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&. CREDIT COUNSELLING. FINANCIAL INCLUSION. 16 th January 2009. College of Agricultural Banking, RBI, Pune. PRIORITY SECTOR & LEAD BANK DIVISION ATMARAM HOUSE, 1, TOLSTOY MARG NEW DELHI 110 001. FINANCIAL INCLUSION CELL. What is the magnitude of Financial Exclusion in India ?.

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financial inclusion

&

CREDIT COUNSELLING

FINANCIAL INCLUSION

16th January 2009

College of Agricultural Banking, RBI, Pune

PRIORITY SECTOR & LEAD BANK DIVISION

ATMARAM HOUSE, 1, TOLSTOY MARG

NEW DELHI 110 001

FINANCIAL INCLUSION CELL

slide3

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%)
rural urban divide
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?

slide7

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

what is bop
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?

slide9

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

slide10

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
initiatives taken by goi rbi
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
challenges in financial inclusion
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

slide13

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

slide14

How to achieve financial inclusion?

HOW TO ACHIEVE FINANCIAL INCLUSION ?

technology an essential component
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

slide16

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
slide17

TECHNOLOGY : AN ENABLER

Web Camera forPhotograph

Optical Biometric scanner for Fingerprints

Pad for Signature capturing

Battery Power back-up for undisrupted enrolment

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

slide18

Process Flow – Enrolments

Post sign-off from the

Bank, the forms are sent

for Data-entry to Service

Provider.

Biometric(finger print)

of the customers are

captured and cards are

distributed by Agents.

Cards are

personalized and

accounts are opened.

Account opening forms

are filled on the field by

Agents.

slide19

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 Provider’s Systems

slide20

VARIOUS PROCESSES OF TRANSACTION

Pre –Enrolment Process Enrolment Process

Enrolment Process Transaction Process

functional financial inclusion
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

slide23

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
financial literacy credit counseling centres
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

organizational administrative setup
Organizational/Administrative Setup

Staffing

Resources- Human, Technological

Training

MIS

Monitoring

Publicity

happenings
HAPPENINGS

Promoting own Bank’s products

As an additional duties

No formal training

Affinity to the parents Bank

towards better tomorrow
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

dr k c chakrabarty chairman managing director
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.”

slide30

PNB created history on 2nd October 2007

Launching of 1st Pilot Project at Neemrana,

District Alwar, Rajasthan

slide34

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

slide35

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
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
slide37

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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