promoting financial inclusion

8/4/2019 Promoting Financial Inclusion

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Pr o m o t in g

Fin a n cia l In clu s ion

LETS CONNECT EVERYONE

A PRESENTATION BY:

RPCD, RBI PATNA


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Definitions

Financial inclusion means extending basic banking services ataffordable prices to the low income and disadvantaged groups.

Purpose: to connect the excluded with the formal banking system inorder to help them obtain an understanding of the financial servicesavailable and equipping them with the confidence to make informedfinancial decisions.

Basic services include deposits / withdrawals, credit, remittance,investment, insurance etc.

No frills account: An account with zero or minimum balancewith maximum balance of Rs 50,000/- at any given point in time andtotal credit in a year not exceeding Rs 1,00,000/-.

Banks can restrict the nature of services offered, number of transactionspermitted etc.


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Some misconceptions

Financial Inclusion (FI) is the latest fad . FI is only social service; not a good

business proposition.

FI simply means opening as many bankaccounts as possible.

Everyone handles money. Therefore,

everyone is financially literate.


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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 thetargeted beneficiary.

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


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A few statistics 51.40%: Farmer households financially

excluded.

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

64%: Share of Central, Eastern and NorthEastern regions in the total financiallyexcluded farmer households in the country.

Source:NSSO Survey 59thRound


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TARGET By 2012: Cover at least 50% (55.77 million)

of the excluded.

By 2015: Include the remaining.

250 new households per branch perannum to be covered by all semi-urban andrural branches of banks and RRBs.

Source:Report of the Committee on Financial Inclusion in India (Chairman: Dr C. Rangarajan);January 2008


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Initiatives by RBI No-frills accounts in November 2005. Now, with Overdraft

facility.

Business Facilitator/Business Correspondent model forgreater outreach.

KYC norms relaxed.

GCCs introduced.

Project Financial Literacy & multi-lingual website.

Working Group Report on Technology based FI for RRBs.

Funding support through IDRBT envisaged.

Contribution to FIF and FITF (managed by NABARD).


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Progress made by banks so far

Number of no-frills accounts opened as on:

31.03.2006 31.03.2007 31.03.2008*

Public sector banks 332878 5865419 13925674

Private sector banks 156388 856495 1879073

Foreign banks 231 2753 33115

TOTAL 489497 6724667 15837862

*Provisional

Source: RBIs Report on Currency & Finance 2006-08


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Select success stories Andhra Pradesh

Pilot project in six districts of Warangal for disbursement of SSPand NREGS benefits through BCs with the use of smart cards andmobile technology.

Launched by Rural Development Deptt. of A.P. Govt.

Involving 6 banks.

Project coordinated by RBI.RBI.

MIS provided to Govt. by IDRBT.

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

Contd on next slideSource: Report on Currency & Finance 2006-08


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Dharavi (Maharashtra)

Dharavi is Asias largest slum with 3-3.5 lakh workers.

Smart card based banking introduced by Indian Bank to providedoorstep-banking for the slum dwellers, many of whom aremigrants.

The facility has enabled workers to save and migrants to sendremittances easily and reliably.

Life and health insurance are also being offered.

The model is now being extended to

Guntur town (AP) and Tharamani (Chennai).

Source: Report on Currency & Finance 2006-08


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Some innovative steps

Pragati Gramin Bank, Bellary:Loans under DRIscheme disbursed to 260 small vendors.

Mann Deshi Mahila Bank, Mahaswad (Satara):

Business school on Wheels to enable poorwomen in rural areas to become entrepreneurs.

SBI Tiny Card: Tech. based FI in Aizawl.

PNB: Bhamashah Project for rural women inRajasthan.


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Financial InclusionFinancial Inclusion

ininBiharBihar


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Where are we?To paraphraseWinston Churchill:

(during the London blitzkrieg- World War II)

This is not the end [of financial exclusion]; not even thebeginning of the end [of financial exclusion] butperhaps the end of the beginning [of financial inclusioncampaign].

Some States have reached this stage.

We have a lot of catching up to do!


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Numbers tell the story

Only 33% of the population covered.

One bank branch for 20,500 people.

(national average:15,000)

Andhra PradeshAndhra Pradesh entering Phase IIentering Phase II::

One account per adult.One account per adult.

Bihar still in Phase IBihar still in Phase I::

One account per household.One account per household.


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Goals

By March 2009: 100% financial inclusion inthe 19 identified districts.

For other districts, all branches to adopt 5villages of their area for 100% financialinclusion.

By March 2012: One bank account per

household.Source: 25th review meeting of SLBC for Bihar: Aug 21, 2008


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Major Initiatives by RBI Patna

Programme on IT-Enabled Financial Inclusion for banks and senior Govt.officials.

Distribution of financial literacy related books in Maithili and Bhojpuri.

State Level Essay Competition for school children.

Jingle on FI on Radio Mirchi.

RBI Stall at Sonepur Mela. Skit on FI, distribution of pamphlets, caps bearing FI message etc.

Regular interaction with senior bankers, RRB Chairmen etc.


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In the pipe line

Seminar on Financial Inclusion involving State Govt.,

bankers, experts, Industry chambers, NGOs etc.

Programmes on local radio / TV.

Debates in schools / colleges.

Comic booklet on FI.

Road-shows on FI in various districts of Bihar.


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Problems? No Challenges! Measuring actual extent of financial exclusion. Inadequate awareness levels. Low literacy rates. Poor saving habits.

Consumption oriented expenditure patterns. Lack of infrastructure. Varied local conditions. Small ticket transactions & high transaction costs.

Agent and vendor risk. Recovery related issues. Dormant accounts.

Sustainability factor.

AND.OUR ATTITUDE

Not all hurdles can be removed but surelyall can be overcome!


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Prescription Innovative promotion.

Basic product design.

Affordable pricing model.

Inexpensive and reliable delivery module.

Continuous monitoring.

EXTEND : Financial advice and credit counselling.

MODIFY : Credit usage pattern.

ENHANCE : Credit absorption capacity.


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Agencies / intermediaries to be involved

State Government & local administration.

Banking Industry and Developmental Institutions.

Section 25 companies / Insurance agents.

NGOs / SHGs /MFIs/ Farmers clubs/ PACS.

Ex servicemen /retired govt. and bank employees/ teachers.

Post Offices / Panchayats.

IT service providers.

Schools and Colleges.

Media.


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It pays to remember

Good ideas are not enough: An idea is only as good asits implementation.

Detailed schemes are not enough: Lack of publicawareness can bury the best scheme.

We can all contribute by generating publicity andensuring action at the ground level.


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THANK YOU!

promoting financial inclusion

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