financial inclusion cgap
TRANSCRIPT
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Financial Inclusion Policies,tools and institutions
N.Srinivasan
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Financial Inclusion the Indian
context Bringing underserved and marginalised in to the
mainstream economy
Covering barter and cash economy under the
formal payments system Ensuring effective and safe savings and credit
facilities to all sections of people
Banking services are a public good- to be madeavailable to those who have a need
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Institution Number of deposit
accounts (Millions)
Commercial banks 320.9
Regional Rural Banks 52.7
Urban cooperative banks 50.0
Rural cooperative banks --
Post office 60.8
Total Formal Institutions
Primary cooperativesocieties (members)
125.8
Self Help Groups (member
savers)
53.3
Total 663.5
Savings accounts - March 2007
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Numbers ahead
Number
of adults
No of
loan a/cs
No of
deposit
a/cs
Gap
India 600 mn 122 mn 466 mn 480 mn
or
130 mn?
Multiple accounts of the same borrower not factored the gap is actually larger
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Issues
Large number of potential clients not covered Sparsely populated areas and remotely located
areas not covered
Uncovered clients not economically significant in
terms of business volumes Branch network limited compared to the number
of excluded
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Issues
Staff strength in banks low compared toadditional effort needed
Large inter-state variations in per branch
and per staff work loads KYC norms entail additional time and cost
Impact on profitability
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What is inclusion today
No frills accounts
General Credit Cards
Offering low balance savings accounts is adrain on banks resources
Loans especially for livelihoods is the
better option but not preferred by banks Insurance only distribution - ineffective
coverage
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New client acquisition -MF
Client outreach (in millions)
2006-07 2007-08
Banking system (SHGs) 38.02 45.20MFIs 10.04 14.01
Total 48.06 59.21
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Significant initiatives
AP experiment of smart card based
NREGS payment accounts
Bhamashah campaign in Rajasthan
enrolment of 5 million new clients to
achieve inclusion with states support
now facing hurdles of a political nature
Several bank specific initiatives
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Policy
Inclusion as an objective
Study of the issues, institutions and
means
Launch of new products
Introduction of new mechanisms (BC, BF,
Mobile banking, Prepaid instruments, etc) Linking benefits transfer with inclusion
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Tools
Funding mechanism to cover technology
and other costs
Financial literacy drive
Debt counseling initiative
New products as tools?
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Technology
Wide variety
to help in customer acquisition
Transaction processing
Accounting
MIS
Monitoring
Handheld devices, Point of Sale devices, card
readers, cell phone devices, cell phones
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concerns
Physical network inadequate faster roll out oftechnology and agency banking needed
Savings emphasized - much less talk of credit and
insurance
Primary focus on commercial banks
Cooperatives, MFIs ignored
CSR view of inclusion is not helpful
Technology to make institutions life comfortable customer focus needed
Agent banking could increase risks mitigation to
take care of customer protection too
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Conclusion
It is a challenge but also an opportunity Tomorrows clients today with some costs
hopefully being absorbed by inclusion fund Investment in technology would be of long term
help FITF is available Business volumes would get up built up over the
next few years on the back of large number ofnew clients
It is not a cost; nor a vain effort it is aninvestment in future of the bank as well theunderserved people.
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thanks
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Internal preparedness
Need to identify staff and train staff in fast clientacquisition
Skills of contracting outsourced services
Investment in software and networking to render remote
KYC compliance easy Active role of SLBC and DLCC for documenting best
practices and sharing the same
Lobbying with RBI for a relook at KYC norms for the
inclusion agenda Lobbying with GoI and RBI for access to financial
inclusion fund - based on results achieved andinvestment in technology
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How the strategies
Overarching concerns
Cost effectiveness
Early completion of the taskStrategies
Use of technology
Outsourcing of services correspondentsand facilitators
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How - strategies
Devising a credible KYC compliance procedure
that would satisfy RBI ( such as a bankers
committee at the block level)
Campaign mode of enrolling clients Usage of facilitator model to use SHGs, NGOs,
Farmers clubs and MFIs - especially in
agriculture finance
Financing of MFIs, cooperatives and SHGs in
larger numbers to achieve indirect inclusion -