Welcome

Electronic Benefit TransferA. P. Smartcard Project

A.V.V. Prasad, Addl. CommissionerDepartment of Rural Development

Govt of Andhra Pradesh

Extent of Financial Exclusion• 30,000 bank branches and 1.5 lakh

post offices for about 6,00,000 rural villages.

• 51.36% of rural households are financially excluded.

• 44.9% of total earners have bank accounts.

• Only 28.3% of total earners ( who earn less than Rs.50,000 ) have bank accounts.

• Only 54 persons per 100 have savings account.

• Only 13.0% of total earners ( who earn less than Rs.50,000 ) take credit from banks.

Social Group

Population in ‘000

% Included

% Excluded

S.C 15592.6 50.23 49.77

S.T 11924.1 36.32 63.68

OBC 37043 51.42 48.58

Others 24688.4 49.42 50.58

Total 89248.1 48.64 51.36

Institution / End-March 1993

2002

2007

Scheduled Commercial Banks 246 246.5

320.9

Regional Rural Banks 30.5 36.7 52.7

Primary Agricultural Credit Societies

89 102.1

125.8

Urban Co-operative Banks 41.6 42 50

Post Offices 47.5 60.2 60.8

Total 454.6

487.1

610.3

Total Accounts per 100 adult persons

51 46 54

In million

Source: Report on Currency and Finance 2006-08 (IIMS Survey, 2007), NABARD report

Source: Report on Currency and Finance 2006-08 (IIMS Survey, 2007), NABARD report

Households

Financial Inclusion

Comprehensive financial inclusion

Credit, insurance etc

Financial literacy

Opening of a bank account

‡Banking service –Public Good.‡Delivery of banking services at an affordable cost.‡Delivery of banking service to the disadvantaged and low income groups.

Financial InclusionFinancial Inclusion

STATE DRIVEN INTERVENTIONSTATE DRIVEN INTERVENTION

VOLUNTARY EFFORT BY BANKSVOLUNTARY EFFORT BY BANKS

“A small loan, a savings account or an insurance policy can make a great difference to a low-income family. They enable people to invest in better nutrition, housing, health and education for their children. They ease the strain of coping with difficult times caused by crop failures, illness or death. They help people plan for the future.”

- Kofi Annan, Secretary General of the United Nations

Source:1.Commemorative Lecture by Shri V.Leeladhar, Deputy Governor Reserve bank of India at the Fedbank Hormis Memorial Foundation at Ernakulam on December 2, 2005. 2. Building Inclusive Financial Sectors for Development, The Blue Book. 3. The NABARD Report, January 2008

A.P.Smartcard Project State Driven Intervention. Establishment of last mile banking -

establishing banking outpost at each Gram Panchayat.

Disbursement of Social Security pensions and MG-NREGS wage payments.

Chip based smartcard backed by bank a/c as identity card for disbursement.

Biometric proof of identity arrangement. Disbursement through a GP level Business

correspondent. Branchless Banking model – A major step

towards financial inclusion. Bank lays the entire infrastructure i.e.

position kit and CSP at each Gram Panchayat.

Govt pays 2% as commission to the total amount paid.

Banking outpost in each Gram Panchayat

Banking outpost in each Gram Panchayat

SSP pensioners & MG-NREGS wage seekers

have bank a/cs

SSP pensioners & MG-NREGS wage seekers

have bank a/cs

TOTAL FINANCIAL INCLUSIONTOTAL FINANCIAL INCLUSION

Key-Processes

Allots districts/GPs

Bank Bank

Bid

Bid

Bid

Bid

Technology Service Providers

Business Correspondents

1)

Enrollment

•Govt identifies the beneficiaries and give data.•Bank conduct enrollment camps at GP.•Govt machinery helps in logistics.•6/10 finger prints, demographic details, photograph and identity proof – captured.

•Govt identifies the beneficiaries and give data.•Bank conduct enrollment camps at GP.•Govt machinery helps in logistics.•6/10 finger prints, demographic details, photograph and identity proof – captured.

3)

2)

Issue of

•Data is encrypted and card is prepared.•Data fulfilling KYC norm is used to open bank accounts.•Bank account is updated in the card and issued to the beneficiaries.

•Data is encrypted and card is prepared.•Data fulfilling KYC norm is used to open bank accounts.•Bank account is updated in the card and issued to the beneficiaries.

4)

Smartcard Business Cycle

BUSINESSCORRESPONDENT

BUSINESSCORRESPONDENT

Unspent moneyReconciled

statement

Reconciled statement

Unspent money

Unspent money

Acquittanc e

CSPCSP

BANKBANK

The AP Smart Card Project

CASHDISBURSEMENT

Acquittanc e

e-Payorder & FTO

Acquittanc ee-payorder CASH Acquittanc e

5)

CSP Disbursement cycle

Download-data

Biometric authentication

Cash disbursement

6)

Upload-data

PILOTPILOT

Started in 6 mandals in Warangal District

Started in 6 mandals in Warangal District

Service area Approach, ALW as TSP with 6 banks

Service area Approach, ALW as TSP with 6 banks

Enrollment started March,2007in and payments started in April, 2007

Enrollment started March,2007in and payments started in April, 2007

Service Area

Approach

Service Area

Approach

GPs in six districts are allocated to different banks based on the service area

GPs in six districts are allocated to different banks based on the service area

From March, 2008 onwards, enrollment started

From March, 2008 onwards, enrollment started

The GPs are allocated to 12 banks in service area approach

The GPs are allocated to 12 banks in service area approach

One Dist- One Bank

model

One Dist- One Bank

model

One single district is completely allocated to one single bank

One single district is completely allocated to one single bank

From November, 2008 onwards, enrollment started

From November, 2008 onwards, enrollment started

7 banks are operating in this model.7 banks are operating in this model.

No. of districts : 22

Total no of GPs 21805

No of GPs where payments are commenced

18789

Target (No.of Beneficiaries)

188 lakhs

No. of beneficiaries enrolled

142 lakhs

No. of cards issued 134 lakhs

Amount paid (from May 2007)

Rs.4180

Crores

Project ImplementationOVERALL PROGRESS AT A GLANCE

Challenges and way forward:• Banks need to create a separate vertical only for EBT/FIP.

HO-State-District-Branch level activities• Technology:

– Hardware & Software- Standardization of protocols.– Information Flows, Data interfaces and furnishing disbursement data to the govt.

• Business Process Reengineering:– Enrollment, Account Creation, Card Issue.– Integrity - w/o zero balance , w/o carded but manual payments.– Payment within 4 days– Reconciliation of accounts in time.– Maintaining accounts in CBS – Mandatory.– Bank to have direct control over BC.– Maintaining the appropriate OD limits for effective implementation of EBT.

• Cash Management:– Managing & monitoring cash transfers between Bank, MC, CSP & customers.– Accessing Remote areas: Connectivity, Cost, Security

• Capacity building & Coordination among functionaries:• Need for Competition among Banks & choice to customer.

FINANCIAL EXCLUSION

30000 rural branches of banks are supposed to serve over 8 lakhs villages.Service Area Approach has become dysfunctional for most of the villages: Denial of service to millions of poor.Poor are starved of credit, forced to pay usurious rate of interest.Urban Poor also left out.

FI: The Rights Approach

If technology permits,Rural Areas should be served on same terms

as the urban areas.The poor shall not have to pay usurious

interest rates; in fact, they shall not be charged more than the rich.

People need services; shall not be denied. In fact, they must have choices.

Towards faster & better FI

• Service Area Banks always fall short of people’s expectations as well as needs. It should not be extended to FI.

• Multiple players may be permitted:• First come, first serve!• Newer, better services.• Cheaper and faster service.• Let people choose whom they patronize.

Service Providers

ALW

FINO

Integra

Atyati

TCS

HCL

Coromondal

APOnline

Banks

Axis Bank

Union Bank of India

APGVB

State Bank of India

Andhra Bank

Corp Bank

State Bank of Hyderabad

ICICI

Indian Bank

Punjab National Bank

ING Vysya Bank

Post Office