Financial Inclusion in Banks

8/10/2019 Financial Inclusion in Banks

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FINANCIAL INCLUSION IN BANKS,

STRATEGY OF BANKS,BCBF (BUSINESS CORRESPONDENT

AND BUSINESS FACILITATORS)MODEL, FINANCIAL LITERACY

CENTRES AND STATUS OF BANKS

BYR.K.GUPTAB. Com (Hons); CAIIB; AIB (London); LL.B; MBA (Finance)

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Topics to be covered during the sessionsa. Definition of financial inclusion

b. What has been left so as to enforce financial inclusion by the GOIc. What strategies banks are following to implement FI & How

effective it is?d. Difficulties in opening no frill accounts &Problems being

encountered?

e. BC/BF model effectiveness.f. Difficulties in Issuance of KCC and GCC cards/OD facility.g. Status of implementation of Electronic Benefit Transfer of

funds ( EBTF) in banks. Issues if any.h. Status and issues in opening Financial Literacy centers and use

thereof.i. Latest guidelines issued by RBI through monetary Policy declaredon 03.05.2013

j. Plan for financial inclusion for the period from 2013-2016k. New guidelines of RBI for appointment of NBFCs as BCs dated

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DEFINITION OF FINANCIAL INCLUSION

a. Financial Inclusion is defined as the process of ensuring access toappropriate financial products and services needed by vulnerablegroups such as weaker sections and low income groups at anaffordable cost in a fair and transparent manner by mainstreaminstitutional players . RBI CIRCULAR 12.08.2011

b. Approach is based on the fundamental principle of 5As of ensuring

i. Adequacy andii. Availability of financial services to all sections of the society

through the formal financial system covering savings, credit,remittance, insurance, etc. and, at the same time,

iii. increasing Awareness of such services andiv. ensuring Affordability andv. Accessibility of the appropriate financial products

through a combination of conventional and alternative delivery channelsand technology enabled services and processes.

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WHAT HAS BEEN LEFT SO AS TO ENFORCEFINANCIAL INCLUSION BY THE GOI

Types of Financial Exclusion :

(i) Exclusion from payment system: not having access to bank accounts(ii) Exclusion from formal credit markets leading to approaching

informal/ exploitative marketsPost-Nationalization (1969) :Expansion of branch network to unbanked areas Increased lending to

agriculture, SSI, business Recent trend : access to basic banking servicesWho have been excluded so far:Marginal farmers landless labour oral lessees self employed unorganized sector urban slum dwellers migrants ethnic minorities

socially excluded groups senior citizens women NER, Eastern &Central regions most excludedFI essential for inclusive growth which is necessary for sustainable overall economicgrowth In developed economies, focus is on small population Indeveloping economies (India), focus is on majority excluded

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WHY FINANCIAL INCLUSION?

a. Out of total 1065 million population, 514 million arefemale.b. Out of 6,00,000 rural habitations across the country, only

30,000 rural habitations have commercial Bank Branchesc. 60% of the population do not have Bank Accounts and life

insurance cover is less than 10%d. 51.4% of the farmer households are financially excluded

from both formal and informal sourcese. Out of the total farmer households ,

i. 27% access formal sources of creditii. 73% of the farmer households access funds from

informal sources like local money lenders


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SELECT INDICATORS OF FINANCIAL INCLUSION CROSS COUNTRY ANALYSIS

Country Number ofBranches

Number ofATMs

Bank credit Bank deposits

(per 0.1 million adults) (as per cent of GDP)

India 10.91 5.44 43.62* 60.11*

Austria* 11.81 48.16 35.26 32.57Brazil 13.76 120.62 29.04 47.51

France 43.11 110.07 56.03 39.15

Mxico 15.22 47.28 16.19 20.91

UK* 25.51 64.58 467.97 427.49United States 35.74 173.75* 46.04 53.14

Korea 18.63 250.29* 84.17 74.51

Afghanistan 2.25 0.50 11.95 21.4

Philippines 7.69 14.88 27.57 53.02


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WHAT STRATEGIES BANKS ARE FOLLOWING TO IMPLEMENT FI?.

i. Ultra Small Branches being set up between the base branch and BC

locations so as to provide support to about 8-10 BC Units at a reasonabledistance of 3-4 kilometres.ii. Such Ultra Small Branches should have minimum infrastructure such as

a Core Banking Solution (CBS) terminal linked to a pass book printer and a safefor cash retention for operating large customer transaction and would have to

be managed full time by bank officers/ employees . Such an arrangementwould lead to efficiency in cash management, documentation, redressal ofcustomer grievances and close supervision of BC operations.

iii. Promotion of SHG/ NGO and appointment of retired bank employeespreferably belonging to these areas besides Micro Finance Institutions (MFIs)and other Civil Society Organisations (CSOs) as intermediaries in providingfinancial and banking services through the use of Business Facilitator andCorrespondent models

iv. Opening the literacy centres for counselling of the borrowers and thedepositors.

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WHAT STRATEGIES BANKS ARE FOLLOWING TOIMPLEMENT FI?.

v. Implementing the EBTF directly to the credit of the beneficiary for routingMGNREGS, wages and social security benefits including proposed cashtransfers in respect of subsidies on Kerosene, LPG and Fertilisers etc.

MONETARY POLICY OF RBI AS ON 03.05.2013

With a view to facilitating Direct Benefit Transfer (DBT) for the delivery of socialwelfare benefits by direct credit to the bank accounts of beneficiaries, it isproposed to advise banks to:

a. Open accounts for all eligible individuals in camp mode with thesupport of local government authorities;

b. Seed the existing accounts or the new accounts opened with Aadhaarnumbers; and

c. Put in place an effective mechanism to monitor and review the progressin the implementation of DBT.

d. Guidelines are being issued separately.

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vi. Social security pensions, Mahatma Gandhi National Rural

Employment Guarantee Scheme ( MNREGS ), National Old AgePension ( NOAPS ) insurance scheme etc. for the benefit of the poor toavoid leakages.

vii. Implementation of ICT (Information and communication Technology)including Mobile , internet, kiosk, ATMs for illiterate ( biometric) andblind persons (Braille language) .

viii. At least one third of new ATMs installed should be talking ATMs withBraille keypads and placed strategically in consultation with otherbanks to ensure that at least one talking ATM with Braille keypad is

generally available in each locality for catering to needs ofvisually impaired persons.

ix. Simplification of branch authorization - Domestic ScheduledCommercial Banks have been permitted to freely open branches inTier 2 to Tier 6 centres

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x. Banks have been mandated to open 25 % of all new branches in unbanked ruralcenters .

xi. Free bank branching for domestic scheduled commercial banks in every part ofthe country. No longer will a well-run scheduled domestic commercial bank haveto approach the RBI for permission to open a branch . RBI CIR: 19.09.13.

xii. Know Your Customer (KYC)requirements for opening bank accounts relaxed forsmall accounts

xiii. Electronic Benefit Transfer for routing social security payments and otherentitlements through the banking channel.

xiv. Pricing for banks totally freed . Interest rates on advances totally deregulatedxv. Making available a minimum four banking products through the ICT based BC

model.xvi. Banks are requested to ensure opening of Aadhaar Enabled Bank Accounts

(AEBA) of all the beneficiaries including those residing in villages with less than2000 population CIR--- RBI 30.11.11

xvii. In addition to introduction from any person on whom KYC has been done, bankscan also rely on certificates of identification issued by the intermediary beingused as Banking Correspondent, Block Development Officer (BDO), head of

Village Panchayat, Post Master of the post office concerned or any other publicfunctionary, known to the bank. 11/22/2014 11


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WHAT STRATEGIES BANKS ARE FOLLOWING TO IMPLEMENT FI?

xvii. Banks prepared Board approved three Year FIPs- April 2010 toMarch 2013 and as per latest guidelines mentioned in MonetaryPolicy declared on 03.05.2013 the banks are required a plan of2013-16

xviii. Self-set targets-FIPs to be integrated with Business plan of thebanks.

xix. Coverage of unbanked villages, > 2000 & < 2000, Rural brick andmortar branches, Deployment of BCs.

xx. No-frill accounts (NFA) to be opened, including through BC-ICT,EBT, KCC, GCC.

xxi. Specific products to be designed to cater to the financially excluded

segments.xxii. FIP achievement- Criteria in the performance evaluation ofofficials of banks.

xxiii. Close Monitoring by Reserve Bank of India- Monthly Reporting- Annual Comprehensive review.

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WHAT STRATEGIES BANKS AREFOLLOWING TO IMPLEMENT FI?.

xxiv. Printed material in trilingual form In order to ensure that banking facilities percolate to the vast sections ofthe population, banks should make available all printed material used byretail customers including account opening forms, pay-in-slips, passbooksetc., in trilingual form i.e., English, Hindi and the concerned RegionalLanguage.MONETARY POLICY DECLARED ON 03.05.2013The Reserve Bank has prepared comprehensive financial literacy materialconsisting of a Financial Literacy Guide, a Financial Diary and a set of 16Financial Literacy Posters. Banks are, therefore, advised to:a. use the model of financial literacy camps as a tool to achieve the

targets set under their FIPs;b. use the financial literacy material as a standard curriculum in the

literacy camps; andc. be innovative in devising suitable communication channels so that the

messages reach the target audience effectively.11/22/2014 13


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HOW EFFECTIVE IT IS?Up to 31.03.2012 the villages having population over 2000 have been

covered by 96.4% for the financial inclusion.a. EBT is one of the products offered under Financial Inclusion, whichfacilitates payments to reach the intended beneficiaries throughbank accounts.

b. This relieves State Government functionaries of cost and time

involved in administering the high volume small value payments.c. Provision of door step banking services in remote areas entails a

cost on the banks.d. The payment of commission by the State Governments for EBT

transactions makes the model economically viable and also helpsbanks to extend their penetration to remote villages.

e. It also provides banks with a business opportunity of linkingcredit products to the payments.

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PARTICULARS MARCH 10 MARCH 13 GROWTH

Banking Outlets in Villages - Branches 33,378 40,837 7459

Banking Outlets in Villages - BCs 34,174 2,21,341 1,87,167

Banking Outlets in Villages - Other Modes 142 6,276 6,134Banking Outlets in Villages -TOTAL 67,694 2,68,454 2,00,760

Urban Locations covered through BCs 447 27,143 26,696

BSBDA Total (in millions) 73.45 182.06 108.61

BSBDA Total (Amt. in ` billions) 55.02 182.92 127.90OD facility availed in BSBD A/c (No. in millions) 0.18 3.95 3.77

OD facility availed in BSBD A/c (Amt in billions) 0.10 1.55 1.45

KCCs - (No. in millions) 24.31 33.79 9.48

KCCs - (Amt. in ` billions) 1240.07 2,622.98 1,382.91GCCs - (No. in millions) 1.39 3.63 2.24

GCCs - (Amt. in ` billions) 35.11 76.34 41.23

ICT A/Cs-BC- Transaction - No. in millions 26.52 250.46 490.49

ICT A/Cs-BC- Transactions - Amt. in ` billions 6.92 233.88 388.97


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ISSUES AND CHALLENGESa. Demographic Spread How to provide banking

services to villages with low population Viability?b. Appropriate Business Model Yet to evolve - Availability

of Suitable products.c. Efficient Delivery Mechanism being experimented.d. Financial Literacy Status of awareness.e. Lack of ownership by banks in implementation under

Financial Inclusion. Issue has been raised by bankswith RBI in April 13

f. Lack of co-ordination.g. ICT Based BC Model - Yet to stabilize.

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WAY FORWARD FOR EBT IMPLEMENTATION

Keeping in view the need to spread the banking habits to all villages, it is advisedthat one district many banks one leader bank model may be adopted

henceforth for EBT implementation.a. In this model, all the banks present in the district participate in EBT, though

for administrative convenience the State Government deals only with oneleader bank.

b. State Government shall designate the leader bank, in consultation with theRegional Office of RBI and the SLBC, who will obtain the funds from theState Government and in turn will arrange to transfer funds throughinterbank transfer to other banks for credit to the accounts of ultimatebeneficiaries account on a commission basis.

c. The commission paid by the State Government may be from the amountwhich will accrue to them due to non-incurring of expenses involved inmanually administering high volumes of small value payments.

d. The revenue sharing model is to be decided mutually amongst participatingbanks.

e. Today, with the availability of various modes of EFT like RTGS, NEFT andNECS, the leader bank is in a position to transfer funds to other participatingbanks speedily and cost effectively.

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f. However, there is no prohibition on adoption of one district one

bank model approach where the model exists and is alreadyworking provided one bank is in a position to provide whole range ofminimum banking services under this dispensation.

g. However, all the operational glitches will have to be resolvedmutually by the State Government and the concerned bank .

h. EBT implementing bank, will in such case have to follow regulatorystipulation that brick and mortar branches are built within 30 kmradius of each of the BC outlets in these villages.

i. Needless to say, the FIP implementing bank's responsibility will be

secondary in the allotted villages of such districts till they alsoobtain the EBT mandate.

j. However, banks will continue opening banking outlets in the villagesallotted to them under FIP and speed up enrolment of customers.

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k. As EBT Scheme is a part of the overall FIP, the EBT accounts is required to provide

whole range of permissible banking services viz. deposit scheme, preferably avariable recurring deposit will in-built Overdraft (OD), remittance andentrepreneurial credit products in the form of GCC/KCC.

l. The State Governments should not stipulate any condition that prevents EBTaccounts from being used for other banking transactions.

m.Whenever the State Government plans to implement EBT scheme through banks infuture, the details of the scheme should be first discussed in the SLBC.

n. For example, these accounts cannot be opened as joint accounts of the beneficiarywith a State Government agency.

o. Similarly, in some states, EBT accounts are made dormant when there are notransactions in the account for 2-3 months. This is not permissible as per regulatoryguidelines.

p. Thus in such cases, neither the account can be made inactive nor can the amountbe returned to State Government .

q. The concerns of State Government can be addressed by providing an exceptionreport of those accounts where there is no transaction for 2-3 months.

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t. State Government shall designate a nodal department for administration of eachof the social benefit schemes.

u. The provisions of MOU signed between Government agency and the banksshould be consistent with the extant guidelines and notifications of RBI.

v. The Nodal Department shall provide the list of beneficiaries for the district to beenrolled along with demographic details to the bank.

w. Banks shall arrange for enrolment and creation of bank account of thebeneficiary.

x. The Nodal Department shall maintain a savings account in its name with theleader bank.y. The departments account in the bank will be credited with a consolidated

amount by the Treasury Bank of the State Government.z. The department will send instructions to the leader bank each month containing

with the updated list of beneficiaries in electronic form.

aa.The bank will then debit the savings bank account of the Nodal Department andarrange for crediting the accounts of beneficiaries.bb.The Management Information System as required by the State Governments will

be strengthened automatically as payment information will flow electronicallyand seamlessly from end to end so that a data base is created for generatingvarious types of reports.

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cc. Achieving full financial inclusion is crucial for implementation of EBTand direct transfer of subsidies . As some of the beneficiaries couldbe residing in a village with population less than 2000 requisiteinfrastructure should be planned and put in place to cover all the EBTbeneficiaries.

dd. SLBC should immediately prepare a plan of action to cover all

unbanked villages including having population of less than 1000.ee. The allocation of these villages may be done on the basis of

geographical proximity. In respect of States/Districts where the EBTscheme is yet to be implemented, this presents an opportunity forthe banks to put in place the requisite infrastructure to cover all theunbanked villages irrespective of the population criteria.

ff. This will strengthen the position of the banks to provide services to allthe EBT beneficiaries whenever State Government decides toimplement EBT.

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gg. Once banking services are extended to all villages under the FIP,convergence between the EBT Scheme and FIP would be

automatically realized.hh. Once FIP is fully implemented covering all the unbanked villages

and a UID number is issued to all the villagers, a model willemerge where the customer will have the option to transact with

the bank of their choice in any village by using UID enabled MicroATMs.ii. This will make customers, less vulnerable to local power

structures, and lower the risk of being exploited by BCs.Customers will be able to transact electronically with each otheras well as with individuals and firms outside the village.

jj. This will reduce their dependence on cash, and lower costs fortransactions.

kk. As banking is a public good, this is essential in the interest ofpublic policy.11/22/2014 22


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RECENT INITIATIVES-FINANCIAL INCLUSION

a. Monetary Policy Actions Mandated SLBCs to prepare a roadmap forcovering all unbanked villages of population less than 2,000 and allotthese villages to banks for providing banking services in a time-boundmanner.

b. Advised banks to open intermediate brick and mortar structure

between the base branch and BC locations. These structures havingminimum infrastructure like a CBS terminal, pass book printer, safe forcash retention, etc. will be at a reasonable distance of 3-4 kilometersand will provide support to about 8-10 BC units Will lead to efficiencyin cash management, documentation, redressal of customer

grievances.c. Satellite offices in the form of Ultra Small BC outlets are also

mandated and being encouragedd. Advised sponsor banks to formulate Financial Inclusion Plans for RRBs.

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RECENT INITIATIVES-FINANCIAL INCLUSION

e. Disaggregation of FIP from Head Office tobranch level- Banks already advised to put inplace a mechanism to monitor the progress at

the branch level periodically .f. Lead Bank Scheme - Metropolitan Areas

All districts in metropolitan areas under the foldof the LBS.

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Recent Initiatives Financial Literacy

f. Financial Literacy & Financial Inclusion should gotogether

g. Financial Stability Development Council has beenmandated to focus on Financial Inclusion and FinancialLiteracy.

h. Discussion with NCERT/CBSE and State Boards- Effortson to include financial education curriculum in schooleducation.

i. Financial Literacy Centres to be set up in all 630+ LDM

offices All rural branches of Scheduled CommercialBanks to undertake FL activities. j. National strategy on financial education being

prepared.

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RBI-22.01.2009-100 per cent Financial Inclusion -Evaluation by external agencies- Broad findings

Studies were conducted in 26 districts in the states of Andhra

Pradesh, Gujarat, Himachal Pradesh, Karnataka, Orissa,Punjab, Rajasthan and West Bengal.a. The findings reveal that although the State Level Bankers

Committees (SLBCs) have declared several districts as

100% financially included, actual financial inclusion hasnot been to that extent in all the districts.b. Further, most of the accounts that have been opened as

a part of the financial inclusion drive have remainedinoperative due to various reasons.

c. There is a need for SLBC/DCCs to actively step up theawareness with regard to 'no frills' accounts as thiscontinues to be poor in many districts.

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RBI-22.01.2009-100 per cent Financial Inclusion -Evaluation by external agencies- Broad findings

In order to sustain the momentum for financial inclusion,

banks are advised toa. Ensure that steps are taken to provide bankingservices nearer to the location of the no frills accountholders through a variety of channels includingsatellite offices, mobile offices, business

correspondents , etc.;b. Consider providing General Credit Card (GCC )/smalloverdrafts along with no-frills accounts to encouragethe account holders to actively operate the accounts;

c. Conduct awareness drives so that the no-frills account

holders are made aware of the facilities offered;d. Review the extent of coverage in districts declared as100% financially included so as to meet the gaps inbanking facilities to those desirous of obtaining suchfacilities; and

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BC/BF MODEL EFFECTIVENESS.

a. Financial Literacy & Financial Inclusion should gotogether

b. Financial Stability Development Council has beenmandated to focus on Financial Inclusion and FinancialLiteracy.

c. A technical group on Financial Inclusion and FinancialLiteracy under aegis of FSDC is coordinating the effortsof all Financial Sector regulators.

d. Discussion with NCERT/CBSE and State Boards- Effortson to include financial education curriculum in schooleducation.

e. Financial Literacy Centres to be set up in all 630+ LDMoffices All rural branches of Scheduled CommercialBanks to undertake FL activities.

f. National strategy on financial education being prepared.

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DIFFICULTIES IN ISSUANCE OF KCC AND GCC


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DIFFICULTIES IN ISSUANCE OF KCC AND GCCCARDS/OD FACILITY.

a. Attitude of the Bank Officials

b. Details of the land holding furnished by the Patwaric. Recovery of the amountd. Lacklustre approach of tehsil authorities after filing RCs.e. End use of fundsf. Accountability

g. Pre and post sanction reporth. Delay in disposali. Lack of knowledge j. Lack of confidencek. Pressure of local Sahukarsl. Political intervention for write off and effect on the attitude of the

borrowers.m. Availability of good seed and fertilizers.n. Benefit of subsidyo. Number of accounts /borrowers VS employees in the branch. VS incentive

VS corruption

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OBJECTIVES OF THE FLCC4 02 09


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OBJECTIVES OF THE FLCC4.02.09a. To provide financial counselling services through face-to-face interaction as well as

through other available media like e-mail, fax, mobile, etc. as per convenience of theinterested persons, including education on responsible borrowing , proactive and earlysavings, and offering debt counselling to individuals who are indebted to formal and/or

informal financial sectors;b. To educate for financial products and services available from the formal financial sector

i. Credit counsellingii. Savings counsellingiii. Interest in local terms i.e. monthly basis and the way of interest calculation in

deposit and advances.

iv. Management of debts for borrowers in distressv. give due emphasis to customers' rights under fair practices code, benefits of

nomination facilities, operation of accounts, etc.vi. The choice of finally accepting or rejecting a debt restructuring proposal

suggested by the FLCCs may be left to the bank/ banks concerned. However, incase of non-acceptance or rejection of restructuring proposals forwarded byFLCCs by banks, they may give the reasons in writing to FLCC in the interests oftransparency.

vii. The FLCCs would, however, not involve themselves in recovering and distributingmoney. This may be left to the bank concerned, or the bank having the largestexposure to act on behalf of all the banks.

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OBJECTIVES OF THE FLCCs Consequent to the revision in the guidelines on June 6, 2012 forsetting up Financial Literacy Centres (FLCs):a. 718 FLCs have been set up as at the end of March 2013.b. A total of 2.2 million people have been educated through indoor

education to walk-in persons and through outdoor activities such

as awareness camps/ choupals , ghostis , seminars and lectures ina one-year period, from April 2012 to March 2013.

c. It aims to establish initial contact with 500 million adults andeducate them on key savings, protection and investment-relatedproducts so that they are empowered to take prudent financialdecisions.

Qualification of the in charge of the FLCC.The Reserve Bank's College of Agriculture Banking, Pune, Bankers' Instituteof Rural Development, Lucknow or the training colleges of banks mayconsider conducting training programmes for the counsellors

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MONITORING AND OTHER ASPECT OF FLCCS

Monitoringa. The functioning of the FLCCs in each State may be monitored by

a Committee headed by the Regional Director of the ReserveBank of India and feedback provided to the banks on a regularbasis.

b. The Committee may comprise SLBC convenor bank, other banks,NABARD, IBA, consumer organizations, NGOs working in thearea, etc.

Transparency / Disclosure of Informationa. To help the customers make informed decisions, all banks may

display on their websites necessary information regarding fees,charges, etc. as prescribed vide Reserve Bank circularDBOD.No.Leg.BC.75/09.07.005/2008-09 dated November 3,2008.

b. The details of the services offered by the FLCCs opened by thebanks may also be placed on the websites of banks concerned.

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MONITORING AND OTHERASPECT OF FLCCS

Publicitya. A great deal of emphasis needs to be given by all

institutions to educate the public of the variousschemes/ facilities.

b. All forms of publicity , viz. press conferences,workshops, publications, websites, road shows,mobile units, village fairs, etc. should be activelyexplored.

c. A suitable budget needs to be provided by all

banks for the purpose.d. As part of on going measures for publicity, banks

may ensure that the list of counselling centres isappropriately publicised.

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PUBLICITY OF THE FLCCs Reserve Bank of India has prepared comprehensive financial literacy

material that consists of:a. A Financial Literacy Guide (basic concepts about managing money,

the importance of savings, advantages of saving with banks, facilities

provided by banks and the benefits of borrowing from banks in a

clear manner)b. A Financial Diary ( It has been prepared to enable the target

audience to keep a record of their income and expenses , leading to

better financial planning and understanding of how they spend)

c. A set of 16 posters ( These are simple, appealing slogans and visualsfor prominent display in camps to communicate messages of money

management, savings, borrowings and basic banking products)

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FI AS DREAM V/S REALITYa. Achievements cannot be ignored - Nearly 100 Million no frills

accounts have been opened by banks so far.

i. When banks started, we were all saying people have no bankaccounts,ii. now with bank accounts being opened we are complaining that there

are no transactions in these accounts.iii. Banks need to be given time for making these Non functional

accounts (NFAs) active.

b. Banks must be able to see Financial Inclusion as a businessopportunity. The Technology is critical for this as brick and mortarbranches would not be cost effective and that is why BC- ICT model isthe key.

c. The market players i.e. banks must be allowed to discover thebusiness and delivery model. To ensure that banks do not getcomplacent they should be actively encouraged to set targets forthemselves and for capturing untapped business in rural areascovering approximately 2/3 rd population of the country .

d. EBT, Remittances and credit products will play a key role in makingthis experiment a commercial success.

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WHY TO BE OPTIMISTIC AND HOW THE DREAMCAN BE A REALITY

a. All stakeholders like RBI, Other sectoral regulators like SEBI, IRDA,PFRDA, etc., NABARD, Banks, Governments, Civil Societies, NGOs,etc. to work together for a sound and purposeful collaboration.

b. Adequate infrastructure such as digital and physical connectivity,uninterrupted power supply, etc . will boost the financial inclusioninitiatives.

c. If the EBT scheme succeeds and if Banks are allowed to developthe business and delivery models , operations through BCs wouldbecome viable and the number of transactions in these accountswill increase.

d. Demand side initiatives - Create awareness, literacy, nationalstrategy, Curriculum in schools at national level .

e. Sensitization - Efforts to be made so as to bring about cultural andattitudinal changes in the mindset of all stakeholders.

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Reasons for Financial Exclusion & Perceptions

REASONS FOR FINANCIAL EXCLUSION:a. Illiteracy (34.62%) Female Illiteracy (45.72%)b. Distance from the nearest Bank Branch resulting in longer

commuting time to the branch

c. Rigid Banking rules and procedures to commence Bankingrelationshipd. Lack of Awareness of Products and services

e. Psychological and Cultural Barriers

f. Lack of suitable Products tailor made to their needs andinfrastructure

g. Involves small value transactions resulting in hightransaction cost


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Reasons for Financial Exclusion & Perceptions

BANKS PERCEPTIONS SHOULD BE: a. Financial Inclusion is not just a Regulatory Directive or as

Corporate Social Responsibility of Banksb. Financial Inclusion is now perceived as a commercially

viable business which facilitates outreach of banking and

financial services to excludedc. It provides the opportunity to Banks to create capacity

building, to support livelihood programs and to addeconomic value

d. NREG (National Rural Employment Guarantee) and SSP(Special Security Payments shall be easy and to the rightperson being linked to agriculture now.

e. ICT (INFORMATION & COMMUNICATION TECHNOLOGY)

RBI LATEST GUIDELINES FOR OPENING OF NEW ACCOUNTSPROOF


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RBI LATEST GUIDELINES FOR OPENING OF NEW ACCOUNTS PROOFOF IDENTITY AND ADDRESS

RBI LATEST GUIDELINES DATED 10.12.12 Since introduction is not necessary for opening of accounts under PML Actand Rules or Reserve Banks extant KYC instructions, banks should not insiston introduction for opening bank accounts of customers.AADHAAR LETTER FOR KYC PURPOSES In modification of instructions quoted above, banks are advised that theymay now accept NREGA Job Card as an officially valid document for opening

of bank accounts without the limitations applicable to Small Accounts. KYC COMPLINACE IN CASE OF SELF HELP GROUPSRBI CIR DATED01.04.2013 KYC verification of all the members of SHG need not be done while openingthe savings bank account of the SHG and KYC verification of all the office

bearers would suffice. As regards KYC verification at the time of credit linking of SHGs, it is clarifiedthat since KYC would have already been verified while opening the savingsbank account and the account continues to be in operation and is to be usedfor credit linkage, no separate KYC verification of the members or officebearers is necessary.


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Guidelines for Engaging Business Facilitator-02.07.12--

Under the "Business Facilitator" model, banks may use theservices of intermediaries such as:a. NGOs/SHGs

b. Farmers Clubsc. Cooperatives

d. Community based organizationse. IT enabled rural outlets of corporate entities

f. Post Offices

g. Insurance agentsh. Well functioning Panchayatsi. Village Knowledge Centres

j. Agri Clinics


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Guidelines for Engaging Business Facilitator-02.07.12

k. Agri Business Centresl. Krishi Vigyan Kendrasm. KVIC/KVIB units depending on the comfort level of the bank for

providing facilitation services. Such services may includei. identification of borrowers and fitment of activities;ii. collection and preliminary processing of loan applications including

verification of primary information/data;iii. creating awareness about savings and other products and education

and advice on managing money and debt counselling;iv. processing and submission of applications to banks; (v) promotion

and nurturing Self Help Groups/Joint Liability Groups;

v. post-sanction monitoring;vi. monitoring and handholding of Self Help Groups/Joint Liability

Groups/Credit Groups/others; and (vii. follow-up for recovery.

G id li f g gi g B i C d t (BC )


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Guidelines for engaging Business Correspondents(BCs)02.07.12

The scheduled commercial banks including Regional Rural Banks (RRBs) and

Local Area Banks (LABs) may engage Business Correspondents (BCs), subjectto Due diligence may be carried out on the individuals/entities to be engagedas BCs prior to their engagement. The due diligence exercise may, inter alia,cover aspects such asa. reputation/market standing,b. financial soundness, (iii) management and corporate governance, (iv)

cash handling ability and (v) ability to implement technology solutionsin rendering financial servicesc. Individuals like retired bank employees, retired teachers, retired

government employees and ex-servicemen, individual owners ofkirana/medical /Fair Price shops, individual Public Call Office (PCO)operators, agents of Small Savings schemes of Government ofIndia/Insurance Companies, individuals who own Petrol Pumps,authorized functionaries of well run Self Help Groups (SHGs) which arelinked to banks, any other individual including those operating CommonService Centres (CSCs);

Guidelines for engaging Business Correspondents(BCs)


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Guidelines for engaging Business Correspondents(BCs)02.07.12

d. NGOs/ MFIs set up under Societies/ Trust Acts and Section 25 Companies ;e. Cooperative Societies registered under Mutually Aided Cooperative Societies Acts/

Cooperative Societies Acts of States/Multi Statef. Cooperative Societies Act; Post Offices; and v) Companies registered under the

Indian Companies Act, 1956 with large and widespread retail outlets, excluding NonBanking Financial Companies (NBFCs).

g. Now NBFC (ND) can be appointed as BC and distance of 30km has also been left tothe banks Board policy vide RBI circular dated 24.06.2014

h. While a BC can be a BC for more than one bank, at the point of customer interface,a retail outlet or a sub-agent of a BC shall represent the bank which has appointedthe BC. However, it has now been decided to permit interoperability at the retailoutlets or sub-agents of BCs (i.e. at the point of customer interface), provided thetechnology available with the bank, which has appointed the BC, supports

interoperability, subject to the following conditions:i. The transactions and authentications at such retail outlets or subagents of BCsare carried out on-line;

ii. The transactions are carried out on Core Banking Solution (CBS) platform; andiii. The banks follow the standard operating procedures to be advised by the

Indian Banks' Association (IBA).

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Guidelines for Engaging Business CORRESPONDENT-02.07.12

Procedure for engaging BCsa. The terms and conditions governing the contract between the bank

and the BC should be carefully defined in written agreements andsubjected to a thorough legal vetting . While drawing up agreements,banks should

b. strictly adhere to instructions contained in the guidelines onmanaging risks and code of conduct in outsourcing of financialservices by banks, issued by Reserve Bank of India on November 3,2006.

c. The banks will be fully responsible for the actions of the BCs andtheir retail outlets/sub agents.

D. Scope of activitiesThe activities to be undertaken by the BCs would be within the normal

course of banking business. The scope of activities of a BC may includei. identification of borrowers;ii. collection and preliminary processing of loan applications including

verification of primary information/data; (iii) creating awarenessabout savings and other products and education and advice onmanaging money and debt counselling;


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SCOPE OF ACTIVITIES OF BUSINESS CORRESPONDENT -02.07.12

iii. processing and submission of applications to banks;iv. promoting, nurturing and monitoring of Self Help

Groups/ Joint Liability Groups/Credit Groups/others;v. post-sanction monitoring;vi. follow-up for recovery,vii. disbursal of small value credit;viii. recovery of principal/collection of interest;ix. collection of small value deposits;x. sale of micro insurance/ mutual fund products/

pension products/ other third party products andxi. receipt and delivery of small value remittances/

other payment instruments.


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Redressal of Grievances in regard to servicesrendered by Business Facilitators/Correspondents

a. Banks should constitute Grievance Redressal Machinerywithin the bank for redressing complaints about servicesrendered by Business Correspondents and Facilitators andgive wide publicity about it through electronic and printmedia.

b. The name and contact number of designated GrievanceRedressal Officer of the bank should be made known andwidely publicised. The designated officer should ensure thatgenuine grievances of customers are redressed promptly.

c. The grievance redressal procedure of the bank and the timeframe fixed for responding to the complaints should be placedon the bank's website.

d. If a complainant does not get satisfactory response from thebank within 60 days from the date of his lodging thecompliant, he will have the option to approach the Office ofthe Banking Ombudsman concerned for redressal of hisgrievance/s.

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Guidelines for Engaging Business Facilitator-02.07.12

In the Paragraph 93 of the Union Budgetannouncement made by the Honourable FinanceMinister for the year 2008-09 where in it wasstated as under:"Banks will be encouraged to embrace the conceptof Total Financial Inclusion. Government willrequest all scheduled commercial banks to followthe example set by some public sector banks andmeet the entire credit requirements of SHG

members, namely, (a) income generation activities,(b) social needs like housing, education, marriage,etc. and (c) debt swapping"


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BUSINESS MODEL CHALLENGES

a. Being perceived more as an obligation than abusiness opportunity.

b. Infrastructure issues- Premises, Roads, Power, etc.c. Less transactions- Non-operational accounts- High

volume small value transactions- High Cost -Viability issues.

d. Technology issues- availability of handhelddevices, cards, technology partners, operationalglitches, Digital connectivity, Turnaround time.

e. Engaging BCs- Associated risks - Lack ofprofessionalism of BCs.f. BC attrition- inadequate remuneration- Non

payment of commission.

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ESSENCE OF WORK LIFE AND WORK ETHICS

What is work? To nurture each other. It is a form of Yagna , sacrifice. It is

the worship of the Divine Why to work?

To purify the mind and the heart ( Chittashuddhi ) and tobecome wise; to provide public benefit

How to work? With the spirit of renunciation, i.e., Tyag and to serve

others without self-interest Spirit of work

Excellence and perfection in work (GEETA PREACHES)


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THANK YOU FOR YOUR KIND [email protected]
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Financial Inclusion in Banks

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