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” in a fair and transparent manner by mainstream institutional players”
The Committee on Financial Inclusion
(Chairman: Dr. C. Rangarajan, 2008)
In advanced economies, Financial Inclusion is more about the knowledge of fair and transparent financial products and a focus on financial literacy.
In emerging economies, it is a question of both access to financial products and knowledge about their fairness and transparency.
2. Financial Inclusion - Definition
“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” in a fair and transparent manner by
mainstream institutional players”
The Committee on Financial Inclusion
(Chairman: Dr. C. Rangarajan, 2008)
In advanced economies, Financial Inclusion is more about the knowledge of fair
and transparent financial products and a focus on financial literacy.
In emerging economies, it is a question of both access to financial products and
knowledge about their fairness and transparency.
3. Financial Inclusion - Scope
Financial Inclusion should include access to
financial products and services like:
Bank accounts.
Immediate Credit
Savings products
Remittances & Payment services
Insurance – Healthcare
Mortgage
Financial advisory services
Entrepreneurial credit
4. Financial Inclusion – Who are these
People?
Underprivileged section in rural and urban areas like, Farmers,
small vendors, etc.
Agricultural and Industrial Labourers
People engaged in un-organised sectors
Unemployed
Women
Children
Old people
Physically challenged people
5. Financial Inclusion – Steps Taken
Co-operative Movement
Setting up of State Bank of India
Nationalization of banks
Lead Bank Scheme
RRBs
Service Area Approach
Self Help Groups
5
6. 6
Financial Inclusion – Why Have We
Failed?
Absence of Technology
Absence of reach and coverage
Delivery Mechanism
Not having a Business model
Rich have no compassion for poor
7. 7
Why Are we Talking of Financial Inclusion Now?
Focus on Inclusive Growth
Banking Technology has arrived
Realisation that Poor is bankable
8. What Are RBI ‘s Contribution
No-Frill Accounts
Overdraft in Saving Bank Accounts
Business Correspondent (BC) Model
KCC Guidelines
Liberalized branch expansion
Liberalized policy for ATM
Introducing technology products and services
Pre-Paid cards, Mobile Banking etc.
Allowing RRBs’ / Co-operative banks to sell Insurance and Financial
Products
Financial Literacy Program
Creation of Special Funds
431 districts identified by the SLBC for 100 per cent financial inclusion
across various States/UTs and the target in 204 districts of 21 States and 7
UTs has reportedly been achieved
8
9. What Have We Achieved
Number of No-Frill Accounts – 28.23 million
Number of rural bank branches – 31,727 constituting
39.7% of total bank branches
Number of ATMs – 44,857
Number of POS – 4,70,237
Number of Cards – 167.09 million
Number of Kisan Credit cards – 76 million
Number of Mobile phones–403 million – out of which 187
million (46%) do not have a bank account
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10. 10
Problems / Difficulties
Scaling up of activities
Transaction cost too high
Appropriate business model yet to evolve
BC model too restrictive
Limitation of cash delivery points
Lack of Interest / Involvement of Big Technology
Players
11. 11
Pre-requisites For The Success of
Financial Inclusion
Appropriate Technology
Appropriate and Efficient Delivery model
Mainstream banks’ determination and involvement
Strong Collaboration among Banks, Technical Service
Provider, Business Correspondent (BC) Services
Involvement of all state administration at grass-root level
Liberalization of Business Correspondent (BC) model
12. Recommendations
Government should increase number of banks branches in remote areas.
Banks should focus more on products which should be simple, affordable ,
and should have high utility.
RBI should frequently check whether the financial products are actually
utilized by customer effectively, if not it should analyse the reasons.
Banks should do regular surveys in villages for understanding the financial
needs of the people.
NGOs and other not for profit organisation/ social organisations / Non
Gouvernemental organisations etc. may be involved more to propagate the
financial services to the remote and non accessible areas.
13. Recommendations
Banks should allow customers to provide feedback about the product
services.
R B I should allow service providers to provide better mobile banking
products at affordable price.
Micro Finance Organisations/ Non-Banking Financial organisations may
be given permissions to do limited financial services in remote areas.
Enlist many intermediaries/ agents with incentives to facilitate
popularising Financial products in remote areas.
Opening of Bank Accounts without minimum balance condition should be
allowed at all branches and places.
14. Recommendations
Opening Bank Branches in remote and rural areas should be
liberalised by RBI.
Institutionalise the agency system that can bring the bank
services at the door step of customer on a commission basis
like commission agents/ daily collectors etc. authorised by
Banks.
15. Recommendations
Telecom Service providers and Banks should together workout and implement
Mobile Banking simple solutions.
RBI should allow entrepreneurs to invest in new product innovation in financial
innovation.
Mobile Banking should be encouraged/incentivised as a smart way of sending and
depositing money in Rural areas.
There should be special discounted charges for Banking services in Rural areas like
Telephone calls originating in Rural Telephones. For example the interest charges in
Rural areas should be less than that of Urban .Similarly the saving Bank account in
Rural can be given more interest than in Urban. The additional burden on account
of this should be met from a separate fund like USO fund in Telecom.
16. CONCLUSION
16
• Financial Inclusion is a win-win situation for the
financially excluded, the Corporates, the Govt. and
the Banks.
• Bankers can support by financing the Agri products
including their preservation and sales.
• Corporates can sell / market their products to the
large untapped rural markets.
17. CONCLUSION
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• Public-Private partnership can utilise “Common Service
Centers” for enabling access to
• Banking Services and products including consumer loans;
Micro-finance Services
• Farm Equipment, Home & Construction Loans
• Credit Cards, Debit Cards, etc., Bill Payment – Electricity,
Utilities, etc., Payment Gateway, ATMs
• Multi-purpose “Smart Cards” can simplify the financial
inclusion process to reach the unreached.