FINANCIAL INCLUSION
&
CREDIT COUNSELLING
16th January 2009
College of Agricultural Banking,
RBI, Pune
FINANCIAL INCLUSION CELL
PRIORITY SECTOR & LEAD BANK DIVISION
ATMARAM HOUSE, 1, TOLSTOY MARG
NEW DELHI 110 001
What is the magnitude of
Financial Exclusion in India ?
2
Rural - 60 %
Urban - 39 %
Exclusion from the payment system Exclusion from the credit
NSSO Survey 59th 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
Rural Urban Divide
Rural Poor – Income Level
Urban Poor – Income level
• Share in economic
growth
• Percolation of benefits
• Share in economic
growth
• Percolation of benefits
Consequences?
4
We are we assaulting at?
5
What are the Essentials of
Financial Inclusion?
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•
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•
•
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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
Financial Inclusion - A burden
or an opportunity?
What is BoP?
Why is it in focus?
Where the future lies?
Where are all roads leading to?
Vast opportunities exist, where?
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The Opportunity lies :•
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•
•
•
•
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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
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BANK ACCOUNT : KEY TO FINANCIAL INCLUSION
The first step:Opening of Account
Smart Card
: Awareness
: Empowerment
:
Providing Identity
Look beyond No Frill Accounts
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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
Initiatives taken by GOI & RBI
•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
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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
•
•
•
•
•
•
•
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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
How to achieve financial inclusion?
• Low Cost
TECHNLOGY • Convenient
• Accessible
GOVT.
SUPPORT
HOW TO
ACHIEVE
FINANCIAL
INCLUSION ?
INSTITUTIO
NAL
SUPPORT
FINANCIAL
EDUCATION
• Active /Direct support
of Central/ State Govt.
in building adequate
infrastructure
• Technological Exp.
• Up-Scaling Exp.
• Civic Society
Institutions like PRIs
• Micro finance
Institutions
• NGOs/SHGs
• Credit Counseling for
improving prospects of
repayment of loans as
well as use of various
financial services
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
 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.
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TECHNOLOGY : AN ENABLER
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
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TECHNOLOGY : AN ENABLER
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
Web Camera for Photograph
•
Optical Biometric
scanner for Fingerprints
Pad for Signature capturing
Battery Power back-up for
undisrupted enrolment 17
Process Flow – Enrolments
Post sign-off from the
Bank, the forms are sent
for Data-entry to Service
Provider.
Account opening forms
are filled on the field by
Agents.
Biometric(finger print)
of the customers are
captured and cards are
distributed by Agents.
Cards are
personalized and
accounts are opened.
Business Process - Transactions
Cash/
Cash
Customer
•Instant Receipt
•Transaction
stored on card
Bank Branch
Agent
Updates for
Customer
Transaction Data
transferred via
phone lines
Transaction Data
Bank Systems
Service Provider’s Systems
VARIOUS PROCESSES OF TRANSACTION
Pre –Enrolment Process
Enrolment Process
Enrolment Process
Transaction Process
Financial INclusion : An Opportunity exists
Financing the poor is?
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.
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
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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
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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
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Organizational/Administrative
Setup
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Staffing
Resources- Human, Technological
Training
MIS
Monitoring
Publicity
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HAPPENINGS
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Promoting own Bank’s products
As an additional duties
No formal training
Affinity to the parents Bank
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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, 200827
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.”
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PNB created history on 2nd October 2007
Launching of 1st Pilot Project at Neemrana,
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District Alwar, Rajasthan
Dr. K. C. Chakrabarty giving a
Biometric Smart Card to a Customer
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Launching of FI Smart Card
Project
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Financial Inclusion through women SHGs
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PRESENT STATUS

:
:
42.51 Lakh
Rs 382 crore
Out of which IT Enabled Smart Cards
:
24.85 Lakh

:
:
:
:
:
:
:
:
:
:
9183
Rs 43.87 Lakh
8
35378
Rs 64.23 crore
82
14
16227
212
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No. of “No Frill “ Accounts
 Amount Outstanding
Overdraft allowed
(No.)
 Amount
Technological Vendors
No. of GCCs
 Amount
Business Facilitators
(No.)
Business Correspondents (No.)
No. of Villages : 100% FI completed
No. of Districts (100% FI in progress)
No. of FLCCs
Published TWO Booklets on Financial Inclusion Initiatives
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
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
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nature
Summing Up………
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”,
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WE HAVE PROMISES TO KEEP AND
MILES TO GO BEFORE WE SLEEP
THANK YOU