial inclusion

Credit counseling and financial education

Revamping of RRBs and cooperative banks

Funds for Financial Inclusion

Micro Finance Development and Equity Fund

Financial Inclusion Fund for Development and Promotional Interventions

Financial Inclusion Technology Fund to meet cost of technology

Meeting the expectations of poor from financial inclusion requires taking into account their

•Seasonal inflow of income from agricultural and rural occupations •Migration from one place to another •Seasonal/ irregular work availability and income •Security and safety of deposits•Low transaction cost •Minimum paper work•Frequent deposits in smaller amounts •Quick and easy access to their savings in times of needs•Products suitability to income and consumption pattern in villages

FIPs- PERFORMANCE ANALYSIS

•Completed 2 years of implementation of Board approved self set FIPs in March 2012 Completed 2 years of implementation of Board approved self set FIPs in March 2012.

•317 rural branches opened during last two years. •BC’s deployed tripled in last two years from 33042 to 96828.•Total number of banking outlets gone up from 54258 to 147354.•54 million No Frill Accounts (NFAs) added.

•ICT based accounts-substantial growth-% of total ICT accounts from total NFA accounts increased from 25 to 50.

•Ascending trend in over draft accounts •4.8 million KCC and 1 million GCC..

FIP AT GLANCE

Particulars

Year ended Mar 10

Year ended Mar 12

Progress-April 10 - Mar 12

No. of BCs/BC Agents Deployed 33042 96828 63786

Banking Outlets through Branches 21475 24701 3226

Banking Outlets through BCs 32684 120355 87671

Banking Outlets-Through other Modes 99 2478 2379

Total Banking Outlets 54258 147534 93276

No Frill A/Cs (No. in Millions) 49.33 103.21 53.88

Overdraft- No Frill A/Cs (No. in Millions) 0.13 1.52 1.39

BC- ICT Based A/Cs (No. in Millions) 12.54 52.07 39.53

EBT A/Cs-through BCs (No. in Millions) 7.48 21.76 14.28

KCC(No. in Millions) 17.63 22.34 4.71

GCC(No. in Millions) .45 1.27 .82

Road map for villages with >2000 population

•At least one banking model in all unbanked villages with population >2000 through branch/BC/ other models.

•Roadmap prepared for opening of bank outelets till march 2012—744141 villages identified and allotted among all banks.

•Progress up to march 2012- Banking outlet opened in 74199 villages,2493 branches,69374 BCs,2332 other models.

•Outlets opened in all 22850 villages allotted to RRBs,,761 branches,20985 BCs ,1023 other modes..

Financial Inclusion : Challenges

Holistic approach( problem with Adhar card )

Viability(low population) Scalability(no brick and mortar

structure) Adoption of technology Use of intermediate

agencies(Banking correspondents).

Continued ..• Lack of co-ordination

• Effective delivery mechanism- still being experimented.

• Appropriate business model yet to evolve-availability of suitable products .

• ICT based BC model –yet to stabilize.

Select success storiesAndhra Pradesh

Pilot project in six districts of Warangal for disbursement of SSP and NREGS benefits through BCs with the use of smart cards and mobile technology. Launched by Rural Development Department of A.P. Govt.Involving 6 banks.Project coordinated by MIS provided to Govt. by IDRBT.

Project now being up-scaled to cover the entire State.

RBI.

Dharavi(Maharashtra)

Dharavi is Asia’s largest slum with 3-3.5 lakh workers.

Smart card based banking introduced by Indian Bank to provide doorstep-banking for the slum dwellers, many of whom are migrantsThe facility has enabled workers to save and migrants to send remittances easily and reliably.Life and health insurance are also being offered.

The model is now being extended to Guntur town (AP) and Tharamani (Chennai).

Some innovative steps

PragatiGramin Bank,Bellary: Loans under DRI scheme disbursed to 260 small vendors.

MannDeshiMahilaBank, Mahaswad(Satara):‘Business school on Wheels’ to enable poor women in rural areas to become entrepreneurs.

SBI Tiny Card:Tech. based FI in Aizawl.

PNB:‘BhamashahProject’for rural women in Rajasthan.

Thank you