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Transcript of IndianBank - KC Chakravathy
8/8/2019 IndianBank - KC Chakravathy
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Financial InclusionFinancial InclusionConcept,Issues and RoadmapConcept,Issues and Roadmap
Presentation byPresentation by
Dr. K CDr. K C ChakrabartyChakrabartyChairman and Managing Director Chairman and Managing Director
Indian Bank,Indian Bank,ChennaiChennai
AtAt
Institute for Development and Research in Banking TechnologyInstitute for Development and Research in Banking Technology
HyderabadHyderabad02.09.200602.09.2006
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Financial ExclusionFinancial Exclusion
What is Financial Exclusion ? What is Financial Exclusion ?
•• Financial exclusion is the lack of Financial exclusion is the lack of access by certain consumers toaccess by certain consumers to
appropriate, low cost,fair andappropriate, low cost,fair andsafe financial products andsafe financial products and
services from mainstreamservices from mainstream
providers.providers.•• Financial exclusion becomes of more concern inFinancial exclusion becomes of more concern in
the community when it applies to lower incomethe community when it applies to lower income
consumers and/or those in financial hardship.consumers and/or those in financial hardship.
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Poverty and FinancialPoverty and Financial
ExclusionExclusion
•• There is a large overlapThere is a large overlapbetween poverty and permanentbetween poverty and permanent
financial exclusion. Both povertyfinancial exclusion. Both poverty
and financial exclusion result inand financial exclusion result ina reduction of choices whicha reduction of choices which
affects social interaction andaffects social interaction andleads to reduced participation inleads to reduced participation in
societysociety
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Financial Exclusion andFinancial Exclusion and
Allied PhenomenaAllied Phenomena
FinancialExclusion
Financial
Discrimination
Financial
Illiteracy
Financial
Exploitation
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Gradations of FinancialGradations of Financial
ExclusionExclusion
•• Core Exclusion:Core Exclusion: Who operate their financial Who operate their financialaffairs completely outside the regulatedaffairs completely outside the regulatedfinancial systemfinancial system
•• Limited Access:Limited Access: May have a basic bankMay have a basic bankaccount but poor financial habits and littleaccount but poor financial habits and little
adviceadvice
•• Included but using inappropriate products:Included but using inappropriate products:Victims of inappropriate products.Victims of inappropriate products.
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Main types of FinancialMain types of Financial
ExclusionExclusion
1.1. Transaction accountsTransaction accounts2.2. Time DepositsTime Deposits
3.3. Financial AdviceFinancial Advice
4.4. Appropriate small creditAppropriate small credit
5.5. InsuranceInsurance
6.6. Mortgage LoansMortgage Loans7.7. SuperannuationSuperannuation
8.8.
Enterprise based loanEnterprise based loan
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Who are Financially Who are Financially
ExcludedExcluded
1.1. Poor Poor 2.2. Socially under Socially under --privilegedprivileged
3.3. DisabledDisabled
4.4. Old as well as childrenOld as well as children
5.5. Women Women
6.6. UneducatedUneducated7.7. Ethnic MinoritiesEthnic Minorities
8.8.
UnUn
--employedemployed
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Extent of FinancialExtent of Financial
ExclusionExclusion1.1. Coverage of Coverage of
•• Check in accountsCheck in accounts --70%70%•• InsuranceInsurance --10%10%•• Financial AssetsFinancial Assets --2%2%•• Assets InsuranceAssets Insurance --2.53%2.53%•• Health InsuranceHealth Insurance --0.20%0.20%•• Credit CardCredit Card --3%3%•• Debit CardDebit Card --5.66%5.66%•• Small OverdraftsSmall Overdrafts --3.65%3.65%•• Entrepreneurial creditEntrepreneurial credit --2.06%2.06%
2.2. Geographical coverageGeographical coverage•• 5% villages are having a bank branch5% villages are having a bank branch
3.3. SHG coverageSHG coverage
•• Out of around 400 million poor, 125 million poor areOut of around 400 million poor, 125 million poor arecovered of which 113 million are womencovered of which 113 million are women
4.4. Farmers coverageFarmers coverage--•• Tenant farmers/share croppers/oral lesseesTenant farmers/share croppers/oral lessees
•• Small and marginal farmersSmall and marginal farmers
•• Out of 89.35 mill. SF/MF, 34.70 mill. (46.30%) areOut of 89.35 mill. SF/MF, 34.70 mill. (46.30%) arecovered.(House holds)covered.(House holds)
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Most needed ServicesMost needed Services
for Financially Excludedfor Financially Excluded
1.1. Access to Small loans or overdraftsAccess to Small loans or overdrafts
2.2. Check in AccountsCheck in Accounts
3.3. Small Savings ProductsSmall Savings Products
4.4. Health InsuranceHealth Insurance5.5. Life InsuranceLife Insurance
6.6. Insurance against the failure of activityInsurance against the failure of activity
7.7. Financial AssetFinancial Asset
8.8. Credit CardCredit Card
9.9. Entrepreneurship creditEntrepreneurship credit
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Model for Financial ExclusionModel for Financial Exclusion
Do without
High Cost alternatives
Delayed pathway out of povertyLow standard of living and poverty
Commercial & regulatory environmen
Debt(often informal)Low/No assets
Unemployment
Low Income
Mainstream product
Attributes: fees;
Penalties,bundling,marketing
Which do not address needs
Social/wider exclusion
Poor Social,economic & Health outcomes Inefficient Use of MoneyFinancial
exclusion
Financial illiteracy Poor financial habits
Poor education
Macro -environment Personal characteristics
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Main Drivers of FinancialMain Drivers of Financial
ExclusionExclusionLess frequentLess frequent
•• Psychological/disabilityPsychological/disabilityissuesissues
•• Feeling of being excludedFeeling of being excluded
•• Indigenous/ethnic issuesIndigenous/ethnic issues
•• Geographical remotenessGeographical remoteness
•• Lack of timeLack of time
•• Lack of PC/InternetLack of PC/Internet
AccessAccess•• Availability of alternativeAvailability of alternative
products and suppliersproducts and suppliers
•• Youth
Most frequentMost frequent
•• Low incomeLow income
•• Nil or low savingsNil or low savings
•• Lack of assetsLack of assets
•• UnemploymentUnemployment•• Under employmentUnder employment
•• Use of inappropriateUse of inappropriate
productsproducts•• Financial illiteracyFinancial illiteracy
•• Poor financial habitsPoor financial habitsYouth
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Problems of FinancialProblems of Financial
Exclusion in IndiaExclusion in India
••
CoverageCoverage
•• Cost of Small Value transactionCost of Small Value transaction
•• InfrastructureInfrastructure
•• Suitable productsSuitable products
•• FlexibilityFlexibility
•• Weak Delivery model Weak Delivery model•• Community Enterprise and FinancialCommunity Enterprise and Financial
Management supportManagement support
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Model for Financial InclusionModel for Financial Inclusion
Easy pathway out of poverty
Good Social,economic & Health outcomes
High standard of living
Commercial & regulatory environmen
Low or controlled debtAsset ownership
Employment
High Income
Mainstream product
Attributes: fees;
Penalties,bundling,marketing
Which suit those with higher
income/assets
Less constrained spending
Low cost services Social/wider inclusion
Free Use of MoneyFinancial
inclusion
Financial lliteracy Good financial habits
Good education
Macro -environment Personal characteristics
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Pre conditions for thePre conditions for the
SuccessSuccess
I.I. Attitude and Will power Attitude and Will power
II.II. TechnologyTechnology
III.III. Delivery MechanismDelivery Mechanism
IV.IV. Support ServicesSupport Services•• InfrastructureInfrastructure
•• Community Development SupportCommunity Development Support
•• Product InnovationProduct Innovation
V.V. Regulatory and Policy InterventionsRegulatory and Policy Interventions
VI.VI. Involvement of allInvolvement of all
•• especially Development/Administration atespecially Development/Administration atDistrict/Block/Village levelDistrict/Block/Village level
B i Ch ll fB i Ch ll f
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Basic Challenges of Basic Challenges of
Financial InclusionFinancial Inclusion
I.I. CoverageCoverage
II.II. Access to Diversified FinancialAccess to Diversified FinancialProducts and ServicesProducts and Services
III.III. Delivery ModelDelivery Model-- Day to dayDay to daytransactionstransactions
Fi i l I l iFi i l I l i I diI di
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Financial InclusionFinancial Inclusion-- IndianIndian
ExperimentExperimentInitiative by Indian Bank Initiative by Indian Bank I.I. Indian Bank was the first Bank to implement theIndian Bank was the first Bank to implement the
Financial Inclusion Project on a pilot basis in UT of Financial Inclusion Project on a pilot basis in UT of Pondicherry where the Bank has lead responsibilitPondicherry where the Bank has lead responsibility
II.II. IB implemented the concept first inIB implemented the concept first in MangalamMangalam
Village of Pondicherry on 30.12.05 which becameVillage of Pondicherry on 30.12.05 which becamethe first village in India, where all the households ithe first village in India, where all the households i
the village were provided Banking facilities.the village were provided Banking facilities.
III.III. Indian Bank spearheaded the project and involvedIndian Bank spearheaded the project and involvedall the 144 bank branches of 37 Banks operating inall the 144 bank branches of 37 Banks operating in
UT of Pondicherry.UT of Pondicherry.
IV.IV.
Participants of the project are: All Banks,Participants of the project are: All Banks,
Govt.Govt.DeptsDepts, Insurance, Insurance CosCos,NGOs,Facilitators etc.,,NGOs,Facilitators etc.,
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The ObjectiveThe Objective
•• Financial Inclusion is delivering Banking facilities/Financial Inclusion is delivering Banking facilities/
financial services to all the people in a transparent andfinancial services to all the people in a transparent andequitable manner at affordable cost.equitable manner at affordable cost.
•• HonHon’’bleble Union Minister of Finance budget speech 2005Union Minister of Finance budget speech 2005--
06:06:
““The financial inclusion provides business opportunity for theThe financial inclusion provides business opportunity for the
financial institutions at the bottom of the pyramid to expandfinancial institutions at the bottom of the pyramid to expand
the volume of business. Profitability can be increased onlythe volume of business. Profitability can be increased only
by finding newer avenues for deployment of fundsby finding newer avenues for deployment of funds””
RBI Governor in Annual Policy Statement 2005RBI Governor in Annual Policy Statement 2005--06 urged the06 urged the
banks to align themselves with the objectives of Financialbanks to align themselves with the objectives of Financial
Inclusion.Inclusion.
•• Economically and socially empower poor and lowEconomically and socially empower poor and low--
income people leading to overall development of theincome people leading to overall development of theHouseholds, Villages, States and finally the Nation.Households, Villages, States and finally the Nation.
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Achievements in PondicherryAchievements in Pondicherry
0
10000
20000
30000
40000
50000
60000
70000
80000
HOUSEHOLD TAR 41963 74605 31906 30603 36461
HOUSEHOLD ACH 40557 26537 8511 9531 9381
SB A/Cs OPENED 67822 23351 3064 12088 3926
INDIAN BANKOTHER
NAT.BANKSSBI GROUP
CO OP
BANKS
PRIVATE
BANKS
Replication of theReplication of the
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Replication of theReplication of the
successsuccess1.1. RBI in the 2006RBI in the 2006--07 Annual Policy Statement highlighted07 Annual Policy Statement highlighted
about Financial inclusion project implemented by theabout Financial inclusion project implemented by the
bank in UT of Pondicherry, and advised SLBCbank in UT of Pondicherry, and advised SLBC convenorsconvenors
in all State /in all State / UTsUTs to identify at least one district in their to identify at least one district in their
area for achieving 100 percent financial inclusion on thearea for achieving 100 percent financial inclusion on the
lines of the initiative taken in Pondicherry.lines of the initiative taken in Pondicherry.
2.2. As a follow up, the project was launched in TN inAs a follow up, the project was launched in TN in
CuddaloreCuddalore Dist, where again IB is the Lead Bank involvingDist, where again IB is the Lead Bank involving
all the banks covering 877 villages.all the banks covering 877 villages.
•• Launched on 11.07.06 and expected to be completed byLaunched on 11.07.06 and expected to be completed by
July 2007.July 2007.
3.3. The Bank also extended the project toThe Bank also extended the project to
– – All the other 12 Lead Districts in TN,AP,All the other 12 Lead Districts in TN,AP,KeralaKerala – – Other states where each of our circle has taken upOther states where each of our circle has taken up
implementation in three villages.implementation in three villages.
O i f th hi tO i f th hi t
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Overview of the achievementOverview of the achievement
of IB across the countryof IB across the country
•• Total number of villagesTotal number of villages
covered so far covered so far
•• Total number of No frills SB a/Total number of No frills SB a/cscs
openedopened
•• OD accounts openedOD accounts opened
•• GCC accounts openedGCC accounts opened
•• *In addition, 16706 women have been linked*In addition, 16706 women have been linked
throughthrough SHGsSHGs..
•• 372372
••
120198*120198*
•• 1322713227
•• 660660
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The processThe process
•• Allocation of villages to the BanksAllocation of villages to the Banks
•• Village/House hold surveyVillage/House hold survey
•• Assessment of the need for Financial InclusionAssessment of the need for Financial Inclusion
ProductsProducts
•• Financial Inclusion Products OfferedFinancial Inclusion Products Offered•• No Frills SB accountNo Frills SB account
•• Small Over Draft facilitySmall Over Draft facility--for general consumptionfor general consumption
•• General Credit CardGeneral Credit Card--for income based activityfor income based activity
•• Micro InsuranceMicro Insurance-- Life and disability cover Life and disability cover
•• Health Insurance Cover Health Insurance Cover
•• Mutual Funds (proposed)Mutual Funds (proposed)
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Thank YouThank YouThank You