FINANCIAL INCLUSION

1
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

2
What is the magnitude of Financial Exclusion in
India ?
3

• 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)

4
Rural Urban Divide

• Rural Poor Income Level
• Share in economic growth
• Percolation of benefits

• Urban Poor Income level
• Share in economic growth
• Percolation of benefits

Consequences?
5
We are we assaulting at?
6
What are the Essentials of Financial Inclusion?
7

• 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

8
What is BoP?
Financial Inclusion - A burden or an opportunity?
Why is it in focus?
Where the future lies?
Where are all roads leading to?

• Vast opportunities exist, where?

9
The Opportunity lies -

• 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

10
BANK ACCOUNT KEY TO FINANCIAL INCLUSION

• The first step- Awareness
• Opening of Account Empowerment
• Smart Card Providing
  Identity
• Look beyond No Frill Accounts
• 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

11
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

12
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

13
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
14
How to achieve financial inclusion?
HOW TO ACHIEVE FINANCIAL INCLUSION ?
15
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.

15
16
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

17
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
18
Process Flow Enrolments


19

Business Process - Transactions

Cash/
Cash

• Instant Receipt
• Transaction
• stored on card

Bank Branch
Customer
Agent
Transaction Data transferred via phone lines
Updates for Customer
Transaction Data
Bank Systems
Service Providers Systems
20
VARIOUS PROCESSES OF TRANSACTION
Pre Enrolment Process Enrolment
Process
Enrolment Process Transaction Process
21
Financial INclusion An Opportunity exists
Financing the poor is?
22
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

23
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

24
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

25
Organizational/Administrative Setup

• Staffing
• Resources- Human, Technological
• Training
• MIS
• Monitoring
• Publicity

26
HAPPENINGS

• Promoting own Banks products
• As an additional duties
• No formal training
• Affinity to the parents Bank

27
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,
2008
28
Dr. K. C. ChakrabartyChairman 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.
29
(No Transcript)
30

PNB created history on 2nd October 2007
Launching of 1st Pilot Project at Neemrana,
District Alwar, Rajasthan
31
Dr. K. C. Chakrabarty giving a Biometric Smart
Card to a Customer
32
Launching of FI Smart Card Project
33
Financial Inclusion through women SHGs
34
PRESENT STATUS

• No. of No Frill Accounts 42.51 Lakh
• Amount Outstanding Rs 382 crore
• Out of which IT Enabled Smart Cards 24.85
  Lakh
• Overdraft allowed (No.) 9183
• Amount Rs 43.87 Lakh
• Technological Vendors 8
• No. of GCCs 35378
• Amount Rs 64.23 crore
• Business Facilitators (No.) 82
• Business Correspondents (No.) 14
• No. of Villages 100 FI completed
  16227
• No. of Districts (100 FI in progress)
  212
• No. of FLCCs 9

Published TWO Booklets on Financial Inclusion
Initiatives
35
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

36
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 nature

37
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 worlds 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,
38
WE HAVE PROMISES TO KEEP AND MILES TO GO BEFORE
WE SLEEP
THANK YOU