Beacon of Financial Inclusion : Reserve Bank ofIndia - “The Liberal Regulator”
In the year 2005, the then RBI Governor Dr. YagaVenugopal Reddy coined the term financial inclusion andthe vision of social inclusion of un(der) banked poor andvulnerable masses gained momentum. The idea wasto handhold un(der) banked into mainstream bankingnetwork, link them with the grid of formal financial systemand offer them access to finance through a bouquetof multiple products and services including savings,insurance, Electronic Benefit Transfers (EBTs), creditand not just popular services like P2P remittances.In order to realise this goal, RBI in 2006 allowed banks toutilize services of Business Correspondents (BCs) andBusiness Facilitators (BFs) which was a watershed stepin accelerating financial inclusion agenda in India, as inhistory of the Indian banking system, financial institutionsnever went to the doorstep of customer (particularlyrural customers) to offer banking services; RBI made ithappen!RBI played the role of a proactive and liberal regulatorover the period of time. It facilitated and even expandedscope of BC guidelines from time to time. RBI's responsewas dynamic and accommodating, particularly in 2010when it permitted for-profit business entities to offer BCservices.All the good intentions of RBI along with policy push fromGovernment of India have yielded results and BC's haveput up an impressive show. However, ironically beforethe model (BC) could stabilize, a chaotic confluenceof devices, technology, usability and viability debatehas besieged the model and has created an inclusionvacuum in the system. Most of the mainstream financialinstitutions are being too cautious and follow compliancerelated objectives of financial inclusion which primarilyinvolves offering No Frills Savings Accounts (NFAs) toend customers.Interestingly a NFA in itself is not just a financial productbut a financial menu card with a purpose to connect endcustomers with customized financial products &services. Unfortunately, in the current scenario menu isavailable not products, making it uninteresting for end-customers which ultimately has resulted into increaseddormancy levels.
Last Mile Changemakers : Business Correspondentsin India
Business Correspondent model as an alternate bankingchannel has brought a conspicuous change in thefinancial inclusion landscape of India. For the last fiveyears, agent based BC model has played a pivotal role infurthering agenda of financial inclusion across nooks andcorners of the country. From just 30,000 banking outletsin about 600,000 villages in India (5% penetration), BCshave helped in increasing the banking penetration tomore than 1.07 lakh villages (around 20%). Out of around80 million No Frills Accounts (NFAs) opened by banks,BCs have opened 50 million (around 72% of total NFAs).The table below shows the status of financial inclusion innumbers.
No. of Villages in India (inhabited)600,000No. of villages covered by banks107000No. of BCs empannedled by banks58,361Total No. of villages served by BCs76,081Total no. of No frills accounts opened by Banks7.91 CroreNo. of No Frills accounts opened through BCs5.02 Crore(approx 72%)> 2000 population villages covered by banks59,640< 2000 population villages covered by banks47,964
Total Unbanked (approx)41 Crore
The Journal of Indian Institute of Banking & Finance
April - June 2012
Source : RBI, 2011.
1,00,00080,00060,00040,00020,0000No. of villagesBranchesBCs
Branches Vs Business CorrespondentsMarch 2011March 201076,80122,68433,15821,499