WELCOME TO PRESENTATION ON FINANCIAL INCLUSION NABARD RAJASTHAN REGIONALOFFICE JAIPUR

Structure of Presentation What is Financial Inclusion – various definitions – meaning Why Financial Inclusion – National and State scenario How to go about it- Various options Support available from NABARD Few Initiatives taken by banks

What is Financial Inclusion “the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.” --- C Rangarajan “the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.” --- C Rangarajan

What is Financial Inclusion “. ” “ expanding access to financial services, such as payments services, savings products, insurance products, and inflation-protected pensions.. ” – Raghuram Committee – Raghuram Committee on Financial Sector Reforms (CFSR)

Financial Inclusion means   Basic “no frills” bank account for receiving payments /savings / deposits   Small loan/overdraft facilities   Money transfer facilities   Insurance (life / non-life) services   Financial advisory services

What is Financial Inclusion While financial inclusion, in the narrow sense, may be achieved to some extent by offering any one of these financial services, the objective of “Comprehensive Financial Inclusion” would be to provide a holistic set of financial services.

What is Financial Inclusion – few questions Basis - whether individual, every adult family member/household Basis - whether individual, every adult family member/household Coverage – only rural or urban population is also to be ‘included’ Coverage – only rural or urban population is also to be ‘included’ What about ‘inclusion of segments like women, minorities’

Why Financial Inclusion Directive Principles – equal opportunities Inclusive growth Economic development Social development and Business opportunity Business opportunity

Financial Inclusion – Steps taken by Banking Industry in India Nationalisation of Banks Introduction of Lead Bank Scheme Introduction of Priority Sector Norms Introduction of Service Area Concept Adoption of Villages by Bank Branches Formation of Regional Rural Banks Strengthening of Cooperatives

Banking Network in India Rural and Semi-urban BranchesRural and Semi-urban Branches - Commercial Banks= 33,000 - Regional Rural Banks= 14,500 - Cooperatives= 106,000 Total= 153,500 Avg. No. of villages served per branch – 4Avg. No. of villages served per branch – 4 Is the distribution equitable ? ? Is the distribution equitable ? ? 90% villages don’t have a bank branch within 5 km radius

Extent of Financial Exclusion - India 51.4% of 89.3 million farmer households are excluded from both formal/ informal sources Only 27% of the total farmer households, access formal sources of credit 66% marginal farmer households excluded (NSSO data 59 th round )

Financial Exclusion in Rajasthan 47.6% of farmer households are excluded from both formal / informal sources Outreach of formal financial institutions is around 35% households SHG / MFI – outreach to about 25% families in rural areas but cater to only limited financial needs

Gradation of Financial Exclusion Core Exclusion : Who operate their financial affairs outside the regulated financial system Limited Access : May have a basic bank account but poor financial habits and little advice Though Included but using inappropriate products

Reasons for Financial Exclusion Physical distance Mutual disbelief – poor are not bankable, on other side banks and other FIs are not for us Lack of appropriate products/services Lack of awareness, financial illiteracy Processes too tedious and complicated and AAJ TIME NAHI HAI/STAFF CHHUTTI PAR HAI/ CLOSING HAI, KAL AANA -”. AAJ TIME NAHI HAI/STAFF CHHUTTI PAR HAI/ CLOSING HAI, KAL AANA -”.

National Rural Financial Inclusion Plan (NRFIP) Provide comprehensive financial services to atleast 50% (55.77 million) of the excluded rural cultivator and non- cultivator households across different states by 2012 through rural / semi- urban branches of CBs & RRBs - remaining households by 2015 Semi-urban / rural branches of CBs / RRBs to cover 250 new cultivator and non-cultivator per branch per annum

State Rural Financial Inclusion Plan (SRFIP) DLCCs at district level to draw block / village-wise maps of rural households not having access to formal credit sources Thereafter, a State Level Financial Inclusion Plan to be prepared jointly by NABARD and SLBC to cover minimum 50% currently excluded households by 2012 The Plan to be allocated institution-wise among CBs & RRBs. Cooperative Banks, NBFCs, MFIs to take on the self set targets of financial inclusion

Financial Inclusion – how to go about it Traditional approach Improvement in existing system – reintroduce Service area approach to bring in accountability Improvement in existing system – reintroduce Service area approach to bring in accountability Extending network - using existing extension setups like Farmers’ clubs, KVKs Extending network - using existing extension setups like Farmers’ clubs, KVKs Evolving new models of effective outreach–Business Facilitators / Business Correspondents Evolving new models of effective outreach–Business Facilitators / Business Correspondents

Financial Inclusion – how to go about it Traditional approach Community based approach like SHGs, JLGs Improving credit literacy through camps Community based approach like SHGs, JLGs Improving credit literacy through camps Introduce “Only Field Work Days (OFDs) in rural/semi urban branches Introduce “Only Field Work Days (OFDs) in rural/semi urban branches Target approach as per NRFIP Target approach as per NRFIP

Financial Inclusion – how to go about it New approach Leveraging on technology based solutions Leveraging on technology based solutions Public Private Partnership mode – take new players on board Public Private Partnership mode – take new players on board

Efforts initiated for FI in Rajasthan Adoption of 6 pilot districts for 100% financial inclusion Implementation of Bhamashah Yojna by GOR SHG- Bank Linkage programme Supported MFIs to help them reach out to poor Mobile phone based banking

Financial Inclusion – Efforts of NABARD Two funds namely Financial Inclusion & Promotion Fund (FIF) and Financial Inclusion Technology Fund (FITF), each having initial corpus of Rs. 500 crore have been constituted by the GOI and placed with NABARD Two funds namely Financial Inclusion & Promotion Fund (FIF) and Financial Inclusion Technology Fund (FITF), each having initial corpus of Rs. 500 crore have been constituted by the GOI and placed with NABARD Each fund is to be equally contributed by GOI, RBI and NABARD with annual accretions Each fund is to be equally contributed by GOI, RBI and NABARD with annual accretions Eligible organisations to avail the funds for greater financial inclusion Eligible organisations to avail the funds for greater financial inclusion

Financial Inclusion Fund (FIF) Eligible Purposes : Funding support for capacity building inputs to BCs / BFs Funding support for capacity building inputs to BCs / BFs Providing promotional support to institutions such as Resource Centres, Farmers Service Centres, RUDSETIs to enable them to provide improved technical and financial services (including counseling) Providing promotional support to institutions such as Resource Centres, Farmers Service Centres, RUDSETIs to enable them to provide improved technical and financial services (including counseling)

Financial Inclusion Promotion Technology Fund (FITF) Encouraging user friendly technology solutions Providing financial support to technological solutions aimed at providing affordable financial services to the disadvantaged sections of the society Creating a common technology infrastructure with comprehensive credit information Creating a common technology infrastructure with comprehensive credit information Funding support to technologies facilitating the documentation for processing of loans Funding support to technologies facilitating the documentation for processing of loans Providing viability gap / pilot project funding for unproven but potential technological interventions

Eligible Institutions – FIF & FITF CBs, RRBs and Cooperative Banks NGOs, MFIs, SHGs, Farmers Clubs, Local Level Associations, etc. Training and Research Organisations, Academic Institutions, Universities, etc. Service providers like Insurance Companies (micro insurance), Post Offices, Railways, etc. Any other organisation whose objectives are in conformity with the overall objectives of FIF

Financial Inclusion Initiatives by Banks Set up 100 centres in agri-lending branches for agriculture counseling – SBI Set up 100 centres in agri-lending branches for agriculture counseling – SBI Use of handheld devices and bio-metric cards in a village of Tamilnadu – IOB, UBI Use of handheld devices and bio-metric cards in a village of Tamilnadu – IOB, UBI Introduce 198 Village Knowledge Centre for imparting knowledge to the farmers – UBI, Dena Bank Introduce 198 Village Knowledge Centre for imparting knowledge to the farmers – UBI, Dena Bank Introduced “Union Mitr” Scheme” (90) for providing financial education and debt counseling services to rural population, free of cost – UBI Introduced “Union Mitr” Scheme” (90) for providing financial education and debt counseling services to rural population, free of cost – UBI Introduced Dena Bhoomiheen Kisan Credit Card Scheme(Rs.25,000) for Tenant farmers, oral lessees, share croppers and landless labourers – Dena Bank Introduced Dena Bhoomiheen Kisan Credit Card Scheme(Rs.25,000) for Tenant farmers, oral lessees, share croppers and landless labourers – Dena Bank

FINANCIAL INCLUSION TOGETHER WE CAN AND WE WILL - - -!