Promoting Financial Inclusion




Financial inclusion means extending basic banking services at affordable prices to the low income and disadvantaged groups. Purpose: to connect the excluded with the formal banking system in order to help them obtain an understanding of the financial services available and equipping them with the confidence to make informed financial decisions. Basic services include deposits / withdrawals, credit, remittance, investment, insurance etc. No frills account: An account with ‘zero’ or minimum balance with maximum balance of Rs 50,000/- at any given point in time and total credit in a year not exceeding Rs 1,00,000/-.
Banks can restrict the nature of services offered, number of transactions permitted etc.





„ FI is only social service. everyone is financially literate. „ Everyone handles money.Some misconceptions Financial Inclusion (FI) is the latest ‘fad’ . „ FI simply means opening as many bank accounts as possible. Therefore. not a good business proposition. „ 3 .

For the RBI . sending / receiving remittances.spread of banking culture and extension of the reach of formal financial system. „ „ „ 4 . For the Govt. no need to hold savings in cash etc. For the banks – achieving access to a large untapped pool of customers.ensuring flow of aid / grants to the targeted beneficiary.Benefits of Greater FI „ For the common man – escape from the clutches of money lenders..

Eastern and North Eastern regions in the total financially excluded farmer households in the country.A few statistics „ 51. households financially „ 73%: Farmer households having no access to formal sources of credit.40%: Farmer excluded. Source: NSSO Survey 59th Round 5 „ . 64%: Share of Central.

6 January 2008 .77 million) of the excluded. By 2015: ‘Include’ the remaining. Rangarajan). 250 new households per branch per annum to be covered by all semi-urban and rural branches of banks and RRBs. „ „ Source: Report of the Committee on Financial Inclusion in India (Chairman: Dr C.TARGET „ By 2012: Cover at least 50% (55.

Business Facilitator/Business Correspondent model – for greater outreach. GCCs introduced. Working Group Report on ‘Technology based FI’ for RRBs. Now. 7 „ „ „ „ „ „ . Project Financial Literacy & multi-lingual website. Contribution to FIF and FITF (managed by NABARD). with Overdraft facility. … Funding support through IDRBT envisaged.Initiatives by RBI „ ‘No-frills’ accounts in November 2005. KYC norms relaxed.

03.03.Progress made by banks so far „ Number of no-frills accounts opened as on: 31.2007 5865419 856495 2753 6724667 31.2008* 13925674 1879073 33115 15837862 *Provisional Source: RBI’s Report on Currency & Finance 2006-08 8 .03.2006 Public sector banks Private sector banks Foreign banks TOTAL 332878 156388 231 489497 31.

P. MIS provided to Govt. Launched by Rural Development Deptt. ¾ ¾ ¾ ¾ Source: Report on Currency & Finance 2006-08 Contd on next slide 9 . of A. Project now being up-scaled to cover the entire State.Select success stories „ Andhra Pradesh ¾ Pilot project in six districts of Warangal for disbursement of SSP and NREGS benefits through BCs with the use of smart cards and mobile technology. Govt. by IDRBT. Involving 6 banks. Project coordinated by RBI.

¾ ¾ Source: Report on Currency & Finance 2006-08 10 .„ Dharavi (Maharashtra) ¾ ¾ Dharavi is Asia’s largest slum with 3-3. The model is now being extended to Guntur town (AP) and Tharamani (Chennai). Smart card based banking introduced by Indian Bank to provide doorstep-banking for the slum dwellers. The facility has enabled workers to save and migrants to send remittances easily and reliably. many of whom are migrants.5 lakh workers. Life and health insurance are also being offered.

Bellary: Loans under DRI scheme disbursed to 260 small vendors. Mahaswad (Satara): ‘Business school on Wheels’ to enable poor women in rural areas to become entrepreneurs. PNB: ‘Bhamashah Project’ for rural women in Rajasthan. Mann Deshi Mahila Bank. 11 . based FI in Aizawl. SBI Tiny Card: Tech.Some innovative steps „ „ „ „ Pragati Gramin Bank.

Financial Inclusion in Bihar 12 .

Some States have reached this stage. We have a lot of catching up to do! 13 . not even the beginning of the end [of financial exclusion] but perhaps the end of the beginning [of financial inclusion campaign].World War II) This is not the end [of financial exclusion].Where are we? To paraphrase Winston Churchill: (during the London blitzkrieg.

One bank branch for 20.500 people.000) Andhra Pradesh entering Phase II: One account per adult.Numbers tell the story Only 33% of the population covered. Bihar still in Phase I: One account per household. (national average:15. 14 .

all branches to adopt 5 villages of their area for 100% financial inclusion. For other districts. „ By March 2012: One bank account per household. Source: 25th review meeting of SLBC for Bihar: Aug 21. 2008 15 .Goals „ By March 2009: 100% financial inclusion in the 19 identified districts.

officials. State Level Essay Competition for school children. 16 . RBI Stall at Sonepur Mela. Distribution of financial literacy related books in Maithili and Bhojpuri.Major Initiatives by RBI Patna „ Programme on IT-Enabled Financial Inclusion for banks and senior Govt. … „ „ „ „ Skit on FI. distribution of pamphlets. „ Regular interaction with senior bankers. Jingle on FI on Radio Mirchi. RRB Chairmen etc. caps bearing FI message etc.

. 17 „ „ „ „ . experts. NGOs etc.In the pipe line „ Seminar on Financial Inclusion involving State Govt. bankers. Debates in schools / colleges. Programmes on local radio / TV. Industry chambers. Road-shows on FI in various districts of Bihar. Comic booklet on FI.

Inadequate awareness levels. Recovery related issues. Poor saving habits. Low literacy rates. Consumption oriented expenditure patterns.Problems? No… Challenges! „ „ „ „ „ „ „ „ „ „ „ „ Measuring ‘actual’ extent of financial exclusion. Sustainability factor.OUR ATTITUDE Not all hurdles can be removed but surely all can be overcome! 18 . Lack of infrastructure. Agent and vendor risk. Small ticket transactions & high transaction costs. AND…. Varied local conditions. Dormant accounts.

Continuous monitoring. Affordable pricing model. MODIFY : Credit usage pattern. EXTEND : Financial advice and credit counselling.Prescription „ „ „ „ „ ¾ ¾ ¾ Innovative promotion. Basic product design. Inexpensive and reliable delivery module. 19 . ENHANCE : Credit absorption capacity.

Agencies / intermediaries to be involved „ „ „ „ „ „ „ „ „ State Government & local administration. Schools and Colleges. Section 25 companies / Insurance agents. IT service providers. NGOs / SHGs /MFIs/ Farmers’ clubs/ PACS. Media. and bank employees/ teachers. 20 . Ex –servicemen /retired govt. Post Offices / Panchayats. Banking Industry and Developmental Institutions.

It pays to remember… „ Good ideas are not enough: An idea is only as good as its implementation. Detailed schemes are not enough: Lack of public awareness can bury the best scheme. 21 . „ We can all contribute by generating publicity and ensuring action at the ground level.


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