Role of State-owned Banks in
Financial Inclusion
Presentation by Dr H K Bhanwala, Chairman, NABARD
Asia Microfinance Forum
Sanghai, China
04 – 08 August 2014
ग ाँव बढ़े तो दे श बढ़े
Taking Rural India >> Forward
India, briefly
1.21 billion, 69% rural,
density: 382 persons/sq km
400 million, 70% rural
105 million cultivators, 65
million agricultural labourers
30% (355 million) poor,
10% unemployed
192 million households
ग ाँव बढ़े तो दे श बढ़े
Low per capita income @ US $
1527
Taking Rural India >> Forward
Banking Structure in India
Reserve Bank of
India
Commercial
Banks
Cooperative
Banks
Regional
Rural
Banks
Development
Banks
Nationalized
(28)
Private
(17)
Foreign
(12)
Agricultural
(NABARD)
ग ाँव बढ़े तो दे श बढ़े
Industrial
(SIDBI)
Taking Rural India >> Forward
EXIM
Banking with the Poor- Few Landmarks
Year
Event
1904 Cooperative Movement
Year
1991
1935 Reserve Bank of India established 1992
Event
Indian Economy Liberalized
SHG Pilot Launched by NABARD
1969 Bank Nationalization
2000s New Age Banks came into being
1975 Formation of Regional Rural
Banks
2006
RBI allows Agency Model (BC Model)
1982 NABARD established
2008
Government announces Financial
Inclusion Plan
ग ाँव बढ़े तो दे श बढ़े
Taking Rural India >> Forward
Enabling Environment in India
Financial Inclusion in India
Bank-led Model
Banks, incl. SoBs & incl RRBs
allocated villages
Technology driven
Outsource (Agency)
Model
CBS, PoS, Micro ATM, Smart
Cards (RuPay), Biometric
All social benefits, wages of
employment generation
programmes, student scholarships to
be credited directly to the accounts
ग ाँव बढ़े तो दे श बढ़े
BC Model
Offer small value
savings, credit, deposit,
micro insurance, micro
pension & remittance
Taking Rural India >> Forward
Financial Inclusion and Public Subsidies
BC
Bank Branch
Customers
Commission
based (not
subsidy
oriented)
As per RBI directive, SoBs are expected
to take financial inclusion as a business
opportunity
Two funds created
by Govt of India &
housed in NABARD
For strengthening demand side thru
financial literacy, capacity building etc.
ग ाँव बढ़े तो दे श बढ़े
FITF
FIF
Supporting ICT solutions in banks
(RRBs & Coop Banks, not SoBs)
Taking Rural India >> Forward
NABARD & Group Approach
Self Help Groups (SHGs)
•
•
•
•
Experimented by NABARD in 1992
A savings first, credit later model
Norm: Credit Discipline & Social Collateral
Solved the twin problems faced by banks: low recovery &
high transaction costs
• 7.3 million SHGs (81% exclusive women groups), covering 95
million households
• of which 4.5 million availed credit of INR 394 billion
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Joint Liability Groups (JLGs)
• Comprises share croppers, oral
lessees
• 529000 such groups
• INR 46 billion availed as loan
Taking Rural India >> Forward
Collaboration with other players
In India, MFIs have been receiving support from SoBs for increasing their credit outreach
Bank Loan provided to MFIs – as on 31 March 2013
Banks
No
Amount (INR Billion)
SoBs
1497
84
Private
Banks
268
40
Foreign
Banks
4
1.31
RRBs
153
0.71
Coop Banks
18
0.068
Other FIs
102
18.80
Total
2042
144
ग ाँव बढ़े तो दे श बढ़े
• The experience with MFIs are mixed ones –
profit motive & high rate of interest have gone
against their reputation
• The Central Bank (RBI) had to step in to curb
their profit instincts
• MFIs have their limitations under Indian law they can’t open bank accounts, can’t provide
savings and remittance products though they
can deliver other financial products like
insurance, pension etc.
• Nevertheless, Bandhan, an MFI with 5.4 million
as its rural customers bagged the banking
license in a stiff competition
Taking Rural India >> Forward
Using Technology for Financial Inclusion
Technology
Requires initial CAPEX investment
Creates Customer Segmentation
But is cheaper in the long run
Secular (Customer Neutral)
904.5 million out of 1221 million (74%) mobile phone users in India
Technology has always been at the core of Financial Inclusion – it has been ‘the’ driving force
India is going M Banking way viz. Mobile Wallet (a la M-PESA, Airtel Money etc.)
ग ाँव बढ़े तो दे श बढ़े
Taking Rural India >> Forward
Thanks
www.nabard.org
chairman@nabard.org
ग ाँव बढ़े तो दे श बढ़े
Taking Rural India >> Forward