A. Santhi Kumari, IAS

Principal Secretary to Chief Minister

Govt of Telangana

Financial Inclusion

1

Definition

“Process of ensuring access to financial services and

timely & adequate credit where needed by vulnerable

groups such as weaker sections and low income group

at affordable cost”.

-RBI

Scope of services

o Bank account/checking account

o Savings

o Credit

o Remittance- payments

o Insurance-

o Mortgage / entrepreneurial credit

o Financial advisory services 2

Who needs it most ?

People below poverty line

Marginalised sections - Disabled, single women,

SC/ST

Agricultural – small & marginal, tenant farmers

Land less agricultural labour.

Industrial – unorganised sector

Old people

Unemployed

Slum dwellers/ migrant population

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Why Financial Inclusion ?

Macro perspective

Economic Objective

oMobilisation of Savings

oLarger financial Market.

Social Objectives

o Sustainable Livelihood

Individual perspective

oAccess to financial services on fair terms – cost,

repayment , transparent processes.

oCredibile / reliable institutions –guaranteed service.

4

What Financial Products for Poor ?

5

Govt Initiatives so far 1955 State Bank of India created

1969 19 Commercial Banks Nationalized,

1970 Lead Bank Scheme introduced

1975 Regional Rural Bank set up

1980 6 more Commercial Banks nationalized

1990 Micro finance institutions

1992 SHG - Bank Linkage Programme

2001 Kisan Credit Card (KCC) introduced

2010 Swabhiman Program

2013 Pradhan Mantri Jan Dhan Yojana (PMJDY)

2015 Specialised banks – payment banks & SFB

2015 MUDRA BANK

However, efforts to achieve financial inclusion met with limited success.

6

Key features of Micro financial service

Zero balance , No frills accounts

Simplified KYC.

Loan is given to an unregistered group ( SHG ).

Upto Rs 5 Lakhs; SHG loans are without collateral.

They are uniquely coded to facilitate monitoring.

Interest subvention schemes – central Govt/ state

govt.

MUDRA bank for- small entrepreneurial loans

Refinance to Micro finance companies, RRBs &

MUDRA by NABARD & SIDBI.

7

India’s performance

among emerging nations

FI – Performance Comparison

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FI – Performance Comparison

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FI – Performance Comparison

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FI – Performance Comparison

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Domestic scenario

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Number of bank branches opened

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FI in India – Bank penetration

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Banking penetration –key analytics

Rural population in India – 83.3 cr 69%

Bank branches in rural areas 37,953 37%

Urban population -37.7 cr 31 %

Bank branches in urban areas - 64,390 63 %

Trends

No of branches added in Metros, Urban and Semi

urban areas ( 2006-13 ) – 26,281 .

This represents about 80 % of total new branches

opened in that period.

No of branches added in rural areas – 7,381 20 %

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FI in India – Census 2011

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FI in India – CRISIL Inclusix Index

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FI in India – NSSO Survey

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National scenario in a nut shell

120 cr population.

1 lakh bank branches & 1.14 lk ATM network.

1.4 lk villages penetrated by FI s.

18 + 20 cr bank accounts & 43 % dormant accounts

50 % people financially included.

About 50 % of credit needs being met by formal lending sources.

Rural – Urban service coverage has wide disparities.

Spread banking network more extensively, take up massive financial literacy , enhance credit delivery through FIs– so as to ensure that more and more people participate in mainstream economy .

Recent models in India

1. SHG bank linkage

2. Microfinance companies – NBFCs and NGOs

Many models prevalent in India

SHG Bank Linkage;

Streenidhi Credit Cooperative Federation Ltd

3. PMJDY

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SHG - Bank Linkage

SHGs are being

provided with credit by

service area banks as per

Micro Credit Plans of

SHGs.

Vaddi leni runalu (VLR)

scheme - Telangana

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SHG Bank Linkage

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SHG – Bank Linkage

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Streenidhi Credit Cooperative Federation

–AP & Telangana

Promoted by the Government and the Mandal Samkahyas to supplement credit flow from banking sector

Loan application through IVRS at the SHG level; disbursement through e-FMS module directly to the SHG account. Faster loan disbursement (with 48 hrs)

Lower interest rate of 13% compared to 26 % & above of MFIs Lower operating cost upto 1% of the working capital

Other Government funds like SCSP / TSP disbursed using this

system.

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Streenidhi Bank

S.

No Particulars 2014-15 2015-16

Cumulative

as on

25.10.2016

a. Loan Amount disbursed (Rs. Cr.) 702.34 1152.20 2909.64

b. No of MSs/TLFs availed loan 443 456 473

c. No of VOs/SLFs availed loan 9242 12,064 15,426

d. No of SHGs availed loan 88,034 1,27,091 2,35,434

e. No of SHG members availed loan 3,36,631 4,55,189 13,45,022

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Microfinance Institutions

Institutions offering micro

credit to the areas where

there is very less / no access

to commercial banks.

223 MFIs exist in India.

28 MFI has clientele of

more than 2.5 lakhs; 45 b/w

50,000 to 2.5 lakhs and rest

less than 50K

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Growth of MFI

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PMJDY - Benefits

Launched in Aug 2014

Interest on deposit.

Accidental insurance cover of Rs.1.00 lac

No minimum balance required.

Life insurance cover of Rs.30,000/-

Easy Transfer of money across India

Accidental Insurance Cover, RuPay Debit Card must be used at

least once in 45 days.

Overdraft facility upto Rs.5000/- is available in only one account

per household, preferably lady of the household.

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Pradhan Mantri Jan Dhan Yojana - STATUS (All figures in Crores)

Bank Name Number of Accounts

No of

Rupay

Cards

Balance in

Accounts

% of Zero

Balance

Accounts Rural Urban Total

Public

Sector Bank 11.39 8.9 20.28 15.69 36074.62 23.47

Regional

Rural Bank 3.70 0.60 4.30 2.95 7621.64 20.31

Private

Banks 0.53 0.34 0.86 0.80 1606.22 36.20

Total 15.62 9.83 25.45 19.44 45302.48 23.37

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Challenges

Poverty, illiteracy and vast geography.

Inadequate banking penetration - distance.

Complex procedures for availing financial services.

Not embracing technology based models in a big way.

Lack of credible , proximate institutions – limitations

in Post office/Micro finance institutions

Financial illiteracy.

Politicization – loan waivers

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FI – way forward

Development of appropriate delivery model for different geographical regions

oEmbrace technology in a big way

o Set up appropriate institutions and network

oDevelop easy to access services/ products, people

friendly service architecture

oNurture repayment culture.

oPromote Financial literacy

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Thank you !!

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