1. FINANCIAL INCLUSION PRIORITY SECTOR & LEAD BANK DIVISION ATMARAM HOUSE, 1, TOLSTOY MARG NEW DELHI 110 001 FINANCIAL INCLUSION CELL College of Agricultural Banking, RBI, Pune & CREDIT COUNSELLING 16 th January 2009

2. What is the magnitude of Financial Exclusion in India ? 2

3. Rural - 60 % Urban - 39 % Exclusion from the payment system - Exclusion from the credit NSSO Survey 59 th Round : 73% of farm households have no access to formal sources of credit;  proportion is higher in North Eastern(95%), Eastern(81%) and Central Region(77%) 3

4. Rural Urban Divide Rural Poor – Income Level Share in economic growth Percolation of benefits Urban Poor – Income level Share in economic growth Percolation of benefits 4 Consequences?

5. We are we assaulting at? 5

6. What are the Essentials of Financial Inclusion? 6

7. Access to payment systems Delivery of Banking & Financial Services Timings & other conveniences Cost Product Range Education - Health, Insurance, equity, etc. Penetration to deepest geographies Segmented approach Functional Financial Inclusion 7

8. What is BoP? Why is it in focus? Where the future lies? Where are all roads leading to? Financial Inclusion - A burden or an opportunity? 8 Vast opportunities exist, where?

9. 9 At the bottom of the pyramid In deepest geographies At last mile stone In remote corners In unreached villages Across untraveled roads Across underprivileged segments The Opportunity lies :-

10. BANK ACCOUNT : KEY TO FINANCIAL INCLUSION The first step:- : Awareness Opening of Account : Empowerment Smart Card : Providing Identity Look beyond No Frill Accounts  Incentive to save  transactions - banking relationship  small credit facility creation of credit history and transparency in credit expansion.  Customer becomes a productive assets of the society  Leading to inclusive growth

11. Initiatives taken by GOI & RBI 11 Nationalization of RBI Nationalization of Imperial Bank of India Social control of commercial Banks Nationalization of commercial Banks Branch Extension Introduction of Lead Bank Scheme Regional Rural Banks Priority Sector Credit Other Govt. Schemes Creation of NABARD SHG Bank Linkage Pilot Introduction of KCC Specialized Agri Finance Branches Financial Inclusion No Frill Accounts Overdraft GCC BF/BC Model

12. CHALLENGES IN FINANCIAL INCLUSION Enormous Tasks Used Target Groups Vast Geographical Spread Small Value and High Transaction cost Limited Outreach Technology Infrastructure-Technological, Administrative, Organizational Business Model Products 12

13. WHAT limits access to financial services? Most Frequent Low income & literacy levels Nil or low savings Lack of awareness Lack of assets Unemployment/Under Employment Use of inappropriate products Financial illiteracy Poor financial habits Inadequacy of financial infrastructure Less Frequent Indigenous/ethnic issues Geographical remoteness Lack of time Psychological / disability issues Feeling of being excluded Lack of PC/Internet Access Availability of alternative products and suppliers THUS SOCIAL EXCLUSION IS AN INTEGRAL PART OF FINANCIAL EXCLUSION

14. How to achieve financial inclusion? TECHNLOGY Low Cost Convenient Accessible GOVT. SUPPORT Active /Direct support of Central/ State Govt. in building adequate infrastructure Technological Exp. Up-Scaling Exp. INSTITUTIO NAL SUPPORT Civic Society Institutions like PRIs Micro finance Institutions NGOs/SHGs FINANCIAL EDUCATION Credit Counseling for improving prospects of repayment of loans as well as use of various financial services HOW TO ACHIEVE FINANCIAL INCLUSION ?

15. Technology- An Essential Component  Smart Card (to be provided to every customer)  Point of Sales Machines (PoS) for reading and writing Smart Cards for transactions 15  Laptop with webcam, biometric devices- for capturing the account opening details, thumb impression, photo and account details Innovation becomes fruitful when it reaches the masses. 15

16. Technology plays an important role in achieving financial inclusion by allowing branchless banking at the doorstep of clients in remote/low population density areas. Usage of Biometric smart cards/Mobile technology to increase the outreach and to reach the Last Mile Villages. Technology should help transact basic banking transaction in a :  Convenient & Hassle free manner : easy to use  Cost Effective : credit delivery at lower operational cost  Accessible : at doorstep of customer 16 TECHNOLOGY : AN ENABLER

17. Smart Card (to be provided to every Customer) and Point of Sales Machines (PoS) for reading and writing Smart Cards for transactions Laptop with webcam, biometric devices - for capturing the account opening details, thumb impression, photo and account details 17 TECHNOLOGY : AN ENABLER Web Camera for Photograph Optical Biometric scanner for Fingerprints Pad for Signature capturing Battery Power back-up for undisrupted enrolment

18. Process Flow – Enrolments Account opening forms are filled on the field by Agents. Post sign-off from the Bank, the forms are sent for Data-entry to Service Provider. Cards are personalized and accounts are opened. Biometric(finger print) of the customers are captured and cards are distributed by Agents.

19. Business Process - Transactions Customer Agent Transaction Data Bank Systems Service Provider’s Systems Cash Instant Receipt Transaction stored on card Transaction Data transferred via phone lines Updates for Customer Cash/ Bank Branch

20. VARIOUS PROCESSES OF TRANSACTION Pre –Enrolment Process Enrolment Process Enrolment ProcessTransaction Process

21. Financial INclusion : An Opportunity exists POTENTIAL EXTISTS FOR….. Investment in agri. & allied activities Contract farming Growth in newer activities such as horticulture, floriculture, organic farming, Supply chain activities like sorting, grading, storage, etc Increasing rural incomes leading to opportunities for mass consumption Higher consumer financing in rural markets Huge opportunities in insurance to cover all kinds of risks faced by farmers. Financing the poor is?

22. Functional Financial Inclusion Janmitra Rickshaw Project Integrated Development Project at Punpun-Patna Bhamashah Financial Empowerment Project-for BPL families Common Service Centre Project- Financing VLEs Mother Dairy Tie up Project NREGA Projects PROJECT FOR CONSTRUCTION WORKERS AT BANGALORE 22

23. Rickshaw Projects: Sustainable Community Development Economic Impact  Enables rickshaw pullers to own the rickshaws  Access to basic financial services which raises their income levels and hence the standard of living  Improved sales for local businesses and corporations as they can advertise at the back space Social Impact  Better health facilities  Better law and order to the community  Positive work environment 23

24. Financial Literacy & Credit Counseling Centres RBI advised SLBC – FLCC at one district Objectives- Counseling through face to face interaction Financial Education - financial products & services Benefits-Savings, Managing Money, Credit Counseling and Debt Management Helping distressed borrowers FLCC setup by PNB – Punjab – 7, Haryana – 2 Warning 24

25. Organizational/Administrative Setup Staffing Resources- Human, Technological Training MIS Monitoring Publicity 25

26. HAPPENINGS Promoting own Bank’s products As an additional duties No formal training Affinity to the parents Bank 26

27. Towards better tomorrow Dr. K. C. Chakrabarty, CMD along with Sh. Pawan Kumar Bansal (MoS for Finance, GoI), at the inauguration of FLCC at Chandigarh on April 3, 2008 27

28. Dr. K. C. Chakrabarty Chairman & Managing Director “ At PNB, we believe that the poor are bankable, and are laying greater focus on implementing the Financial Inclusion Plan throughout the country in general and Indo Gangetic Plain in particular, where our Bank has major presence.” “ Our vision is focused on widespread financial inclusion - deploying technologies, infrastructure and strategies to take banking to the unreached.” 28

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30. Launching of 1 st Pilot Project at Neemrana, District Alwar, Rajasthan PNB created history on 2 nd October 2007 30

31. Dr. K. C. Chakrabarty giving a Biometric Smart Card to a Customer 31

32. Launching of FI Smart Card Project 32

33. Financial Inclusion through women SHGs 33

34. PRESENT STATUS  No. of “No Frill “ Accounts:42.51 Lakh  Amount Outstanding: Rs 382 crore Out of which IT Enabled Smart Cards :24.85 Lakh  Overdraft allowed (No.): 9183  Amount :Rs 43.87 Lakh  Technological Vendors: 8  No. of GCCs:35378  Amount :Rs 64.23 crore  Business Facilitators(No.): 82  Business Correspondents (No.): 14  No. of Villages : 100% FI completed : 16227  No. of Districts (100% FI in progress) : 212  No. of FLCCs: 9 Published TWO Booklets on Financial Inclusion Initiatives

35. TARGETS FOR 2013  To cover 1,00,000 villages, 12 million households and 60 million people  To set up 1 Lac Touch Points under Brick & Mortar/ Branchless Banking  No Frill Accounts, Overdrafts/Loans, insurance (life & health ), micro insurance, micro finance, pensions, remittances, Govt. payments (like NREGP) etc.  To cover 1 Lac rickshaw puller in 5 years.  To setup 57 FLCCs in all PNB Lead Districts

36. Challenges ahead By 2012, out of next 250 million Indian wireless users, 100 million (40%) are likely to be from rural areas.  Mobile phones to act as local banks in a big way.; solve power and connectivity problem. Accessibility : Remoteness of villages Connectivity Errors in Account opening and verification process Relaxation of KYC norms for migrant population Finding suitable BCs Pilot projects to go beyond experimental stage. Standardization of card specifications Interoperability among the different technological systems as the solutions being offered today are proprietary in nature 36

37. Indian BPL – 214 Million earning on an average Rs. 10 per day, out of which 16 million people are living in rural areas Of the world’s 6.4 billion poor, about 2.6 billion live on less than US $2 per day. The poor have largely untapped potential for consumption, production, innovation and entrepreneurial activity. The need is to do business with them so as to bring them out in the market place. This is a sure way of freeing them from the poverty. The more business models integrate and include the poor, the higher are the chances for the companies to increase their revenues while fulfilling the millennium development goals (MDGs)”. Report by UN Development Programme, “ Creating Value for All: Strategies for Doing Business with the Poor”, Summing Up……… 37

38. WE HAVE PROMISES TO KEEP AND MILES TO GO BEFORE WE SLEEP