RURAL BANKING IN INDIA

INITIATIVES TAKEN BY STATE BANK OF INDIA

Presented By:Aman GargMohd. Asif

69% of the total country’s population 69% literacy rate (it implies that this much can

use the basic banking services without much extra efforts)

More than 6.4 lacs villages 86% of the total rural population earns less than

Rs.100 a day But still contributes 50% of the total GDP There are 185 million “potentially bankable”

people in rural india who do not use formal banking due to poor access or usage of services.

A Glimpse of Rural India

Rural banking & microfinance need to be addressed for sustainable growth : RBI Deputy Governer (Ms.Shayamala Gopinath)

The biggest challenge for next decade or more to banks in the country is to capture the banking business of over 50% population of this country of over 120 billion people.( Dr.Deepali Joshi, Executive Director, RBI)

What’s making news????

Rural banking in India started since the establishment of banking sector in India.

Rural banks mainly focuses upon the agro sector and priority sector lending.

In rural banking in India there are 14,475 rural banks in the country of which 2126 are located in remote rural areas.

SBI- Largest bank catering to rural areas. Other commercial banks, RRB’s, Co-operative Banks

also have their establishments in rural areas. NABARD( a wing of RBI) provides credit and

regulates banking in Rural India.

Rural Banking : Introduction

Rural population of about 780 million with limited access to financial services.

A high proportion of rural lending is from informal sources.

About 500-600 million people in India do not have bank accounts.

Current demand for credit in Rural India is about Rs.1,33,000 crores.

Various policies and financial inclusion plans are being administered by RBI to promote banking in rural areas.

Rural Banking: Current Status

Structure of Rural Banking in India

Structure of Rural Banking

Commercial Banks

Three tier Federal co-

operative Bank

State Co-operative Banks

District Central Co-operative

Banks

Primary Agricultural

credit societies

Primary Co-operative

agriculture & rural developement

Banks

Regional Rural Banks

Loans Savings accounts Remittance Financial counseling Credit cards Insurance Risk mitigation products

Banking services required by rural sector

Short term loan - 12 to15 monthsSHORT TERM LOAN are issued to the farmer for the purpose of cultivation or domestics expenses such buying seeds, manure and fodder for cattle, etc.

Medium term loan -3 to 5 yearsMEDIUM TERM LOAN are given to farmer to purchase cattle, agriculture implement and to make improvement on land.

Long term loan -15 to 20 yearsLONG TERM LOAN are given to the farmer to purchase land, pay of old debt and purchase useful machinery for long term usage. These loans are for comparative long period since the farmers can repay them gradually over a number of years

Term of Rural Finance

. Priority sector lending scheme

Under this scheme banks must have to lend small loans to small and marginal farmers for agriculture and allied activities, loans to Micro and Small Enterprises, loans for small housing projects, education loans and other small loans to people with low income levels. Presently, the target for aggregate advances to the priority sector is 40 per cent of the Adjusted Net Bank Credit.

Initiatives taken by RBI

Kisan Credit Card Scheme (KCC)The major challenge is to bring all farmers into the institutionalcredit framework. To boost the credit to agriculture sector, apart from a host of initiatives, the Kisan Credit Card (KCC) Scheme was introduced in the year 1998-99 to enable farmers to purchase agricultural inputs and draw cash for their production needs. Since the inception of the scheme public sector banks have issued more than 5.48 crore KCCs till march 2012.

Initiatives taken by RBI

Regional Rural Banks (RRB’s)Regional Rural Banks (RRBs) were established in the year 1976 as a low cost financial intermediation structure in the rural areas to ensure sufficient flow of institutional credit for agriculture and other rural sectors.

Currently there are 71 RRB’s in India with more than 16000 branches in rural areas.

Initiatives taken by RBI

Financial Inclusion PlanFinancial Inclusion (FI) is the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular at an affordable cost in a fair and transparent manner by mainstream institutional players.Banks were advised to extend banking services with business correspondents models in the unbanked remote villages.

Initiatives taken by RBI

The Financial Inclusion Plan (2010-13), introduced in April 2010 has concluded in March 2013. The penetration of baking services in the rural areas has increased to a great extent.

Banking connectivity has been extended to 2,11,234/- villages from 67,694 at the beginning of the plan period. 5694 rural branches have been opened during the period.

Progress……..

Numbers of Business Correspondents have increased from 34,532 to 1,52,328.

Progress……..

Total number of Basic Savings Bank Deposit Accounts (BSBDAs) have gone up from 73.45 million in 2010 to 171.43 million upto December 31 2012, Number of Kissan Credit Cards outstanding have gone up from 24.31 million in 2010 to 31.73 million upto December 31 2012 and Number of General Credit Cards outstanding have gone up from 1.39 million in 2010 to 3.11 million upto December 31 2012.

Progress………

Case Study: State Bank of India

Largest commercial bank in India Bank with largest branch network with more

than 15000 branches. Rural and semi urban branches -6473 SBI has 30 regional rural banks in India. The rural banks is spread in 13 states

extending from Kashmir to Karnataka and Himachal to North east.

The total number of SBI’s RRB branches are 2349(16%).

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The bank is actively involved since 1973 in non-profit activity called community services banking.

Micro Finance deeply ingrained in SBI. Social obligation services like E-ticketing,

mobile banking. Comprehensive financial services

viz.savings, credit, remittances, insurance and financial products through ICT.

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SBI TINY ACCOUNT Opening of simple savings account for the

villagers with zero balance. One of the villagers as SBI mitra. Drop box for depositing cash –at the SBI

mitra’s shop/house. Small emergency loan. SBI mitra assists in opening account.

Some projects of

SBI TINY SMART CARDS A smart card with photo and fingerprint. Card serves as the account Can be used for govt. disbursals, insurance

and loan disbursals. SBI KISAN CREDIT CARDS This is medium limit card upto Rs.1,00,000. Farmers can withdrew partial amount from

card. 4% annual interest only on withdrew led

amount.

Some projects of

SELF HELP GROUPS (SHG’s) Credit linked 677 thousand SHG’s as on December

2006 with total disbursement of USD $660 million benefiting 9.48 million families.

Market share of 43% of total SHF’s financed by commercial banks in he country.

734 thousand SHG’s are having thrift account with total thrift of USD$108 million in these accounts.

6400 thousand women beneficiaries. Increase in income, expenditure on education,

clothes and health thus improving living standards.

Some projects of

Expand reach Kiosk banking Educate customers Be cost effective Innovate and adopt technology Focus on micro finance

Way forward…….

This was just the beginning, the best is yet to come.

Thank you