Presentation by Shri U C Sarangi, Chairman, NABARD
Transcript of Presentation by Shri U C Sarangi, Chairman, NABARD
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National Seminar on
Launching a National Initiativefor Financial Inclusion
18 September 2009
U C Sarangi
Chairman
National Bank for Agriculture
And Rural Development
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11th
Plan emphasizes on
Inclusive growth
Growth to which the poor contribute
Growth from which the poor benefit
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Financial inclusion is defined as The process of ensuring access to financial
services and timely and adequate credit
where needed by vulnerable groups such asweaker sections and low income groups at anaffordable cost
---- The committee on financial
inclusion under Chairmanship of Dr C.Rangarajan
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Govt. policy initiatives for inclusive
finance
1904 Cooperative Society Act net work ofprimary credit delivery institutions
1954 Rural Credit Survey Committee,
Cooperation has failed but cooperation mustsucceed
1969 - Nationalisation of 14 major commercialbanks followed by 6 more in 1980 Expansion of the rural banking infrastructure Institutional rural credit provision Lead Bank Scheme Emphasis on priority sector lending
Ongoing policy imperatives for extending financial services in the remote areas
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Financial Inclusion efforts in the past 1975 - RRBs as low cost lending
institutions
to Reach the poorest in credit-deficient areas 1980 - Poverty Alleviation Programes
IRDP
1990s Microfinance SHG movement KCC
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India The Banking System - 1969
Commercial Banks Public Private Total
No. of Banks 8 81 89
Total Branches 6596 1666 8262
Rural Branches
(%Total Branches)
1504
(23)
329
(20)
1833
(22)
% share of agriculturein total credit 2.2 negligible 2.2
+ a large number of small sized cooperative bank
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Reserve Bank of India Government of India
NABARDNABARD
Public Sector
Banks (28)
RRBs (88)
LABs (4)
June 2008
Private
Banks (22)
Rural
Semi-urban
Urban
Metro
Total
18,557
12,776
11,336
10,501
53,190
11,498
2,612
607
63
14,780
1,052
2,468
2,504
2,245
8,269
Foreign
Banks (30)
0
2
50
227
279
TOTAL
31,127
17,858
14,497
13,306
76,518
+ the cooperative banks with more than 12000 branches and almost 100,000 primary
credit cooperatives linked to cooperative banks and now even commercial banks
Banking Network In India
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And still the level of exclusion is nearly 60
percent with marked regional variation
S.No
Social
Group
Households
(000)
% Excluded
1 SC 15592.6 49.77
2 ST 11924.1 63.68
3 OBC 37043.0 48.58
4 Others 24688.4 50.58
5 Total 89248.1 51.36
Occupation wise
Category - % Exclusion
Marginal farmers - 55.00%
Small Farmers - 49.00%
Medium Farmers - 39.64%
Large Farmers - 33.00%
Social Group wise Region wise
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the POOR requires.the POOR requires.Mechanism to keep their limited
resources safely Credit to meet emergencies Credit for micro Enterprise
Facility to receive remittances
Have access toHassle-free
financial
services
So we were
looking forSustainable approaches
Products that match
Needs & capacities and
Reduces transaction
costs and timeand time
Gap Analysis in Financial Services
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Steps taken to move in that direction
Simplifications ofSimplifications of
KYC normsKYC norms
GCC introducedGCC introduced
SLBC identifySLBC identify
Dist. for 100% FIDist. for 100% FI
BC/ BF modelBC/ BF model
Priority sectorPriority sector
redefinedredefined
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RBI took the initiative with its circular in 2005
RBI Annual Policy Statement for 2005-06. The termFinancial Inclusion was explicitly used
for the first time Concerns in regard to the banking practices that tended
to exclude rather than attract vast sections ofpopulation
Implement policies to encourage banks to provideextensive services
Banks urged to review their existing practices to alignthem with the objective of financial inclusion.
November 2005
Banks were advised to open no frills account
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Category March 31,
2006
March 31,
2007
March 31,
2008*
March 31,
2009*
Public Sector
Banks
3,32,878 58,65,419 1,39,09,935 2,98,59,178
Private Sector
Banks
1,56,388 8,60,997 18,45,869 31,24,101
Foreign Banks 231 5,919 33,115 41,482
Total 4,89,497 67,32,335 1,57,88,919 3,30,24,761
Progress of 'No frills' Accounts in
the Banking Sector in India
* Provisional
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FIF and FITF
- Funding Status
Particulars Contribution
(%)
Initial CorpusReceived ( Rs crore)
FIF FITF FIF FITF
GoI 40 40 10 10
RBI 40 40 * *
NABARD 20 20 5 5Total 100 100 15 15*Matching contribution of 40% to be received after disbursements.
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Financial Services
- A holistic approach
Micro Savings
Affordable Credit
Remittance/ funds
transfer
Micro Insurance/
Micro Pension
Financial Literacy
Credit Counselling
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Major initiatives
Advisory committee on financial inclusion constituted Guidelines for support from the fund finalised
Initiatives of several institutions already supported 250 rural household accounts by Commercial Banks and
RRBs every year; targets achieved for 2008-09 Focus on MFIs/ NGOs/ CSOs
Special attention to 268 critically excluded and disturbeddistricts
Dovetailing with other schemesinitiated and implementedby NABARD
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Major initiatives Banks to formulate suitable schemes for
extending financial support for Common
Service Centres Financial Literacy and Counseling Centres Financial Literacy related projects
Capacity Building of BC/ BF Pilots undertaken from FIF and FITF
support
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FI - Road map for Institutions
Financial
Inclusion
Banks/ Co-ops/ RRBs
Loan/ Credit A/c
Saving A/c
Payment &
Remittances
MFIs/ NGOs
Financial
Counselling/
Literacy
Micro Credit/
Saving
Insurance Cos Post Offices
Postal SavingsRemittancesStand Alone
Insurance
BC/BF
BC/BF
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Challenges/ Issues in Smart Card Model
Enrolling the large excluded number Over wide geographic spread
High Maintenance cost Less number of transactions to start with Illiteracy and use of vernacular Product and Service Pricing -
affordability and viability Trust and Acceptance Lack of electricity
Poor telecommunications
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Major Issues
Open standard for card andcost thereof
Smart card v/s plastic card
IBRDT initiative
Revenue generation/Sustainability of BC
Technology Obsolescence capacity building of BC
Regulatory direction
Reducing risk perception
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Other Major Issues
Sec 25 Co. as BC vs. Individual BC
Security/ Confidentiality issues
Common Tender Process for all district level Banks
Reduction in cost of components
Financial viability for RRBs and Cooperatives
Integration with existing systems of Banks
Interoperability/ Open Standard
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Banks InitiativeGovt. Support
Implementation of BC / BF Model
One Bank One District
Supported by Govt. forNREGS, Pension, etc.
Bank's own initiative forFinancial Services
Smart Card/Normal Card/
POS
Incentive by State Govt Possible support from FITF
Service Area of Bank
FI
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Future Strategies
Focus on Demand Side as well through Financial Literacy drive
Certification Program for BC/ BF On the Spot loan appraisal/ sanction/ rating
evaluation through Mobile van system Audio/ Visual display Partnership with reputed and experienced NGOs Sensitization programe through training
establishment
Inclusion of Financial Literacy in schoolcurriculum
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Future Strategies
Integrated approach of FinancialInclusion Projects involving micro insurance schemes
life, asset, accident, health etc Product for part saving of Govt. payments-
NREGP/ Social Security/ Pension
Involvement of MFI sector for FI (Microfinance Bill needs to be prioritised)
Last but not the least Integrate with proposed Unique
Identification Card of GoI.
One
Citizen
One
Card.
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Vision - 2012 Financial Inclusion of all Rural House holds (11.15 cr).
Last mile client should be able to use POS/ Smart Card/
Mobile Financial Services at doorstep of Rural Households.
KCC/ GCC/ SCC to all farmers/ artisans/ landless
labourers
Cash less transaction through cards for all Banking/
Payment transactions
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Vision - 2012 Every person wishing to open a savings account with
the banking system will have an option to do so in his
or her own neighborhood Every no-frills account will have an overdraft facility
thru a General Credit Card
Business Correspondents will support all transactions
for deposits and withdrawals, loan disbursements and
repayments and money transfers, micro- insurance
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Strategy Constitute an authority for National
Mission on Financial inclusion
Draw a road map for replicating thesuccessful pilots
Establish open standards for technology
to be used Source BC from diverse streams to get
at the required number
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Strategy Undertake a massive program for financial
literacy and credit counselling
Dovetail Govt. payments under variousprograms through bank accounts Strategic action plan for remittance facility
both inter bank/intra bank and post office
Implement a time bound plan for training ofBC
Include PACS and SHGs as BC
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