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Transcript of Banking Inclusion
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THE CONTEMPORARY STATE
OF AFFAIRS OF BANKING
INCLUSION IN INDIA
Submitted by: Krishnashis Chakraborty
Roll: 40911, No: 0603434
A Study on
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CONTENTS
Objective of the study, Sources of information, Limitations.
Status of Banking Inclusion in India.
Indicators for India and their interpretation.
Recent initiatives taken by RBI
Recommendations.
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Key Objectives of the Study:
To explore the present state of affairs of Banking Inclusion in India.
To evolve strategies devised to achieve Banking Inclusion.
Research Methodology:
The study is descriptive in nature.
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Source of Data:
For the particular study secondary data has been used. The
secondary data has been collected from internet, magazines,
periodicals etc related to the Indian banking sector.
Limitations:
The study might have certain limitations owing to
Time constraint.
Lack of requisite study materials and data associated with the
study.
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Banking Inclusion:
Banking Inclusion means bringing the population of a country
under the purview of banking. The primary motive of bankinginclusion is to extend the reach of the financial sector to all those
sections of the society which were ignored in the past and also to
the various geographical regions which were overlooked.
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STATUS OF BANKING INCLUSION IN INDIA
RBI studies show that only 54 per cent adults in India have a bank account.
Of the 6,00,000 villages in India, approximately only 50,000 have access
to finance.
India has the highest number of households (145million) excluded frombanking.
Only 40 percent of Indians have access to banking facilities.
44.9 per cent of the Indian earners had bank account in the year 2007. Ofthis, only 38 per cent of paid workers in villages had accounts comparedto 62 per cent of those in urban space.
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Though the total number of bank branches have increased from 8,700 atthe time of nationalisation in 1969 to 85,300 now, rural areas have only32,000 branches.
According to the data from the National Sample Survey Organisation,45.9 million farmer households out of a total of 89.3 million, do notaccess credit.
Technology and MGNREGA have combined to boost financial inclusionin rural areas. According to the Ministry of Rural Development, 69 per
cent of over Rs 75,000 crore released to the state governments underMGNREGA has been paid to workers through banks.
The scheme has resulted in the financial inclusion of more than 8.6 croreworkers who have opened bank or post office accounts.
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At end-March 2010, 50.6 million no-frills accounts were opened by thebanking system.
By November 2008, out of the 342 districts identified, 155 districts inthe country were declared to have achieved 100% financialinclusion.
Recently, 431 districts have been identified by the State-Level BankersCommittee (SLBC) for 100 per cent financial inclusion across variousStates / Union Territories (UT) and the target has reportedly been met inrespect of 204 districts of 21 States and 7 UTs.
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People Who Are Excluded:
The financially excluded sections largely comprise marginal
farmers, landless labourers, urban slum dwellers, migrants, socially
excluded groups, senior citizens etc. While there are pockets oflarge excluded population in all parts of the country, the North
East, Eastern and Central regions contain most of the financially
excluded population.
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Reasons for Exclusion: In remote, hilly and sparsely populated areas with poor infrastructure,
physical access itself acts as a deterrent.
Lack of awareness, low incomes/assets, social exclusion, illiteracy act as
barriers. Distance from branch, branch timings, cumbersome documentation and
procedures, unsuitable products, language, staff attitudes etc.
Lack of legal identity like voter id, driving license, birth certificates,employment identity card etc. acts as barriers especially for migrants and
slum dwellers.
The idea of poor people that banks are only for the rich people.
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INDICATORS FOR INDIA
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Branches per 100,000 people:
6
6.1
6.2
6.3
6.4
6.5
6.6
6.7
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008
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Interpretation:
The number of branches per 100,000 people in India from the year2001 to 2008 has been hovering around 6.42 to 6.6. The number of
branches has increased over the years but the rate of growth is very
slow. India in order to achieve financial inclusion vis--vis banking
inclusion needs to increase the number of bank branches and
should try to reach near the OECD benchmark for high incomecountries.
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Bank branches per 1000 sq km:
20
21
22
23
24
25
26
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008
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Interpretation:
The number of bank branches per 1000 sq km was 22.18 in the year
2001. Since then the number of bank branches per 1000 sq km has
seen an increase and in the year 2008, the number of bank branches
per 1000 sq km has reached to 25.49. The growth in the number of
bank branches per 1000 sq km over the last 8 years show that both
the RBI and the Govt. of India are taking initiatives to achieve
banking inclusion.
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Population per Bank Branch:
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Interpretation:
The total population per bank branch has come down from 16000 in
the year 2007 to 14000 in the year 2010. In rural areas the population
per bank branch has come down from 17,800 in the year 2007 to16,100 in the year 2010 while in urban areas the population per ban
bank branch has come down from 12,700 in the year 2007 to 10,400
in the year 2010. The population in each bank branch irrespective of
whether in rural or urban areas has shown a steady decrease. This is
due to the fact that more and more bank branches are now being
opened in both rural and urban areas.
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Deposit accounts per 1000 people:
390
400
410
420
430
440
450
460
470
480
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008
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Interpretation:
The deposit accounts per 1000 people in India have been hovering
around 41.6% in 2001 to 46.74% in 2008. In fact it has seen anincrease from 41% to 46% but is still very low. This is the main
indicator of banking inclusion and this data clearly depicts the
picture of banking inclusion in India. In order to achieve banking
inclusion India will have work really hard on this aspect alone and
at this moment India is really lagging behind.
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ATMs per 100,000 people:
0
0.5
1
1.5
2
2.5
3
3.5
FY2005 FY2006 FY2007 FY2008
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Interpretation:
The number of ATMs per 100,000 people in India was 1.63 in the
year 2005. Since then the number of ATMs per 100,000 people hasseen an increase over the years and in the year 2008 the number of
ATMs has increased to 3.28.According to RBI, the number of
ATMs in the country as on May 31, 2009, stood at 44,857. This is a
healthy addition of about 10,357 ATMs compared to FY 08 and has
translated into a 30% growth in units.
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ATMs per 1000 sq km:
0
2
4
6
8
10
12
14
FY2005 FY2006 FY2007 FY2008
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Interpretation:
The number of ATMs per 1000 sq km rose from 5.93 in the year
2005 to 12.68 in the year 2008. The growth of ATMs per 1000 sq km
has been a steady one and this is yet another area which needs lotsof improvement to achieve banking inclusion. This step of
increasing the number of ATMs is indicative of the fact that RBI is
seriously looking forward to achieve banking inclusion. More and
more people will be inclined to open bank accounts when they will
find that there are ATMs available in their place to facilitate
withdrawal of money. More and more number of ATMs in various
locations will tempt people to open bank accounts.
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Population per ATM:
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Interpretation:
The total population per ATM has come down considerably over
the years. The total population per ATM has come down from
43000 in the year 2007 to 19,700 in the year 2010. In rural areas thepopulation per ATM has come down from 1, 25,600 in the year 2007
to 43,500 in the year 2010 while in urban areas the population has
come down from 15,900 in the year 2007 to 8,100 in the year 2010.
This clearly depicts the increase in the number of ATMs over the
years in both rural and urban areas and this increase in ATMs is
very much instrumental in achieving banking inclusion.
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Percentage share of ATMs at different centres:
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Interpretation:
The percentage share of ATMs over the last 4 years have increased
both in rural and semi urban areas while it has decreased in urbanand metropolitan centres. This gives a clear indication that the
Govt. and RBI is giving due importance to the rural people and
trying them to bring under the umbrella of banking. By increasing
the number of ATMs, RBI is definitely trying to lure the rural and
semi urban people to open bank accounts.
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Recent Initiatives by RBI: Banks have been asked to voluntarily make available a no-frills account.
Banks have been asked to provide the printed bank materials in regionallanguages.
Very recently, RBI has asked banks to ensure that the people they recruithave compassion for the underprivileged and are willing to work in ruralIndia as its focus is now on achieving 100% financial inclusion. Banksshould not only select the best person but also the appropriate people forthe job.
In case of PSU banks, it is now mandatory that all employees are postedin rural branches at least for two years.
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Know Your Customer (KYC) procedures have been simplified for lowincome groups.
Introducing technology based products and services.
Mobile banking.
Organizing Financial Literacy Programme.
Use of intermediaries etc.
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Recommendations: In order to achieve banking inclusion, more and more number of bank
branches should be opened all over India and more emphasis should begiven to the rural and semi urban areas because majority of the unbankedpopulation reside in those areas.
The banks in order to open new branches in rural and remote areas andto tempt the people living therein to open bank accounts should forgelinks with the local community, the Gao Panchayats and also with the SelfHelp Groups.
Banks should open more and more numbers of no-frills accounts.
Banks should give wide publicity to the facility of no frills account.
More emphasis should be given on the use of technology.
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Banks should organize more and more number of financial literacyprograms to impart financial literacy to the people.
The number of ATMs should be increased throughout the country.
The forms of opening savings accounts, withdrawal and pay-in-slipsshould be printed in local language. This will render understanding to therural people as they are not proficient in any other language.
Banks should take special care in recruiting people who are willing towork in the rural areas and are compassionate to the poor and
unprivileged.
Banks should increase the number of Business Correspondents in orderact as intermediary between them and the rural people.
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THANK YOU