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.”

Scope Of FINANCIAL INCLUSION

Extending basic banking facilities to unbanked & marginally banked Adopting both Branch and Branchless Banking Providing Financial Literacy for gainful utilization of services “ Need” creation among the target group Extending a combination of banking product No Frill Savings Account Micro Credit Micro Insurance Remittance Overdraft Spreading Financial Literacy Village Knowledge Centers Financial Literacy and Credit Counseling Centers

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 account KYC norms simplified Introduction of GCC OTS 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 linked 42 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. 3171 rural branches opened during the two year period. BCs deployed- tripled in 2 years from 33042 to 96828. Total No. of banking outlets gone up- from 54258 to 147534. 54 Million NFAs added. ICT based accounts -Substantial growth - Percentage of ICT accounts to total NFAs-increased from 25 % to 50%. Ascending trend in OD Accounts. 4.8 million KCC and about 1 Million GCC added. 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 stories Andhra 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 migrants The 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