FINANCIAL INCLUSION

PRIORITY SECTOR & LEAD BANK DIVISIONATMARAM HOUSE, 1, TOLSTOY MARG

NEW DELHI 110 001

FINANCIAL INCLUSION CELL

College of Agricultural Banking, RBI, Pune

&CREDIT COUNSELLING

16th January 2009

What is the magnitude of Financial Exclusion

in India ?

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Rural - 60 %

Urban - 39 %

Exclusion from the payment system - Exclusion from the credit NSSO Survey 59th Round : 73% of farm householdshave no access to formal sources of credit;

proportion is higher in North Eastern(95%), Eastern(81%) and Central Region(77%)

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Rural Urban DivideRural Poor – Income Level

• Share in economic growth

• Percolation of benefits

Urban Poor – Income level

• Share in economic growth

• Percolation of benefits

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Consequences?

We are we assaulting at?

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What are the Essentials of Financial

Inclusion?

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• Access to payment systems• Delivery of Banking & Financial Services• Timings & other conveniences• Cost• Product Range• Education - Health, Insurance, equity,

etc. • Penetration to deepest geographies• Segmented approach• Functional Financial Inclusion

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What is BoP?

Why is it in focus?

Where the future lies?Where are all roads leading to?

Financial Inclusion - A burden or an opportunity?

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Vast opportunities exist, where?

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• At the bottom of the pyramid• In deepest geographies• At last mile stone• In remote corners• In unreached villages• Across untraveled roads• Across underprivileged segments

The Opportunity lies :-

BANK ACCOUNT : KEY TO FINANCIAL INCLUSION

BANK ACCOUNT : KEY TO FINANCIAL INCLUSION

The first step:- : AwarenessOpening of Account : EmpowermentSmart Card : Providing Identity

Look beyond No Frill Accounts

Incentive to save transactions - banking relationship small credit facility creation of credit

history and transparency in credit expansion.

Customer becomes a productive assets of the society

Leading to inclusive growth

Initiatives taken by GOI & RBI

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•Nationalization of RBI•Nationalization of Imperial Bank of India•Social control of commercial Banks•Nationalization of commercial Banks•Branch Extension•Introduction of Lead Bank Scheme•Regional Rural Banks•Priority Sector Credit•Other Govt. Schemes•Creation of NABARD•SHG Bank Linkage Pilot•Introduction of KCC•Specialized Agri Finance Branches•Financial Inclusion•No Frill Accounts•Overdraft•GCC•BF/BC Model

CHALLENGES IN FINANCIAL INCLUSION

• Enormous Tasks• Used Target Groups• Vast Geographical Spread• Small Value and High Transaction cost• Limited Outreach• Technology• Infrastructure-Technological, Administrative,

Organizational • Business Model• Products

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WHAT limits access to financial services?WHAT limits access to financial services?

Most Frequent Low income & literacy

levelsNil or low savings Lack of awareness Lack of assets Unemployment/Under

EmploymentUse of inappropriate

products Financial illiteracy Poor financial habits Inadequacy of financial

infrastructure

Less FrequentLess FrequentIndigenous/ethnic issues Geographical remotenessLack of time Psychological / disability issues Feeling of being excluded Lack of PC/Internet Access Availability of alternative products and suppliers

THUS SOCIAL EXCLUSION IS AN INTEGRAL PART OF FINANCIAL EXCLUSION

How to achieve financial inclusion?How to achieve financial inclusion?

HOW TO ACHIEVE FINANCIAL INCLUSION ?

Technology- An Essential Component Smart Card (to be provided to

every customer)

Point of Sales Machines (PoS) for reading and writing Smart Cards for transactions

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Laptop with webcam, biometric devices- for capturing the account opening details, thumb impression, photo and account details

Innovation becomes fruitful when it reaches the masses.

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•

Technology plays an important role in achieving financial inclusion by allowing branchless banking at the doorstep of clients in remote/low population density areas.Usage of Biometric smart cards/Mobile technology to increase the outreach and to reach the Last Mile Villages.Technology should help transact basic banking transaction in a :

Convenient & Hassle free manner : easy to use

Cost Effective : credit delivery at lower operational cost

Accessible : at doorstep of customer16

TECHNOLOGY : AN ENABLERTECHNOLOGY : AN ENABLER

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Smart Card (to be provided to every Customer) and Point of Sales Machines (PoS) for reading and writing Smart Cards for

transactionsLaptop with webcam, biometric devices - for capturing the

account opening details, thumb impression, photo and

account details

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TECHNOLOGY : AN ENABLERTECHNOLOGY : AN ENABLER

Web Camera for Photograph

Optical Biometric scanner for Fingerprints

Pad for Signature capturing

Battery Power back-up for undisrupted enrolment

Process Flow – EnrolmentsProcess Flow – Enrolments

Account opening forms are filled on the field by Agents.

Post sign-off from the Bank, the forms are sent for Data-entry to Service Provider.

Cards arepersonalized and

accounts are opened.

Biometric(finger print)of the customers are captured and cards are distributed by Agents.

Business Process - Transactions

Customer Agent

Transaction Data

Bank Systems Service Provider’s Systems

Cash

•Instant Receipt•Transaction stored on card

Transaction Data transferred via phone lines

Updates for Customer

Cash/

Bank Branch

VARIOUS PROCESSES OF TRANSACTION

VARIOUS PROCESSES OF TRANSACTION

Pre –Enrolment Process Enrolment Process

Enrolment Process Transaction Process

Financial INclusion : An Opportunity existsFinancial INclusion : An Opportunity exists

Financing the poor is?

Functional Financial Inclusion• Janmitra Rickshaw Project

• Integrated Development Project at Punpun-Patna

• Bhamashah Financial Empowerment Project-for BPL families

• Common Service Centre Project- Financing VLEs

• Mother Dairy Tie up Project• NREGA Projects• PROJECT FOR CONSTRUCTION

WORKERS AT BANGALORE22

Rickshaw Projects: Sustainable Community Development

Economic Impact Enables rickshaw pullers to own the rickshawsAccess to basic financial services which raises their income levels and hence the standard of livingImproved sales for local businesses and corporations as they can advertise at the back spaceSocial Impact Better health facilitiesBetter law and order to the communityPositive work environment

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Financial Literacy & Credit Counseling Centres

• RBI advised SLBC – FLCC at one district• Objectives- Counseling through face to face

interaction• Financial Education - financial products &

services• Benefits-Savings, Managing Money, Credit

Counseling and Debt Management• Helping distressed borrowers• FLCC setup by PNB – Punjab – 7, Haryana – 2• Warning

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Organizational/Administrative Setup

• Staffing• Resources- Human, Technological• Training • MIS • Monitoring• Publicity

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HAPPENINGS

• Promoting own Bank’s products• As an additional duties• No formal training• Affinity to the parents Bank

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Towards better tomorrow

Dr. K. C. Chakrabarty, CMD along with Sh. Pawan Kumar Bansal (MoS for Finance, GoI), at the inauguration of FLCC at Chandigarh on April 3, 2008

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Dr. K. C. Chakrabarty

Chairman & Managing Director

“At PNB, we believe that the poor are bankable, and are laying greater focus on implementing the Financial Inclusion Plan throughout the country in general and Indo Gangetic Plain in particular, where our Bank has major presence.”

“Our vision is focused on widespread financial inclusion - deploying technologies, infrastructure and strategies to take banking to the unreached.”

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Launching of 1st Pilot Project at Neemrana, District Alwar, Rajasthan

PNB created history on 2nd October 2007

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Dr. K. C. Chakrabarty giving a Biometric Smart Card to a

Customer

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Launching of FI Smart Card Project

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Financial Inclusion through women SHGs

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PRESENT STATUS No. of “No Frill “ Accounts : 42.51 Lakh

Amount Outstanding : Rs 382 croreOut of which IT Enabled Smart Cards : 24.85 Lakh Overdraft allowed (No.) : 9183

Amount : Rs 43.87 Lakh Technological Vendors : 8 No. of GCCs : 35378

Amount : Rs 64.23 crore Business Facilitators (No.) : 82 Business Correspondents (No.) : 14 No. of Villages : 100% FI completed : 16227 No. of Districts (100% FI in progress) : 212 No. of FLCCs : 9

Published TWO Booklets on Financial Inclusion Initiatives

TARGETS FOR 2013 TARGETS FOR 2013

To cover 1,00,000 villages, 12 million households and 60 million people

To set up 1 Lac Touch Points under Brick & Mortar/ Branchless Banking

No Frill Accounts, Overdrafts/Loans, insurance (life & health ), micro insurance, micro finance, pensions, remittances, Govt. payments (like NREGP) etc.

To cover 1 Lac rickshaw puller in 5 years.To setup 57 FLCCs in all PNB Lead

Districts

Challenges aheadBy 2012, out of next 250 million Indian wireless users, 100 million (40%) are likely to be from rural areas. Mobile phones to act as local banks in a big way.; solve

power and connectivity problem.Accessibility : Remoteness of villagesConnectivityErrors in Account opening and verification processRelaxation of KYC norms for migrant populationFinding suitable BCsPilot projects to go beyond experimental stage. Standardization of card specificationsInteroperability among the different technological systems as the solutions being offered today are proprietary in nature

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Indian BPL – 214 Million earning on an average Rs. 10 per day, out of which 16 million people are living in rural areas

Of the world’s 6.4 billion poor, about 2.6 billion live on less than US $2 per day. The poor have largely untapped potential for consumption, production, innovation and entrepreneurial activity. The need is to do business with them so as to bring them out in the market place. This is a sure way of freeing them from the poverty. The more business models integrate and include the poor, the higher are the chances for the companies to increase their revenues while fulfilling the millennium development goals (MDGs)”.

Report by UN Development Programme, “ Creating Value for All: Strategies for Doing Business with the Poor”,

Summing Up………

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WE HAVE PROMISES TO KEEP AND MILES TO GO BEFORE

WE SLEEP