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Financial Inclusion Report RBI Internship
Financial Inclusion Report RBI Internship
A Project Report by
Prakash Agarwal
RBI Young Scholar 2009
FOREWORD
Over the last decade, there has been expansion, competition and diversification of ownership of banks leading to both enhanced efficiency and systemic resilience. However, there are legitimate concerns in regard to the banking practices that tend to exclude rather than attract vast sections of population, in particular, pensioners, self-employed and those employed in unorganized sector. This culminated into the Reserve Bank emphasizing in its Annual Policy Statement for 2005-06, that bankers should empower the depositors by providing wider access and better quality of banking services. With the objective of ensuring greater inclusive growth, Reserve Bank has undertaken a number of initiatives to continuously widen the scope and extent of financial Inclusion. In order to explore the potential for integrating financial education and literacy into the Reserve Banks overall endeavour for financial inclusion, the Bank launched the Reserve Bank of India Young Scholars Scheme for students between 18 and 23 years of age and studying in undergraduate classes at various institutions across the country. In this context, we consider ourselves fortunate enough to be allotted the project Financial Inclusion/Financial Literacy of which the Young Scholar Scheme is an inseparable part. This report is not just the work done by two of us, it is also the result of our interactions with the staff at RBI, Ranchi office, which moulded and shaped over views on financial inclusion, which can be seen, reflected in the report itself. The continued guidance from Shri R.N. Mishra, GM & O-In-C and mentor Shri Chandan Kumar, AGM helped us focus on financial inclusion and not get distracted away from our core topic. Our visit to the SHG meeting at Ramgarh with Smt Bimla Bhagat, Manager and Shri S.T. Punnoose, AGM was our first foray outside Ranchi, which helped us understand the working of SHGs and Farmer Clubs. The number of surveys and visits we undertook would not have been possible without them being facilitated beforehand by our mentor, who took every pain so as to smoothen our project work, which sometimes used to get off track too. We are also thankful to Shri S. Das who guided us in the early days of our project and gave a macro view on the topic of financial inclusion.
[i]
The entire staff at office made it a point that we learn something each day we attended office. We are indebted to all of them, who helped us in one or the other manner.
[Prakash Agarwal]
[ii]
CONTENTS
List of Abbreviations Chapter No. 1 2 3 4 5 6 7 8 Introduction Initiatives for Promoting Financial Inclusion Pre 2005 International Experiences in Financial Inclusion Initiatives for Promoting Financial Inclusion 2005 Onwards Role of ICT in Enabling Financial Inclusion Survey on the Extent of Financial Inclusion Field Visits Recommendations Annexures References Title [v] Page No. 1 7 14 19 26 32 47 58 70 85 86 87
[iii]
List of Annexures
Annexure I Annexure II Annexure III Annexure IV Annexure V Annexure VI Annexure VII Annexure VIII Annexure IX RBI Young Scholar Survey on Financial Inclusion (Questionnaire) Performance Report of Abhay Credit Counselling Centre Working Hours of Abhay FLCC (as displayed on the centres website) Leaflet of Programmes Offered by BMIED, Hazaribag Annual Training Calendar of BMIED for the year 2009-10 Helpline for Farmers A Self-Sustaining Model Disha Financial Counselling Centre (Website Homepage) Detailed Working of The Kiva Model Homepages of Various Financial Education Websites A Comaprision
[iv]
List of Abbreviations
ADWRS AML ATM BC BF BMIED BPL CCC CDFI CDMA CFT CGM CRA CRC CSOS CSP CTF DCC DRDA DRI FIF FITF FLCC Agriculture Debt Waiver and Debt Relief Scheme Anti Money Laundering Automated Teller Machine Business Correspondent Business Facilitator Birsa Munda Institute for Entrepreneurship Development Below Poverty Level Credit Counselling Centre Community Development Financial Institution Code Division Multiple Access Centralised Funds Transfer Chief General Manager Community Reinvestment Act Commission for Rural Communities Civil Society Organisations Customer Service Point Child Trust Fund District Consultative Committee District Rural Development Authority Differential Rate of Interest Financial Inclusion Fund Financial Inclusion Technology Fund Financial Literacy and Credit Counselling Centre
[v]
GCC GDP GIPSA GoI GPRS GSM GUI ICT IDRBT IVRS KCC KVIC KYC LBS LDM LDO MFIS MSMED MoRD NABARD NBFC NCC NFC NGO NPA
General Credit Card Gross Domestic Product General Insurers Public Sector Association Government of India General Packet Radio Service Global System for Mobile Communications Graphical User Interface Information and Communication Technologies Institute for Development and Research in Banking Technology Interactive Voice Response Service Kisan Credit Card Khadi Village Industry Corporation Know Your Customer Lead Bank Scheme Lead District Manager Lead District Officer Micro Finance Institutions Micro Small and Medium Enterprises Development Ministry of Rural Development National Bank for Agriculture and Rural Development Non Banking Financial Company National Credit Council Near Field Communication Non Government Organisation Non Performing Asset
[vi]
NREGES PACS PAIS PIN PMEGP PMRY POCA PoS PPP RCB RFID RPCD RRB RUDSETI SAA SGSY SHG SHPI SIDBI SIM SJSRY SLBC SLRS SME SMS
National Rural Employment Guarantee Scheme Primary Agriculture Credit Society Personal Accident Insurance scheme Personal Identification Number Prime Ministers Employment Generation Programme Prime Ministers Rozgar Yojana Post Office Card Account Point of Sale Purchasing Power Parity Rural Credit Bureau Radio Frequency Identification Device Rural Planning and Credit Development Regional Rural Bank Rural Development and Self Employment Training Institute Service Area Approach Swarnajayanti Gram Swarozgar Yojana Self-Help Group Self-Help Promoting Institution Small Industries Development Bank of India Subscriber Identity Module Swarna Jayanti Shahari Rozgar Yojana State Level Bankers Committee Scheme of Liberation and Rehabilitation of Scavengers Small and Medium Enterprise Short Message Service
[vii]
Small Scale Industries Society Security Pension Urban Co-operative Banks User Interface Unique Identification Number Union Territory Level Bankers Committee
[viii]
1. Introduction
India is the fourth largest economy in the world on a purchasing power parity (PPP) basis and twelfth on a nominal basis. With the real GDP forecasted to grow by 5.7% in the year 2009-10, the Indian economy is marching ahead. This rapid expansion is expected to continue as growth in the services and high technology manufacturing sector accelerates. Agriculture, which continues to support around 60% of the population, has grown by a mere 2.7% in the second quarter of 2008-09. In addition, the organized sector employment presently comprises less than 10% of the workforce, leaving the vast majority of the working population with irregular income streams. Notwithstanding the rapid increase in overall GDP and per capita income in recent years, a significant proportion of the population in both rural and urban areas still experiences difficulties in accessing the formal financial system. There is currently a perception that there are a large number of people, potential entrepreneurs, small enterprises and others, who may not have adequate access to the financial sector, which could lead to their marginalization and denial of opportunity to grow and prosper.
population is higher in the poorer regions of the country, and is the worst in the North-Eastern and Eastern regions.
Supply-side Barriers: The following issues on the supply side are major
obstacles in providing an adequate supply of financial services to the currently unbanked: 1. Locational constraints Absence of physical infrastructure in interior-most parts of the country leads to difficulties in accessing financial institutions (like banks, etc) resulting in a substantial proportion of households in rural and remote areas being kept outside the ambit of the formal financial system. 2. Real and perceived risk in lending - The perceived risk of lending to the poor is higher than the real risk, creating a supply barrier by triggering higher than necessary transactions costs due to stricter than needed prudential requirements.
3. Approaches and products - Generally, financial services tend to be concentrated in urban areas, allowing rural clients little access to services and information for making well grounded decisions. 4. Financial viability of MFIs - MFI practitioners encounter difficulties in having a double bottom line: at the same time aiming to be profitable and stimulating local economic development.
The Report of the Committee on Financial Inclusion in India (Chairman: C Rangarajan) (2008) defines financial inclusion as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.
(ii) Through voluntary effort by the banking community itself for evolving various strategies to bring within the ambit of the banking sector the large strata of society. Internationally, financial exclusion has been viewed in a much wider perspective. Merely having a bank account is not regarded as an accurate indicator of financial inclusion. Rather, its scope is considered to be quite large and ranges from empowerment of people through schemes of financial literacy/education to ensuring their participation in institutional credit, insurance cover and remittance services. The scope of financial inclusion is much broader and hence, it is considered to be critical for achieving inclusive and sustainable growth in the country.
financial inclusion. While financial inclusion, in the narrow sense, may be achieved to some extent by offering a single financial service/product, the objective of comprehensive financial inclusion would be to provide a holistic set of services encompassing all of the above.
Overall Approach
Financial inclusion in the Indian context implies the provision of affordable financial services, viz., access to payments and remittance facilities, savings, loans and insurance services by the formal financial system to those who tend to be excluded. Besides access, emphasis is also placed on affordability (low cost) of financial services such as savings, loan, and remittance to the underprivileged segments of the population. Although the term financial inclusion was not in vogue in India then, since the late 1960s both the Government and the Reserve Bank have been concerned about the non availability of banking facilities to the under-privileged and weaker sections of the society. Accordingly, several initiatives have been taken over time.
The initiatives undertaken for the purpose of promoting financial inclusion in India can be broadly categorized into the following four phases. In the first phase during the early years of independent India from 1947 - 1967, the focus was on channeling of credit to the neglected sectors of the economy, especially agriculture and the spread of banking in the unbanked and rural areas. Special emphasis was also laid on weaker sections of the society. In the second phase beginning 1967 till the early 1990s, the focus was mainly on nationalization of private sector banks, the spread of banking, institution of directed credit through introduction of priority sector lending norms and setting up of Regional Rural Banks. The third phase from 1991-92 onwards till 2005 focused on improving the credit delivery system to the rural sector and SMEs.
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competitive banking system. A high-powered Committee on the Financial System (CFS) was constituted by the Government of India in August 1991 to examine all aspects relating to the structure, organization, functions and procedures of the financial system (Chairman: Shri M. Narasimham). The main issues faced in this phase were (i) increase the flow of credit to agriculture and SMEs; (ii) strengthen the urban cooperative banks and resolve the issue of dual control; and (iii) bring a large segment of excluded population within the fold of the banking sector. Credit to the SME and agriculture sectors decelerated in the 1990s and early years of the current decade. Given the significance of both the sectors, concerted efforts were made by the Government and the Reserve Bank to increase the flow of credit to these sectors. The restructuring of RRBs by merging them sponsor bank wise at the state level was done to make them larger and stronger to serve as a better instrument of rural credit delivery. An important step to bring financially excluded people within the fold of formal financial sector was the promotion of microfinance in India. The SHGbank linkage programme was launched by NABARD in 1992, with policy support from the Reserve Bank, to facilitate collective decision making by the poor and provide door step banking. Banks, as wholesalers of credit, were to provide the resources, while the NGOs were to act as agencies to organize the poor, build their capacities and facilitate the process of empowering them.
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for loans up to Rs.5 lakh. In addition, the Reserve Bank also aligned repayment dates with harvesting of crops by treating loans granted for short duration crops as an NPA, if the installment of the principal or interest thereon remained unpaid for two crop seasons beyond the due date.
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Since 1992, SHG-bank linkage programme has been promoting micro finance facilities to the poor. A growing component of inclusive banking is the lending by MFIs that are societies, trusts, cooperatives or not for profit companies or non banking financial companies registered with the Reserve Bank. The MFIs cover millions of borrowers and the NBFC segment within this sector is the fastest growing segment. Interest rates on lending to MFIs/NBFCs have been completely deregulated. Bank lending to such entities for microfinance is treated as priority sector lending. In India, there have been several innovative experiments with various variants of micro-finance taking into account the highly localized needs. To further promote the SHG-bank linkage programme in the country, banks were advised in 1998 that SHGs that were engaged in promoting the saving habits among their members would be eligible to open savings bank accounts and that such SHGs need not necessarily have availed of credit facilities from banks before opening savings bank accounts. Subsequent to the Monetary and Credit Policy announcement for the year 1999-2000, banks were advised that interest rates applicable to loans given by them to micro credit organizations or by the micro credit organizations to SHGs/member beneficiaries would be left to their discretion. Subsequently, banks were advised that they should provide adequate incentives to their branches for financing the SHGs and that the group dynamics of working of the SHGs may be left to themselves. The main advantage to the banks of their links with the SHGs is the externalization of a part of the work items of the credit cycle, viz, assessment of credit needs, appraisal, disbursal supervision and repayment, reduction in the formal paper work involved and a consequent reduction in the transaction costs. Though a variety of micro-finance models are followed in India, SHG-bank linkage programme is the predominant one. Along with the SHG-Bank Linkage Programme, a multi-pronged strategy was followed to promote financial inclusion which not only served better the diverse demand for financial services, but also reduced the systemic risks, increased competition, and improved efficiency. On the larger scale, a wide paraphernalia of institutional framework was established by the Reserve Bank and the Government to ensure better banking penetration and outreach so that the credit needs of agriculture and small enterprises were met while allowing sufficient flexibility to banks to evolve their own policies and strategies for the purpose.
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invested, up to a maximum of 25 per annum. The forthcoming Child Trust Fund (CTF), which will offer all households a fixed sum for long-term investment at the birth of their children, is hoped to be most beneficial in lower income households. Initiatives to promote financial inclusion have not been restricted to just the urban centres. As part of the Commission for Rural Communities (CRC) work to tackle disadvantage in rural areas, some good and enterprising practices in rural financial inclusion includes the NatWests mobile bank, Cumbrian Debt Rescue and Financial Advice, Ely Citizens Advice Bureau, Farm Crisis Network and many others.
3.3 Brazil
In 1997, banks and regulators in Brazil created a network of "correspondents bancarios" or "banking correspondents", small outlets with extended working hours that offered basic banking services. At that time, 40 out of the 68 million economically active Brazilians had no access to formal financial services. Today, an additional 4 million have begun using banks for the first time through 27,000 banking correspondents. Under this arrangement, banks are permitted to appoint a wide variety of institutions/entities as correspondents/ agents, which are easily accessible to people, e.g., drug stores, petrol pumps, super markets, small stores in neighbourhood, post
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offices and even lottery shops. The Brazilian model is largely technology driven. The agents use kiosks or automated teller machines to accept payment, open accounts, without a cheque book facility, take small deposits, provide micro credits, and sell savings bonds and insurance.
3.5 Singapore
A sophisticated example of global payments network operating via postal banks is the Singapore Post which regards payments and remittance services, an important catalyst for enhancing financial inclusion. Singapore Posts remittance services, in partnership with banks and other financial entities in a number of countries, provides consumer loan services, insurance and investment products on behalf of banks and finance companies, offices and investment managers to Singapore residents including workers from overseas.
3.6 Philippines
In 2004, BSP, the central bank of Philippines sanctioned two e-money products. The first was Smart Money, product of a major commercial bank and the second was G-cash, a non-bank product whose provider was ultimately licensed as a remittance agent. The impact of these e-money products has been substantial. Some 8 million people use one or other of the two products, while the numbers of banks involved has grown rapidly. Apart from the larger commercial banks, increasing numbers of small rural banks
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has also participated in these products. Some banks have lowered interest rates, by up to 50bps/month, on microfinance loans administered via the phone repayment platform. Lower cost remittance channels have seen remittance costs fall markedly. These advances have increased financial inclusion in the country with the convergence of e-money, mobile technology and the traditional brick-and-mortar networks of financial institutions.
3.7 Bangladesh
The Grameen Bank (GB) in Bangladesh has reversed conventional banking practice by obviating the need for collateral. It has created a banking system based on mutual trust, accountability, participation and creativity. GB provides credit to the poorest of the poor in rural Bangladesh, without any collateral. It offers credit for creating self-employment, income-generating activities and housing for the poor, as opposed to consumption, and provides service at the doorsteps of the poor. In order to obtain loans, a borrower must join a group of borrowers. The repayment responsibility solely rests on the individual borrower and there is no form of joint liability. Loans can be received in a continuous sequence. New loan becomes available to a borrower if his/her previous loan is repaid. All loans are to be paid back in instalments (weekly or bi-weekly). GBs success can also be gauged from the fact that it has 7.46 million borrowers in Bangladesh alone and has grown into over 2 dozen enterprises represented by the Grameen Family of Enterprises. Grameen Foundation not only provides microloans in the USA itself but also supports microfinance institutions in Asia-Pacific, America and Africa.
3.8 Kenya
Recent international experience indicates that micro savings are as important as micro credit. Moving in this direction, Equity Building Society in Kenya has developed the Jijenge Savings Account, a contractual savings product with an emergency loan facility. The client defines the length of the contract and the periodicity of the deposits, which could be weekly or monthly. A premium interest rate is offered to those who take out longer term contracts and there are significant penalties for premature withdrawals. All Jijenge savings account holders have guaranteed immediate access to an emergency loan of 90 percent of the amount in their Jijenge savings account. As well as providing a disciplined way to save, this product allows clients to meet their "illiquidity" preference and protects their savings against the demands of petty spending
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or "marauding relatives". The account is already proving extremely popular with existing as well as new clients. Commercial Bank of Africa in conjunction with local mobile operator Safaricom has enabled mobile subscribers to make micro payments from mobile phones. The majority of the people in Kenya do not hold bank accounts but purchase prepaid mobile refill cards. The technology allows settlement of bills by building up credit balance on the mobile phone and sending text message to make payments. The above discussed cross country experiences show that there has been several innovative experiments worldwide to promote financial inclusion with special emphasis on creating demand through diversified credit instruments, outreach considerations, sustainability aspects, delivery mechanisms among others. Although these international experiences come with their own merits and demerits, the initiatives undertaken in India (to be discussed in subsequent chapters) are unique in nature, formulated with due consideration to the diverse socio-economic conditions prevailing in the country.
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4.1 Microfinance
Of the different models for delivery of microfinance, the SHG-Bank Linkage Programme has emerged as the major micro-finance programme in the country. It is being implemented by commercial banks, RRBs and cooperative banks. As on March 31, 2008 3.6 million SHGs had outstanding bank loans of Rs.17000 crore, an increase of 25 per cent over March 31, 2007 in respect of number of SHGs credit linked. As at end-March 2008, SHGs had 5 million savings accounts with banks for Rs.3785 crore. Based on the findings of a joint study conducted by the Reserve Bank along with a few major banks, the banks were advised in November 2006 to encourage microfinance institutions (MFIs) assisted by them to (i) focus on
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unbanked and underbanked areas; (ii) desist from multiple lending; (iii) engage in capacity building and empowerment of the groups; and (iv) follow practices that maintain the cohesiveness of the groups. This led to banks financing NGOs/MFIs for on-lending under micro-finance. As on March 31, 2007, the number of MFIs that had outstanding bank loans was 550 amounting to Rs.1585 crore. Recognising the potential of microfinance to positively influence the development of the poor, the Reserve Bank has advised commercial banks that micro credit should cover not only consumption and production loans for various farm and non-farm activities of the poor, but also include their other credit needs such as housing and shelter improvements. A Micro Financial Sector (Development and Regulation) Bill, 2007, which envisages the regulation of the sector, is currently under consideration of the Parliament.
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to ensure that customers belonging to poor sections of the society are not kept away from banking system, on account of difficulties in meeting the KYC requirements for opening bank account. The KYC procedure for opening accounts was simplified further for persons who intend to keep balances not exceeding Rs.50000 in all their accounts taken together and the total credit in all the accounts taken together is not expected to exceed Rs.1 lakh in a year. The customer is allowed to exceed the threshold limit only after the full compliance with the KYC norms. Based on feedback received on the extant KYC/AML/CFT regime, relevant guidelines were revised on February 18, 2008. These guidelines include among others (i) in case of close relatives who find it difficult to furnish documents relating to place of residence while opening accounts, banks can obtain an identity document and a utility bill of the relative with whom the prospective customer is living, along with a declaration from the relative that the said person (prospective customer) wanting to open an account is a relative and is staying with him/her. Banks can also use any supplementary evidence such as a letter received through post for further verification of the address; (ii) banks have been advised to keep in mind the spirit of the instructions and avoid undue hardships to individuals who are otherwise classified as low risk customers; (iii) banks should review the risk categorization of customers at a periodicity of not less than once in six months.
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branch, ordinarily, should not exceed 15 kms. (further extended to 30 kms. from April 2009) in rural, semi-urban and urban areas. In metropolitan centres, the distance could be up to 5 kms. However, in case a need is felt to relax the distance criterion, the matter can be referred to the District Consultative Committee (DCC) of the district concerned for approval.
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with overdues in credit cards, personal loans, housing loans, etc. among others. So far, banks have reported setting up or proposing to set up 123 credit counselling centres in various states of the country.
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gap/pilot project funding for unproven but potential technological interventions; and conduct of studies, consultancies, research, evaluation studies relating to technological interventions for financial inclusion.
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readily available and have been deployed widely in the country, financial Table 5.1 Pros and Cons of Various Technologies
Connectivity Short Message Service (SMS) Pros Easier to build applications Already a popular medium to communicate Billing activities can be automated by tight integration with operators systems Provides ability to build advanced features User interacts with a well designed user interface (UI) and does not require training Can integrate seamlessly with e-commerce scenarios Cons Still unreliable delivery of message is not guaranteed Requires user to remember codes/ keywords Data size per message is restricted to 160 characters Multiple SMS based transactions can cause user resistance GPRS in particular requires separate hardware and is not present wherever GSM connectivity is available Both in turn do not have a pan India presence CDMA requires specialised skillset which is not widely available
General Packet Radio Service (GPRS) / Code Division Multiple Access (CDMA)
Handset Technologies Subscriber Identity Module (SIM) Toolkit Ensure availability of application as and when customer buys a new SIM Operator is closely associated with the mobile banking project, hence the delivery of service is easy Operator independent Development skillset is widely present for GPRS Ability to deliver better features and UI Requires operators assistance in replacing existing SIM cards Operator lock-in for banks Technology may not be interoperable in multiple operator scenarios
Emerging Technologies Near Field Communication (NFC) Mobile Phone as a device Ease of use Experience similar to credit card usage Round the clock availability with customer More handsets, than bank accounts Still in nascent stages. Mobile phones still costly Not built for mobile transactions Compared to PoS/ATM devices which are built and certified for banking activities
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inclusion presents some unique challenges. Low levels of literacy, the high number of languages spoken and poor infrastructure, for example, require enabling technologies to bring self-service closer to the unbanked population. Biometric Recognition eliminates the need for a personal identification number (PIN). It authenticates the user by scanning a thumb impression or retina of the account holder. Biometrics is an important enabler when reaching out to the illiterate and semi-literate population that avoids banking due to fear of technology and security concerns. Interactive Voice Response Services (IVRS) are software-based solutions that relate the transaction process in a synthesized voice format and guide a customer through the entire transaction flow. In India, this has obvious and immediate benefits as a large section of the population cannot read or write. Multilingual Software: There are about 1600 languages spoken in India and, according to the countrys constitution there are 22 official languages of communication. This creates a complex environment for the consistent delivery of any service. As an extension of IVRS, multilingual software provides a navigation solution in multiple languages, overcoming regional barriers, communication issues and illiteracy. Graphical User Interfaces (GUIs) as part of the navigation process helps to guide a user through a transaction by providing an intuitive set of graphical images or pictorial references instead of words. For Indias poor and illiterate, GUIs increase confidence in performing a transaction and thereby encouraging adoption of new technology. GUIs can also help to eliminate transactional errors through step-by-step guidance. Wireless Connectivity: Every month, nine million new Indians subscribe to a mobile service. The growing wireless networks provide an excellent platform to reach out to the financially excluded population in the diverse and remote regions of the country. Mobile banking applications can deliver banking facilities to the financially excluded population at low costs. For a geographically divided country like India with the growing rate of mobile connectivity, banking through mobile phone presents a strong future for technology enabled financial inclusion. Internet Connectivity: A persons usage of Internet banking basically depends on access to Internet through computer or mobile phone either at home or in the office. In most of Asia, where home computer penetration is much lower 15.3 percent, access to the internet, is
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increasing via the wireless mobile phone networks. Nevertheless, Indias internet penetration is barely more than five percent and it is difficult today to see the internet by itself being a key self-service enabler for eliminating exclusion and bridging the divide.
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The technology holds potential for a whole range of activities that banks can conduct through BCs and this includes other products like fixed deposits, various loans, and insurance, among others. Thus, this model is very likely to gain acceptance when more products of the banks are routed through them.
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between Rs.10000 to Rs. 20000 depending upon its features and accessories like printers. The cost of the central processor would depend upon the configuration which in turn is dependent upon the number of accounts, types of accounts, number of transactions, type of reports etc. As compared to the cost of establishing and operating a physical bank branch in a rural area, the system would be extremely cost effective. It will extend outreach at the doorstep of the farmers, handle even small size transactions, is capable of being operated by persons having local presence and feel, have necessary checks and balances to avoid frauds, protect the interest of depositors and help expand the volume of business for the bank. The experience of many banks in India suggests that the appropriate use of information technology can help in reducing the cost of providing financial services and make it operationally viable to expand the coverage of financial services. The appropriate technology combined with an effective use of banking correspondents has the potential of creating a banking outpost/ATM in every village, as has been observed in the case of Andhra Pradesh, which has successfully implemented mobile phone technology for providing banking services in remote areas in coordination with the Reserve Bank and IDRBT. There are several other instances where it has been observed that technology has the potential to overcome the problem of high operating cost. The need, therefore, is to increase the use of technology to expand the outreach in the hitherto untapped areas. A wide range of technologies is available. Financial inclusion offers a huge potential for business in terms of resources and assets. However, while selecting a technology, banks need to ensure that the solutions are highly secure and amenable to audit. It must have widely accepted open standards to ensure eventual inter-operability among the different systems as was highlighted in the Reserve Banks Annual Policy Statement for 2007-08.
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6.1 Objectives
The broad objectives of conducting the survey are as follows: (i) To identify the extent and nature of financial inclusion in and around Ranchi; (ii) To understand the drivers of financial exclusion/inclusion; (iii) To determine the level of awareness of people in various financial products and interest in undergoing courses in financial inclusion; (iv) To assess further thrust needed to achieve 100 percent financial inclusion so as to enable appropriate policy modifications; and (v) Finally, to hear from the very people for whom various financial inclusion initiatives have been launched, what they think and what needs to be done by government agencies to make them financially included.
6.2 Methodology
Primary data collected from 160 randomly selected households have been analysed and the results interpreted in this chapter. Households have been selected both in urban as well as rural areas, and a comparison has been drawn. Survey of urban areas have been conducted both inside and outside of bank premises which include ICICI Bank, Ranchi Main Road; PNB, Mahavir Chowk; SBI, Pandra; Pandra Krishi Market and Mesra all lying in rural and urban areas of Ranchi. We also visited the under-developed Gumla district for
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the purpose, for it being more prone to financial exclusion, as also has been brought out by our survey. We looked at various aspects of financial inclusion. One was the savings side where we tried to assess the number of households having/not having a bank account, the type of account, the reasons behind opening an account as well as reasons behind not having such an account, and the awareness among people on the recently launched initiative of no-frills accounts. On the borrowing side, we identified households which have ever availed of loans whether from institutional or non-institutional sources, their reasons of availing a one and whether they have ever been refused credit and on what grounds. We also looked at other financial products (mainly insurance) and services (mainly credit counselling) as well as financial education being provided by organisations and the financial services sector. The survey questionnaire employed is provided in Annexure I.
22%
41%
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(iii) Number of accounts in a household: The graph (Fig 6.3) below shows the % of households having one, two, three and more than three accounts in urban as well as rural areas. Out of the 78 % urban households and 41 % rural households who were having a bank account, 66 % urban households were having two or more than two accounts. On the other hand, 75 % rural households were having just one account. This observation should serve as a caution before we declare that 100 % financial inclusion has been achieved. It has to be ensured that there is no duplicity of accounts when we are taking into comparing the number of accounts and the number of households. It has to be ensured that each household has at least one bank account, rather than simply dividing the total number of bank accounts and the total number of households to obtain a somewhat misleading ratio. In the figure below, it may be seen that, whereas in urban areas, households with one, two or three accounts are relatively uniform, in case of rural households there exists a large variation. Moreover, in case of rural households, there exists not even a single household surveyed with more than three accounts. This clearly brings to light that there exists a section of people in urban areas who are super included having more than three accounts. In fact, we encountered a few households having double the number of accounts than the number of members in the family. Also there were households having one account each for the adult members as well as the children in the family. The accounts include savings, current, recurring as well as fixed deposit ones, but excludes accounts maintained in post offices. This highlights that, while financial deepening already exists in urban centres, financial widening is what needs to be achieved, especially in rural areas.
Fig 6.3 Number of accounts in a household
80 70 60 50 40 30 20 10 0 75
% of households
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Number of accounts
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(iv) Households having a bank account with cheque book facility: In urban areas, out of total number of households having a bank account only 44 % were having a cheque book facility, whereas in rural areas, it comes out to be a mere 12 %. This disparity may be due to the fact that rural households generally deal in cash transactions and cheque books are not accorded much importance. High illiteracy rates among rural households can also be a contributing factor. (v) Reason behind households opening a bank account: The graph (Fig 6.4) below shows the various reasons behind opening of accounts in rural and urban areas. In rural households, while few have opened accounts for the sole purpose of receiving NREGS payments, there is hardly such a household to be found in urban areas, which is quite obvious when seen from the context of the place of implementation of such programs. When it comes to receiving remittances, rural households are ahead of their urban counterparts, since many men folk have migrated to the cities in search of work and continue remitting money from their work places. Moreover, urban households seem to be more aware of saving money than rural ones, which may also be because of their higher earning incomes. That urban households are more inclined in availing credit from institutional sources is reflected in their opening accounts just for requesting a loan. While it is 7 % in case of urban households, the same is just 3 % for rural ones.
7 5 3 12 30 49 3 7 6 8 20 30 40 50 60 70 80 70 Rural Urban
10
% of households
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(vi) Reasons for not having a bank account: For a vast majority of households not having bank accounts, for 63 % of urban respondents and 72 % of rural respondents, the sole reason was they had no or little money to put in. Since the areas we surveyed were having at least one bank branch in their vicinity, so there were no respondents complaining of not having an account because of absence of a bank branch in their area. Although no one said they were not having an account as they thought it not important to them, there were many instances (17 % in urban and 20 % in rural) where people were put off just because of anticipated rejection, lengthy processes and the pre condition of maintaining a minimum balance in the accounts. (vii) Reasons for being refused a bank account: As pointed out by the respondents, the primary reason for being refused of a bank account was their lack of identity proof. Lack of legal identities like identity cards, birth certificates, etc came out as the major reason resulting in exclusion of women and especially migrant workers who are most likely not to have an address proof. There were also people complaining that their application forms were outright rejected without bank authorities offering any explanation. This comes not as a surprise considering the indifferent attitude of officials towards the disadvantaged groups, whom they do not consider a viable business opportunity. (viii) Awareness regarding no-frills account: Awareness on no-frills account was limited to a handful of 4 to 5 people we surveyed. This finding is consistent with our observation of the different banks we visited, where we did not come across any notice or poster giving information on no-frills account. Even if it was present it was not an eye catching one, not to the eyes of a person seeking one, let alone to one who is unaware of any such scheme. In one of our visits, replying to our query on whether any notice on no-frills account was put up inside the bank premises, we were pointed to a more than 30 page thick booklet placed near the notice board. And the supposedly easy task of finding the word no-frill in the booklet was achieved not by us, but by the banks manager who consulted the contents table and finally brought out the page where a two line note on no frill account was mentioned. If this is the scenario prevailing in and around Ranchi, we can fairly estimate
37
the situation in far flung areas of a State like Jharkhand with large tracts of areas populated with tribal sections. With bank employees adopting such an indifferent and insensitive attitude towards the needs of the disadvantaged groups, there is no doubt the scheme will take an indefinite period to take off in a full blown manner. (ix) Sources of availing loans for households: Of the 82 urban households surveyed, only 40 % had availed credit from institutional and non-institutional sources. In case of rural households, the percentage was 62 % but the majority was from non-institutional sources. The graph (Fig 6.5) below shows the different sources from where loans were availed by urban and rural households. It has been observed that while financial institutions esp. banks play a major role in fulfilling the credit requirements of urban households, in case of rural households, it is done mostly by moneylenders. When it comes to small and immediate borrowings, the majority prefers taking help from their relatives and friends, which is why the proportion of households in urban and rural areas is relatively close to each other (24 % in urban and 31 % in rural). In urban areas, households have a wider choice in the other category too which was seen to be dominated by the firms in which they worked. This can be explained when seen in the context of relationship lending. People found it much easier to approach their employers asking for loans than going to a bank, which they believed would be a complicated process. It was also easier to repay such a borrowing as the installment was deducted from their salaries right at the source.
Fig 6.5 Sources of availing loans for households
60 50
% of households
52 43 31 21 24 15 9 5 Urban Rural
40 30 20 10 0 Banks
Relatives/Friends
Moneylenders
Others
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(x) Reasons cited for borrowing from banks: The graph (Fig 6.6) below gives an overview of the different reasons cited for availing loans from banks. In urban households, it was found that this was also because a larger amount of credit was involved, for example while purchasing a house, a four wheeler, etc. However, for majority of respondents in rural as well as urban households, low rate of interest and bank being a trustworthy lender were the primary reasons behind availing of credit facilities from banks. The graph also shows that cases where loans were offered or arranged by banks were generally higher in case of urban households than rural ones. This also shows that banks are generally averse in meeting the credit requirements of their rural customers and consider them as risky. 52 % of rural households citing low interest rate of banks as the biggest reason may also be because of a much larger prevalence of moneylenders charging exorbitant rates of interest in the countryside.
Fig 6.6 Reasons for borrowing from banks
Low rate of interest Was offered/arranged by banks It was easier (vague) Trustworthy lender Others 0 4 6 10 20 30 40 50 60 5 13 10 11 29 33 Rural Urban 37 52
% of households
(xi) Reasons for borrowing from sources other than banks: The graph (Fig 6.7) below shows the various reasons for opting out of banks while availing credit. Borrowing sources, other than banks are dominated mainly by friends, relatives and moneylenders. Borrowing from friends and relatives can be justified on the grounds of it being generally security free, which is also evident from the plot where % of households citing this reason was almost equal (35 % in rural areas and 32 % in urban). But reasons for borrowing from moneylenders can be explained only by looking at the other category in which respondents said they had no friends or relatives who could afford to lend a relatively large sum. This situation is obvious because poor households are more likely to have relatives who themselves are
39
poverty stricken too. Moreover, borrowing from moneylenders at exorbitant interest rates of 2 % per month (which amounts to 24 % p.a.) speaks of the compulsions such people face which ultimately leads to their getting into such debt traps of these unscrupulous moneylenders. Ignorance and illiteracy kept aside, this also highlights how much inaccessible some of our banks have become to poor households. Most of these respondents have developed an aura of fear of stepping into bank premises, which has been facilitated to an extent, by the banks themselves, creating procedural hassles for those who are in dire need of credit, and who finding no other means, finally fall into the clutches of such non-institutional financial intermediaries.
Fig 6.7 Reasons for borrowing sources other than banks
Being able to borrow realtively small sums No security/guarantee was to be provided It being available locally Because of knowing the lender Others 0 5 8 10 15 20 11 10 10 23 25 30 35 40 31 21 19 32 35
Rural Urban
% of households
(xii) Type of loan availed: While in urban areas, credit was availed for a number of reasons housing (21 %), business (39 %), education (7 %), vehicle (10 %) as well as personal loans (23 %), the scenario was completely different in rural households. In rural areas, the majority of households surveyed borrowed just for consumption purposes for marriages, meeting medical expenditures, and even to pay off other debts (62 % in case of rural areas compared to just 23 % in urban areas). This can also be ascertained from Fig. 6.5 where 43 % of rural households had to borrow from moneylenders, since banks tend to avoid doling out personal loans for consumption purposes, esp. in poor households. (xiii) Difficulties faced in availing a bank loan: Lengthy time-consuming processes, documentation and indifferent behaviour
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of bank personnel were cited as the major hurdles in taking out a bank loan. Some even complained of unwillingness by public sector banks to lend to self employed persons (salaried people working in government enterprises were the ones those banks preferred). Indifferent attitude of bank employees towards their customers even resulted in some people taking the help of agents in order to get a quick loan. In one case, we encountered a person who was sent to a branch 4 km away from his home branch (both branches of the same bank, of course) just because the loan application form was not available in the home branch. This was in spite of technology making progress in leaps and bounds. The bank could have simply given him a downloaded print out of the loan application form, but it didnt. Thus, we can see that banks faced with viable business opportunities too, leave no stones unturned in transforming simple processes to time consuming ones, thus adding to the inconveniences of the masses. If potential bank customers are made to undergo such hassles, there remains no doubt what poor households are made to bear while applying even for loans of a modest amount, not speaking of what difficulties they are made to face while applying for a no-frills account (which is more seen as a mere obligation by commercial banks rather than prospective business opportunity). (xiv) Households using other financial products: The graph (Fig 6.8) below gives the distribution of households possessing an insurance policy, a debit card (ATM card) or a credit card. Although 64 urban households had a bank account, when it came to possessing a debit card, the number came down to a stunning 46 nos. (i.e. only 72 % of bank account holders had a ATM facility too). In rural areas, the situation was worse, only 26 % were having a debit card. Similar was the difference between urban and rural households in insurance too (41 % in urban areas compared to a mere 7 % in rural areas). Insurance product in the graph provided below includes all types of insurance life insurance, health insurance, vehicle insurance, and miscellaneous others. One aspect that the graph doesnt bring to picture is the difficulties faced by households (if any) in availing the three products mentioned in the graph. It was a bit surprising to us that not a single household faced even a minor difficulty in buying an insurance policy, whereas a large majority of households had to deal with some or other problem when availing a bank loan.
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% of households
41 26 7 5 Urban Rural 0
Debit Card
Insurance
Credit card
(xv) Different sources of advice on money matters: The following graph (Fig 6.9) gives the different sources where households have sought advice on financial matters. Most of the respondents both in urban as well as rural areas consulted their friends and family members. However some of them from urban households also discussed their financial problems with bank officials and a few even paid a visit to a financial adviser. But in case of rural households, the number of people consulting bank officials was negligible. Even those who went to a financial adviser were the ones surveyed in Gumla district. This was mainly because of the presence of a bank sponsored credit counselling centre in the area (the only one in the entire of Jharkhand) . This also brings to light how such centres can go a long way in resolving the financial problems of the affected people.
Fig 6.9 Souces of advice on money matters
No where Family/Friends Bank Financial Adviser Others 0 3 6 5 4 3 10 20 30 40 50 60 70 80 9 18 29 55 68 Rural Urban
% of households
More information on this Credit Counselling Centre has been provided in the next
chapter.
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(xvi) Managing money: The graph (Fig 6.10) below shows how well respondents thought were they managing their money. As expected, urban households were more adept at managing their money with 29 % of respondents saying they were managing well, whereas for their rural counterparts, it was a mere 11 %. While in urban households 23 % expressed their difficulties in managing their money, 45 % households said the same in rural areas. Moreover, 19 % rural households could not even decide how well they were at money management. This highlights to their lack of self confidence in financial matters and points to the greater need of catering to the rural sections money managing abilities.
Fig 6.10 Money management by households
Managing well Just getting by Getting into difficulties Not sure 0 10 11 29 20 30 40 50 19 7 45 23 25 41 Rural Urban
% of households
(xvii) In case of emergencies: The graph (Fig 6.11) below shows what respondents do when they are in need of money in case of exigencies. In case of urban households, while 15 % would resort to taking a loan from sources other than a bank, it was mainly from the firm in which they were employed (for servicemen only). But 30 % of rural households taking a loan from other sources meant mainly from moneylenders. Also rural households were more disposed to sell something in order to meet their emergency needs than their urban counterparts (22 % and 7 % respectively). In urban areas, those with credit cards were also more likely to use it in emergency. With 5 % urban households possessing a credit card, 3 % said they would use their credit cards in such a situation.
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% of households
(xviii) Level of interest in basic financial services: Table 6.1 below shows the level of interest of households (both urban and rural households) in basic financial services. It can be seen that rural households were much more inclined in saving small amounts of money than their urban counterparts. Urban households were more interested in availing a loan if it comes with a reasonable interest rate than rural households. This may be explained on the grounds that urban respondents were more likely to use the loan for investment purposes and were in a better position to repay
Table 6.1 Level of interest of households in basic financial services:
Very interested % 17 (53) 35 (15) 35 (15) 30 (31) Fairly interested % 31 (24) 28 (19) 05 (15) 26 (23) Not very interested % 28 (14) 12 (27) 05 (30) 19 (22) Not at all interested % 21 (04) 23 (22) 49 (24) 23 (17) Not sure % 03 (05) 02 (17) 03 (16) 02 (07)
Financial services
Saving small amounts of money Taking out a loan at reasonable interest Taking a business loan Advice about managing debts Advice on welfare benefits More information on financial matters
36 (56)
38 (44)
37 (21)
40 (20)
19 (11)
12 (16)
05 (09)
07 (10)
03 (03)
03 (10)
NOTE: Numbers without brackets are for urban households and those within brackets for rural households.
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when compared to rural households, for whom it was mainly for meeting their consumption needs. However, an interesting feature that came out was that rural households were more interested in managing debts which indicates their borrowings were more in emergency cases than in a well thought out process. Rural households were also more interested in welfare benefits, as well as other financial matters. (xix) Level of interest in courses and sessions: Table 6.2 below shows the level of interest of households in various courses and sessions. It gives the general picture that whatever the course/session is, rural households are more likely to participate in such events than urban households (be it support for numbers, with reading or writing). This also brings to light the high illiteracy still prevailing in rural areas. Although only 41 % of rural households were having a bank account (please refer to Fig 6.2), 48 % of rural respondents were very interested in knowing how to operate a bank account and 23 % fairly interested. This shows that in spite of not having a bank account, they are much willing to have one and operate it too.
Table 6.2 Level of interest of households in various courses and sessions:
Very interested % 05 (41) 09 (52) 08 (55) 12 (48) 36 (29) 40 (33) Fairly interested % 08 (33) 09 (30) 14 (26) 16 (23) 08 (21) 38 (27) Not very interested % Not at all interested % 69 (10) 65 (06) 63 (06) 38 (10) 40 (20) 11 (15) Not sure % 04 (06) 03 (04) 03 (03) 04 (05) 04 (09) 02 (07)
Courses/Sessions
Support for numbers or arithmetic Support with reading Support with expressing yourself in writing Support with how to operate a bank account
14 (10)
14 (08) 12 (10) 30 (14) 12 (21) 09 (18)
NOTE: Numbers without brackets are for urban households and those within brackets for rural households.
(xx) Level of importance given by households to financial products: Table 6.3 below gives the level of importance households attach to various financial products and services. Having a bank account is of utmost
45
importance in urban households (with 81 % of respondents considering it very important). This is true for rural households too, but to a lesser extent with 45 % respondents of the view that it is very important and 24 % considering it fairly important. Lack of any interest in credit cards in rural areas is self explanatory. Even in urban areas, only 32 % of respondents viewed possessing a credit card is very important and among those having one, some equated it with status too. While rural households attached more importance to financial education, the level of importance to financial counselling and investment advice was much lower. This may be because they viewed financial education as more of basic education than in purely financial terms. However, in case of urban households the level of importance was distributed more or less uniformly in all the three matters.
Table 6.3 Level of importance to various financial products:
Very important % 81 (45) 39 (30) 32 (00) 58 (45) 64 (25) 58 (60) Fairly important % 13 (24) 25 (31) 10 (00) 21 (35) 16 (20) 22 (24) Not very important % Not at all important % 02 (12) 23 (18) 40 (89) 10 (04) 09 (19) 08 (05) Not sure % 01 (02) 01 (03) 04 (02) 04 (05) 04 (06) 03 (02)
Financial products
Bank account Small personal loan Credit card Financial counselling Investment advice Financial education
03 (17)
12 (18) 14 (09) 07 (11) 07 (30) 09 (09)
NOTE: Numbers without brackets are for urban households and those within brackets for rural households.
(xxi) Suggestions by respondents to achieve financial inclusion: Across households, whether rural or urban the consensus was on giving wide publicity to financial inclusion promoting initiatives through newspapers, posters, public gatherings, advertisements, etc. Other suggestions included reducing paper work or documentation, making available a number of retirement schemes, opening of financial advice centres, simplifying borrowing procedures, awareness campaigns, relaxation of KYC norms (already in existence), increasing social welfare benefits, rethinking on negative areas marked by banks, among many others.
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The survey findings point out that although financial exclusion is widespread in rural areas, it would be incorrect to say that urban households have been satisfactorily financially included. The common thread that runs between rural as well as the urban households who still remain outside the financial net is poverty and illiteracy combined. Though financially excluded, there is no lack of willingness on the part of the excluded sections to uplift themselves from their present status. What remains to be done is fast and effective implementation of the already launched initiatives on a nationwide scale so as to bring the benefits of the countrys economic growth to all and one.
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7. Field Visits
Apart from conducting financial inclusion surveys in and around Ranchi, we also embarked on our journey to evaluate the myriad initiatives that have been launched to promote financial inclusion, by undertaking field visits and assessing the ground reality. We went on to meet members of SHGs and farmers clubs in Ramgarh district, visited the FLCC (the only one in Jharkhand) in Gumla District and also visited the RUDSETI / BMIED (the oldest RUDSETI in the state) in Hazaribag district. Besides, we gave a presentation on financial inclusion/financial literacy to students of St. Francis School, Ranchi. In all these visits and sessions, we tried to assess whether the financial inclusion initiatives that have been undertaken were working in accordance with the issued guidelines or not, and if not, what were the reasons holding it back. For example, in our visit to the FLCC in Gumla district, we assessed the centre keeping in mind the framework proposed in the Financial Literacy and Credit Counselling Centres: Concept Paper released by RBI. Similarly, while reporting on the RUDSETI/BMIED, Hazaribag our evaluation has been based on the Guidelines for RSETIs issued by the MoRD, GOI. This has been done, because we believe that only with effective implementation of such schemes, can their desired goals be achieved, and their benefits realised by the targeted groups.
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(i) Interaction with SHGs: The SHGs were involved in activities like poultry, wormi-compost, brick manufacturing, etc poultry being the key activity. SHG members were imparted a one month duration training by the NGO, teaching them the basics and intricacies as well of poultry activities. Although all the groups were maintaining group accounts in banks, many of the SHG members were not having individual bank accounts. Moreover, the groups were not routing their savings through their group accounts, instead they were doing their transactions directly with the group members. This was resulting in their savings not being reflected in the bank accounts. This even led to improper grading of the groups. They were unaware of the fact that not having proper transactions in their account books necessitated them to produce character certificate to banks for availing further credit. Some SHG members were also harbouring confusion regarding the subsidy on the revolving fund of Rs. 10000 (under the SGSY scheme). They were under the wrong notion that the revolving fund that was the subsidised amount, rather than the interest on the revolving fund that was the subsidy. Although the area was having a good poultry market, during the bird flu period, insurance companies were not willing to insure their livestock and this had led some groups to incur losses in those difficult times. (ii) Interaction with Farmer Clubs: There were relatively few Farmer Clubs in comparison to the number of SHGs. NABARD had sent some of the club members to Ahmednagar for nursery training. Prior to the training, they were of the opinion that lac cultivation was possible only on large sized trees, but the training program taught them that it could be done in smaller ones too. They cited many such examples of how the training program has benefited them. The key activity among the Farmer Clubs, though, was agriculture and pig farming. Post-farmer club formation, they had started recognising the advantages of team work. Instead of all the members visiting the market for seed purchasing (as was in earlier occasions), now only one of the group member visits the market. This has distributed and brought down their travelling expenses. Farmer Club members were encountering difficulties in availing the Kisan
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Credit Card (KCC) facility. This was so, as the farmers were not having the title deeds of their land which the banks sought, in order to give the KCC facility. Also, the Land Possession Certificates (LPCs) issued by the district administration were not recognised as an authentic document by the banks and this had led to many groups not being able to access the KCC facility. (iii) Assessment: Although the SHGs were having some minor confusions regarding the revolving the credit subsidy and not routing the savings through bank accounts, overall, they were in an advanced stage of micro-enterprise development. They even admitted of their living standard being improved, albeit to a somewhat little extent, after entering in the SHG fold. Similarly, the Farmer Club members too had imbibed the philosophy of working with each other in tandem and were availing themselves of credit facilities under the Government sponsored schemes chiefly through KCC. One problem that was common to both the groups was the presence of only one bank in the entire block. Because of the Service Area Approach (SAA) followed in the Government sponsored schemes, some had to travel as much as 5 6 km to reach their bank, in spite of having a bank just one km away (since it was outside the service area). This was accentuated by the manpower crunch in the only bank present in the block. The bank has only three personnel one manager, one officer and one cashier. This resulted in long standing hours and daily wage labourers had to lose their one days pay, if they had to visit the branch for cash withdrawal or any such purpose. It was also noticed that linkages under the SGSY scheme were much lower than normal linkages. This was amplified by the SHPI/NGOs view that under the SGSY scheme, people were more interested in availing the revolving fund interest subsidy rather than undertaking productive activities with the credit availed. The SHPIs preference for normal linkages rather than SGSY linkages, prevented villagers to fully exploit the benefits envisaged under the SGSY scheme.
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is manned by only one counsellor. According to the Credit Counselling Centres performance report sent to CGM, RPCD, RBI Central Office (please refer to Annexure II for the full report), the centre has handled 1237 cases till 31st March, 2009 and has arranged 21 seminars/meetings wherein 2647 persons were present. The Gumla centre provides counselling services to distressed people on their heavy debt burden, creates awareness among the masses emphasising on financial inclusion, and offers counselling to people who come for advice on various financial problems. The debt counselling that is being done here is more curative than preventive. (i) Organisational Set-up: The Gumla centre (as well as other three centres in Mumbai, Wardha and Chennai) is being run by the trust christened Abhay, which was formally launched at New Delhi on 25th August 2006. Bank of India being the lead bank in Gumla district has taken the initiative of setting up the FLCC in its Lead District Office. Counseling and debt management services are provided free of charge to the customers so as to put no additional burden on them. (ii) Working: The centre remains open thrice a week, i.e. on Tuesdays, Thursdays and Saturdays from 11 am till 4 pm. The days have been selected giving die consideration to the local conditions. Tuesdays and Saturdays being market days and Thursdays being non-ploughing day in the area, attracts more people to the centre than any other day would have done. On Wednesdays and Fridays, the counsellor accompanies the sponsoring banks LDM on his visits to nearby villages for meeting with SHGs, Farmer Clubs, etc in order to spread awareness on credit counseling services as well as the Abhay centre. The counsellor also undertakes personal visits to local places where weekly meetings are held in the early morning hours. The counsellor has also visited a few banks in the area for promoting the centre. The centre does maintain liaison with local NGOs working in the field of farming and allied activities.
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(iii) Infrastructure: The centre consists of a single room in the Lead District Office, and is not equipped with adequate communication and networking facilities. The only interface the centre has is face to face. Bereft of a phone, computer and a fax facility, it is not in a position to deal with requests received by phone or email (though the latter one is unlikely to be used considering the socioeconomic conditions prevailing in the district). (iv) Qualification and Training Counsellor: The counsellor has been a scale I officer in Bank of Indias East Singhbhum branch before opting for voluntary retirement. The counsellor being a local person was given preference in manning this centre. After induction, the counsellor was sent to the sponsoring banks Mumbai office in Dadar for a two day training programme on credit counselling services. (v) Monitoring: The functioning of the CCC is monitored by the sponsoring banks head office. The monthly, quarterly and annual performance reports of the centre are submitted to RBI Ranchi, apart from being sent to the banks zonal office and head office. (vi) Assessment: Although the initiative taken by Bank of India of opening a CCC in Gumla District is laudable (the only one such centre in entire Jharkhand), there still remains a few stumbling blocks which need to be cleared off. In spite of the centre having counselled a number of clients, the proportion of clients from non-sponsoring banks to the sponsoring bank cannot be termed satisfactory. There was not even a single case where a non-sponsoring bank had taken the initiative of recommending its customers to this counselling centre. Whenever customers from other banks visited the centre, it was on their own initiative. The counsellor was quick enough to point out a case of how one of his clients (from the sponsoring bank) had greatly benefitted from the counselling sessions. Due to the banks computer fault, the client had been charged Rs. 14500 in excess, at an interest charged higher than the stipulated one. The counsellor helped his client in interest recalculation, in applying for a refund
52
and ultimately got the matter sorted out. This effort definitely deserves praise. But we did not come across any such cases when clients were customers of some other bank. This is not to imply that the counselling centre restricts itself to the sponsoring banks customers only, but it does show that the sponsoring bank is more willing to send its customers to the centre than are other banks in the same area. In course of our interaction with the counsellor, it also came to our notice that although the counsellor did not indulge in marketing the sponsoring banks products and services, there was an unsaid implicit directive/instruction from the banks management to counsel more number of clients from the sponsoring banks customer pool rather than other banks customers. The absence of modern facilities like phone and an internet enabled PC, in a way hampered the effective functioning of the centre. In one of the instances, a group of people approached the centre to know how to avail the subsidy from the National Horticulture Board in case of horticultural loans, but the counsellor had no information on the topic, and finally the group had to leave empty handed. Since the counsellor has not been provided any internet facility, he is unable to keep himself updated with the recent developments. The counsellor is not even authorised to place an order for a time-table board from the local carpenter, which he wants to put up in front of the centre. For such a minor task too, he had to write a letter to the banks zonal office requesting for the same. Since the centre remains open only for three days a week, this has caused much inconvenience to people who unknowingly land on the centres premises on non working hours/days. With this little autonomy assigned to the counsellor, it gets difficult for him to implement any such improvements he wishes to undertake for the centres upgradation. A comparison of the centres performance report (to be found in Annexure II section 2 A (iv)) and our findings from the counsellors interview throws up a few mismatches. With the centre counselling a minimum of 30-35 clients monthly (as found during our interview) it is not clear how could the centre have handled 1237 cases till 31st March 2009 as have been reported in the banks communication to RBI. From 8th September 08 to 31st March 09 (even considering a period of 7 months) at a rate of even 40 clients per month, the centre could have managed around 280 clients only. In order to handle 1237 cases in just 7 months, the centre has to counsel people at a rate of 176 people per month instead of 30 35 cases on a monthly basis. This is even so, when the number of persons attending the 21 seminars/meetings has been provided separately at 2647. Also, with an initial contribution of Rs. 51 lakh
53
as a corpus for Abhay (please refer to Annexure II section 4) it is difficult to find a reason why is the Gumla centre having just one fan, one table and two chairs, and is bereft of as basic a thing as a landline telephone connection (although the Lead District Office of which the centre is a part, is having phone, cooler and computers too). The analysis of the CCC is in no way to criticise the efforts that the sponsoring bank has undertaken in taking cognizance of the directives of the Reserve Bank of India to set up financial literacy and credit counselling centres. The initiative the bank has taken in setting up the first ever FLCC in Jharkhand is highly appreciated and is worthy of praise. But this analysis is just to give a picture of the real ground situation, to know what has been done till now and what still needs to be done which is not at all an insignificant task. Until and unless we have a fair and transparent picture before us, it would be difficult to undertake corrective measures. The analysis provided, just aims to present a clearer picture, not to undermine the picture itself.
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The current rent being paid by the institute is Rs. 11000 per month for a 3200 sq feet area. Cost of running the institute is around is Rs. 1 lakh per month which was being fully borne by the sponsoring bank until the formation of the Allahabad Bank Rural Development Trust on 1st April, 2009. From October 2007 onwards, NABARD has been refinancing 40 50% of the cost of running the training programmes. For the financial year 09-10, the budget for running the courses has been pegged at Rs. 12.44 lakhs and the funding agencies for different programmes include KVIC and DRDA apart from NABARD. The annual training calendar of the institute for 09-10 can be found in Annexure V (it includes the period, duration, budget and funding source of each training program). (ii) Infrastructure: The institute has one classroom, accommodation provisions for 20 trainees with one common bath and toilet facility, one kitchen and one dining hall, one Directors room cum office and one personal room for the Director (the Director resides in the institute premises itself). (iii) Programme Structure: The institute has till now offered around 12 training courses, and is ready with 30 skill development programmes to be implemented in the year 09-10. All the programmes are of short duration ranging from one to four weeks. The programmes already/to be organized are in the trades of agriculture, product manufacturing, process and repair, skill development for PMEGP, SGSY-SHG, among many others (please refer to Annexure V for the complete list of programmes). (iv) Size of Batch: The batch for each of the programmes consists of a maximum of 30 candidates. In case a course falls short of this number, the Director and his supportive staff (only one) makes a visit to the nearby villages for public awareness and finally brings the size of the batch to 30. This ensures that maximum number of youth avail themselves of the benefits of the programmes and simultaneously, publicity of the institute also gets done. (v) Selection of trainees: The minimum qualification for enrolling in a programme is that the applicant should be literate. Some other programmes require higher qualifications - the
55
candidate to be Class VIII passed or having secondary education. Selection procedure is a two stage process review and scrutiny of received applications followed by personal interview of the applicant by the institute Director and DDM, NABARD. (vi) Assessment: Although BMIED is not officially a RSETI, it follows all the guidelines for RSETIs (issued by the MoRD, GOI) to the maximum extent possible, in spite of constraints such as manpower crunch (one Director, one staff and one faculty on contractual basis) and lack of modern infrastructure. This is in sharp contrast to RUDSETI, Ranchi which we were willing to visit but could not do so because no training program was currently going on over there, to put it simply, it was closed. First, we were informed by its sponsoring bank that training will commence from 6th July, 09 but when the day arrived, the commencing date got postponed to one more week. And it seems likely to get postponed once again after this one week also passes away. Coming back to BMIED, lack of modern infrastructure like computers and workshops did not come in their way of conducting programmes like screen printing and carpet making for which they hired five computers (in the former case) and conducted practical classes in the District Industry Center Workshop (in the latter case). Still, the institute is in severe need of a LCD projector, PCs with internet connections and a fax machine other than the basic infrastructure facilities like chairs, tables, etc. The institute is having just one computer for official work only and that too is not having an internet connection. Since the institute is functioning from a smaller area, i.e. 3200 sq feet, the infrastructure standards are not at par with the guidelines for RSETIs. Moreover due to shortage of rooms and facilities, programmes for boys and girls are not run simultaneously. There is facility of holding only one programme at a time and only in exceptional circumstances, does the institute hold two or more than two programmes side by side as was the case in March April 2009. But talks are ongoing with the district administration over land being allotted to the institute, the area of being larger than the minimum stipulated, so as to ensure smooth expansion in the future. During our interaction with the trainees (in their T.V. and radio repairing classes) we encountered some students with qualifications much higher than the prescribed norms. Some were even doing their under graduation while
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simultaneously undergoing the training course. Almost all the students present over there, had come to the institute based on the recommendations they received from the passed out students of the institute. This conveys that the ones who were trained in the institute have found it effective and beneficial, and thus are recommending the institute to their peers. From our interaction with the Director, staff and the trainees, it could not be judged whether the trainees were from BPL families or not. Also this was not the criterion for selection of candidates. The institute has started training programmes for SGSY-SHGs from this academic year and has informed DRDA of this new course. Since DRDA has not yet sponsored or sent any list of BPL candidates to the institute, BMIED is continuing with its other programmes only. But the Director is very much willing to enroll the BPL trainees, understanding that they are in more need of such training than the others who are well-off and literate too. Although the institute has done whatever was in its scope to train the rural youth, manpower crunch has been a major stumbling block which has held it back in their follow up of the trainees for longer periods as has been provided in the guidelines of handholding of trainees for a minimum period of two years. However, the major challenge facing the trainees was of credit linkage, which was between 10 20 % of the total candidates trained in the institute. After the completion of each programme, the institute sends the trainee list to all the nearby banks, so as to ensure financial assistance to the trained youth. In spite of this, the banks have not shown any interest in sponsoring the candidates. The scenario was no different with the institutes sponsoring bank too. Although the institute has been making repeated calls to the banks for trainee sponsoring, banks have only tried to put off the matter on the backburner. This has led to trainees working as employees in garages or shops rather than starting their own micro-enterprise. In other cases, it has also led to a feeling of dejection among the trainees as well as the institute officials. This situation highlights that banks are not giving due recognition to certificates issued by the BMIED/RUDSETI for extending credit to the trainees. Until and unless, trainees are provided with proper financial assistance, the role of RUDSETIs in rural development and upliftment of the poor youth will remain limited even with the best intentions of the policy makers. The full potential of the trainees can be brought out only by providing them with proper credit linkage after they are done with their training programmes.
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8. Recommendations
From the diversity of households covered in our survey, the major issue that came up was the lack of awareness among the masses (both literate and the illiterate ones alike). Although Reserve Bank of India has undertaken a myriad of initiatives to promote the cause of financial inclusion, no mass sensitization has taken place yet. This is evident from our survey findings, where only 59 % of rural households were having a bank account and knowledge of no-frills account was limited to a handful of four to five people only. This is in spite of the fact that no-frill accounts have been in existence since the last three years, if not more. (For more information on these particular findings, please refer chapter 6, section 6.3 [ii] and [viii]). Sensitisation regarding the importance of financial inclusion has been limited to the banking sectors top level officers only, and it has yet to reach the line functionaries branch managers, branch staff and the like. This has also contributed to ignorance among the masses, in general and the targeted groups (the ones financially excluded), in particular.
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rural staff, with special emphasis on loans for agriculture and allied activities. Manpower crunch in bank branches of remote locations lead to long standing queues, results in work overload for the staff and makes bank customers impatient. To mitigate such stress causing situations, there is an urgent need to adequately staff those branches having just two or three personnel, in spite of being the only bank in an entire block as was the case in Mandu block of Ramgarh district, Jharkhand. (Please refer chapter 7, section 7.1 [iii] on the difficulties faced by rural households mainly from BPL families in such cases). This is all the more important in rural areas as there as few ATMs in these villages, which lead customers to visit branches even for cash withdrawal. This is not the case in urban areas, where people visit bank branches for various purposes but rarely for withdrawing cash. The staff may be trained to develop a positive attitude towards their customers. Banks may also devise suitable incentive structures for rural posting including monetary benefits, so as to make them lucrative. Branch managers, with a rural background and inclination towards serving rural people may be given preference while considering such postings. The bottom up approach may comprise of different mechanisms from doorto-door leafleting, public meetings, and advertising through print as well as non-print media. Where resources are not put into an awareness raising campaign, there is a danger that knowledge of the financial services will remain restricted and target groups of financially excluded people not reached. Since majority of rural households tend to borrow money so as to meet their consumption needs, they need to be sensitised for availing credit in order create income generating assets. (Please refer chapter 6 section 6.3 [xii] for more information on types of loan availed by households).They are to be made known of the various Government Sponsored Schemes (GSSs). This can be effectively done in partnership with NGOs working in the fields of poverty alleviation. The long list of schemes like SGSY, SJSRY, PMEGP and SRMS can be made effective only if they are known to people whom they target. Except NREGS, there is hardly any news of the other GSSs in the media, although the other schemes too have been devised with the sole aim of poverty alleviation and ultimately, financial inclusion. Awareness of the GSSs and their benefits will also lead more people to opt for them. This will also be beneficial to SHGs, some of whom are led by NGOs preferring direct linkages rather than SGSY linkages, as was the case in Mandu block, Ramgarh. (Please refer chapter 7
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section 7.1 [iii] for the detailed reasons behind preferring normal linkages over SGSY linkages by NGOs). With 2130 dailies being published in the country and a circulation of more than 88 million, 1 the print media has a huge potential of creating mass awareness about the measures being taken by the Reserve Bank for promoting financial inclusion. Statistics also show that people prefer their regional language newspapers, and hence awareness through such media can go a long way in bringing financial awareness to the grass-root level. With high illiteracy levels prevailing in the country, non-print media too can be effectively used. With the national network DD1 alone having a viewership of 167 million 2 and the only one having a pan India reach (DD1 being more popular in rural households), it can be an effective medium of reaching the rural masses. The fast growing radio segment, registering an increase in listenership with each passing day can also be utilised for promoting the cause of financial inclusion/financial literacy in rural as well as urban India. With the top three FM stations having a combined 83 million listeners 3, they can be used to promote and sensitise the common man at the grass-root level on the need to open bank accounts by developing appropriate audio capsules. Also, one may be of the opinion that people coming to bank branches need not be told about no-frill accounts or other financial services, since they are already financially included. But this belief is based on shaky grounds, as we found out during our surveys. In some of the surveys conducted inside bank premises, we encountered people who were standing in queues for depositing cash in accounts that were not their own. They had been sent to the bank by their employers and to our surprise, they didnt have their own account. These people can be financially included at ease. They are regularly visiting banks, carrying out transactions and yet they themselves dont have a bank account. And this is because some banks have tried their best not to let them know about no-frills account. The banks have displayed no such notices, although they have put up huge boards showing their various schemes on credit cards, personal loans, etc (the more profitable ones). So there is an urgent need to immediately include these bank-coming-but-not-having-bankaccount people in the financial sector, and this be can be done by just putting up a no-frills poster on the banks display boards.
1. Registrar of Newspapers for India (2005-06 figures). 2. Indian Readership Survey 2009 Round 1 data. 3. The top 3 FM stations being Radio Mirchi, AIR FM Rainbow and Big FM (in order of their rank): IRS 2009 Round 1 data.
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Instead of banks building this service, the project can also be made a selfsustaining one by adopting a user-pays model. Charging users a small fee per call can make the project self-sustaining. But counselling being not similar to just answering a question, it may be time consuming and lead to a rather higher bill for distressed farmers, etc, thereby putting an additional burden. Still, market segmentation remains a viable option. Such a self-sustaining helpline extended by telecom companies is already available in 700 villages across 3 states (as of October 07) providing farmers with export advice on pest control, modern farming methods, etc, charging Rs. 5 per call. 4 A free phone counselling is already in existence provided by Disha Financial Counselling under the ICICI Trusteeship Services Ltd. One just needs to sms DISHA to 53030 and within 48 hours, he/she id contacted by a financial counsellor. 5 This service has been verified by us too. Since Disha does not have a presence in Jharkhand or Bihar, we intentionally texted the centre from a Bihar mobile number, and to our extreme delight, we were contacted by a counsellor from Hyderabad, within 48 hours as was promised. With a single trust being able to provide such a service free of cost, there is hardly any doubt, what can a service provided by all the banks in the country, can achieve. These kinds of digital inclusion will definitely a major step forward in promoting financial inclusion across the nation.
4. An article on this helpline has been provided in Annexure VI and can also be accessed at http://www.businessstandard.com/bs_csr/news.php?autono=302628 5. The financial counselling centres URL: www.dishafc.org (Annexure VII).
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provide loans to such trainees, they continue to adopt a hands free approach. But considering that so much is being done by the institute for the rural youth in providing such training, lets not leave the last mile problem unaddressed. Since the trainees are expected to start off with their own micro-enterprises after the training is complete, it would be of immense help if they are provided loans right after their training gets over. The sponsoring bank, if not willing to fund the entire project cost, may be directed to compulsorily lend a minimum of 60 % of the cost of the project to be undertaken by the trainee. Similarly, directives may also be issued to the other banks in the area so as to meet the entire project cost of the trainees enterprise. Also, the Reserve Bank may review whether a loan to such a RUDSETI trainee be included in priority sector lending or any such GSS. Quick and hassle free loan to these trainee will boost their morale, increase the institutes popularity and most importantly, increase banks lending, thus finally translating into profits.
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etc. The course was being offered in 58 schools in 07 08 and 120 more schools in 08 -09. Considering the low reach of the FMM course because of its specialised nature, Reserve Banks focus should be to reach maximum number of schools so as to integrate them with the school curriculum quickly. The immense work still left to be done in financial inclusion, quick implementation of a basic financial education course has the potential to develop a large financially literate work force in the country.
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There are organisations such as Microplace which even offer interest to such lenders with the interest rate being fixed by the lender, whether one wants to give an interest free loan or at an interest of 1 %, 2 % or 3 % whatever. The working model and its advantages can be understood from the following selfexplanatory picture:
The best part of such a model is that people give a loan, not a handout. They get it repaid, choose to re-loan and continue to do so with little sums of money from their side which adds up to a substantial amount when aggregated at their end. Adopting such a model can free up those people shackled in the chains of negative area and can finally integrate them into the mainstream financial sector, thus enabling financial inclusion.
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Financial education sites such as www.federalreserveeducation.org, www.mymoney.gov and www.meine-schulden.de (a German site) seem to be much more popular in attracting visitors. A comparison of the top keywords driving traffic to these sites from search engines, gives us a fair idea of what users are looking for in these sites. Here is the list of keywords: www.rbi.org.in www.federalreserveeducation.org
www.mymoney.gov
www.meine-schulden.de
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The above comparison is clear enough to prove that people visiting RBIs website are not looking for financial education, but in all the other three cases. Users do visit the sites for financial education/financial counselling. So there remains little doubt that the site should be made more aligned to financial counselling and at the same time public awareness regarding the site is to be substantially raised. (Please refer Annexure IX for more details). Again, if we compare the time spent on the above four sites, RBIs website comes at a distant third (as evident from the following graph). People visiting RBIs website spend less time on the site than users visiting the sites www.federalreserveeducation.org and www.meine-schulden.de.
Comparing the daily reach of these sites, RBIs website wins hand down (please refer the following graph), and this is what we will have to capitalise on to popularize the financial education website. It was also observed that www.meine-schulden.de with the lowest number of sites linking in at 83 is also the one where people spend more minutes per day. This may be because meine-schulden.de is the only site specifically aimed at debt counselling. The Federal Reserve Systems financial education website, FederalReserveEducation.org, is dovetailed to increase the use of Federal Reserve educational materials and promote financial education in the classroom. The website has material intended for the general public, as well as materials specifically geared toward teachers and high school and college students. It provides easy access to free educational materials, a resource
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search engine for teachers, and games for various ages and knowledge levels. The other regional Feds also have various interactive online programmes on their website designed to generate awareness about better financial management and assessment of one's own financial position. Similar in nature is the site mymoney.gov with articles on budgeting and taxes, credit, financial planning, home ownership resources, retirement planning, credit card repayment calculator, etc. The site meine-schulden.de provides first information to people seeking advice on how to deal with their debt problems. It consists of three parts covering information, services and guidance. On the information sites, visitors are systematically guided through the regulations around the subject of debt relief. The workflow of a debt settlement process and consumer insolvency proceedings are described as are the many practical notes on what creditors are allowed to do and what they are not. In case visitors have a concrete request they can search for support in the guide-book on the right side of the website. Typical questions from the debt counselling practice are answered here and first tips on how to deal with financial problems are given. On the service sites, many model letters are published and a search module to find the next debt advice centre. The site provides, among others, model letters to apply for a Current Account for everyone and contact details of the banks dispute settlement and customer complaint offices. The RBIs financial education website which is more inclined towards children, should be geared towards adults as well with articles on credit and
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debit cards, deposits, general banking, safe banking, financial counselling, loans, etc. It may also have online tools like financial health check-up and debt test, etc. Videos prepared by RBSC, Chennai like the one on NBFC fraud named Mani Loses Money, etc should be uploaded on the site so as to acquaint the masses with such scams and prevent them from getting trapped in such frauds. Also the site can have a list of credit counselling centres in India. In all, it should act as a repository of information related to customer education, and act as a one-stop site for people looking for anything related to financial literacy. Only then can the site aim to achieve its goal of spreading financial literacy.
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ANNEXURES
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ANNEXURE I
RBI YOUNG SCHOLAR SURVEY ON FINANCIAL INCLUSION (QUESTIONNAIRE)
Place of Survey: ________________________ Name: ________________________________ Gender: M/F No. of family members: ___ adults ___ children Date: _____________________________ Age: ______________________________ Occupation: ________________________
A. SAVINGS:
1. Is your household having a one bank account? 2. No. of accounts in your household: 1 2 Yes 3 No 4 More than 4
3. Which type of account do you have? Savings Bank a/c Current a/c Recurring Deposit a/c Fixed Deposit a/c If others, (please specify) ___________________________ 4. Is the bank account with a cheque book? Yes No
5. What were the reasons that your household opened the account? To receive Govt. payments from NREGP To receive Govt. payments from schemes other than NREGP For receiving remittances For saving money To request a loan If others, (please specify) ___________________________ 6. Who helped you open the account? Village Panchayat Officials Bank Officials Neighbour Friends/Relatives If others, (please specify) ___________________________ 7. How frequently do you save in your account? Don't save / never At least once a month Less than once a month I put in money as and when I can I have paid money in but not in past 12 months I have not added money since account was opened If others, (please specify) __________________________
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8. Reasons for not having a bank account: I have no money/little money to put in No bank in this area No point - benefits received in cash No point - paid in cash Concerned there may be too many charges Tried to open but was refused Lengthy processes Not important to me Anticipated rejection If others, (please specify) _____________________________ 9. Reasons for being refused a bank account: No ID Previous bad credit history No job, unemployed Had to have a minimum amount Had debts Thought I was a risk Not lived here long enough - no credit history - use spouse's account Don't know - did not say If others, (please specify) ___________________________ 10. Are you aware that banks are opening zero min. balance accounts for everyone? 11. How did you find out that banks were opening such no-frills accounts? Bank Officials SHG Members NGOs Village Panchayat Farmer Clubs Posters Newspapers/Advertisements If others, (please specify) ___________________________ Neighbours Village Meetings Yes No
12. Do you have any grievances in your no-frills a/c? No If yes, please specify? _____________________________________
B. BORROWINGS:
13. Have your household ever borrowed or taken a loan? No If yes, from where? Banks Relatives Friends Moneylenders If others, (please specify) ___________________________
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14. If borrowed from banks, which of the following reasons led to this choice? Low rate of interest Good deal, good rate Was offered/arranged by the banks It is easy (vague) Trustworthy lender If others, (please specify) ___________________________ 15. If borrowed from sources other than banks, which of the following reasons led to this choice? Being able to borrow relatively small sums I did not need to provide security or guarantees It was available locally I can make repayments in cash in small weekly or fortnightly sums It is convenient because they come to the door to collect It is because I know the lender/collector If others, (please specify) ___________________________ 16. If ever borrowed, what was the type of the credit/loan? Housing loan Business Loan Training/Education loan Vehicle loan If p ersonal loan, purpose of the loan Household items Computer Day to day living expenses or bills To pay off other debts If others, (please specify) ________________________ If others, (please specify) ________________________ 17. If loan was availed, what difficulties were faced in the process? __________________________________________________________________________________ __________________________________________________________________________________ 18. In the past three years, have you been refused a loan or credit? Yes, been refused credit No, been given credit I wanted Not asked for any credit 19. If you were refused, do you know why you were turned down? Please give details. __________________________________________________________________________________ __________________________________________________________________________________
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21. What were the reasons for not availing any form of insurance? Too expensive, can't afford it Just don't bother, no real reasons No need for it I don't have much, nothing valuable I am in process of doing it No insurance men coming to door now Have to have bank account If others, (please specify) ___________________________________ 21. If already having insurance, which of the following type is it? Life insurance Health insurance Vehicle insurance If others, (please specify) ____________________________ 22. Reason for using the above said financial service(s)? __________________________________________________________________________________ __________________________________________________________________________________ 23. What difficulties were faced in the process of accessing the above financial service(s)? __________________________________________________________________________________ __________________________________________________________________________________ 24. In the past three years, have you been refused any of the above financial product(s)? Yes, been refused credit No, been given credit I wanted Not asked for any credit 25. If you were refused, do you know why you were turned down? Please give details. __________________________________________________________________________________ __________________________________________________________________________________ 26. Over the past couple of years, have you been anywhere for advice about money matters? No, no where Family/friends Bank Financial Adviser Social worker If others, (please specify) ___________________________________ 27. And would you say this advice was Very helpful Helpful Very unhelpful Not sure
28. Is there any financial advice centre/credit counseling center in your area?
Yes
No
29. If yes, how satisfied are you with its working and the advice it provides? Completely satisfied Satisfied Just ok Unsatisfied Completely unsatisfied 30. If you are not satisfied with its working, then please give reasons. __________________________________________________________________________________ __________________________________________________________________________________
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31. At present how well do you think you are managing your money? Managing well Just getting by Getting into difficulties Not sure 32. At present how worried are you about getting into debt? Very worried Fairly worried Not at all worried Not sure
33. What would you do if you needed money in an emergency? Ask family or friends Draw on savings Take out a bank loan or overdraft Take out loan from other sources Use my credit card Sell something Don't know If others, (please specify) ___________________________________ 34. Level of interest in local financial services (1. Very interested 2. Fairly interested 3. Not very interested 4. Not at all interested 5. Not sure): Saving small amounts of money 1 2 3 4 5 Take out a loan at reasonable interest 1 2 3 4 5 Taking a business loan 1 2 3 4 5 Advice about managing debts 1 2 3 4 5 Advice on welfare benefits 1 2 3 4 5 More information about financial matters 1 2 3 4 5 35. Level of interest in courses or sessions (same system of marking as in Q.34 above): Support for numbers or arithmetic 1 2 3 4 5 Support with reading 1 2 3 4 5 Support with expressing yourself in writing 1 2 3 4 5 Support with how to operate a bank account 1 2 3 4 5 Support for taking a loan 1 2 3 4 5 Support for various bankable products 1 2 3 4 5 36. Level of importance in the following (1. Very important 2. Fairly important 3. Not very important 4. Not at all important 5. Not sure): Bank a/c 1 2 3 4 5 Small personal loan 1 2 3 4 5 Credit card 1 2 3 4 5 Financial counselling 1 2 3 4 5 Investment advice 1 2 3 4 5 Financial education 1 2 3 4 5 37. Are you satisfied with the BC/BF model or you feel the need of a bank branch at your place? Yes, satisfied No, not satisfied (please give reasons) ________________________________________________ __________________________________________________________________________________ 38. What do you think that the Government, local bodies, banks, NGOs and others might need to do to further achieve financial inclusion? _______________________________________________ _________________________________________________________________________________ _________________________________________________________________________________
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ANNEXURE II
PERFORMANCE REPORT OF ABHAY CREDIT COUNSELLING CENTRE
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ANNEXURE III
WORKING HOURS OF ABHAY FLCC AS DISPLAYED ON THE CENTRES WEBSITE
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ANNEXURE V
BIRSA MUNDA INSTITUTE FOR ENTREPRENEURSHIP DEVELOPMENT, HAZARIBAG, JHARKHAND ANNUAL TRAINING CALENDAR FOR THE YEAR 2009-10
Sl. No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NAME REDP Beautician Course PMEGP Training PMEGP Training Two Wheeler Repairing T.V. & Radio Repair SGSY SHG SGSY SHG Mushroom Cultivation Cell Phone Repairing SGSY SHG SGSY SHG Readymade Cloth Manufacturing Screen Printing SGSY SHG Agarbatti Manufacturing PMEGP Training SGSY SHG SGSY SHG SGSY SHG SGSY SHG Beautician Course SGSY SHG SGSY SHG Photo Lamination & Photography SGSY - SHG SGSY - SHG Electric Transformer Repair Irrigation Pump Repair Electric Motor Winding PMEGP Training PERIOD 4 weeks 2 weeks 2 weeks 4 weeks 4 weeks 1 week 1 week 2 weeks 4 weeks 1 week 1 week 4 weeks 4 weeks 1 week 2 weeks 2 weeks 1 week 1 week 1 week 1 week 2 weeks 1 week 1 week 1 week 1 week 1 week 1 week 1 week 2 weeks 2 weeks DURATION 01/04/09 04/05/09 18/05/09 01/06/09 29/06/09 06/07/09 13/07/09 27/07/09 10/08/09 07/09/09 14/09/09 21/09/09 19/10/09 16/11/09 23/11/09 07/12/09 21/12/09 28/12/09 04/01/10 11/01/10 04/01/10 01/02/10 08/02/10 15/02/10 22/02/10 01/03/10 08/03/10 15/03/10 22/03/10 22/03/10 30/04/09 16/05/09 29/05/09 27/06/09 25/07/09 11/07/09 18/07/09 08/08/09 05/09/09 12/09/09 19/09/09 17/10/09 14/11/09 21/11/09 05/12/09 19/12/09 26/12/09 02/01/10 09/01/10 16/01/10 30/01/10 06/02/10 13/02/10 20/02/10 27/02/10 06/03/10 13/03/10 20/03/10 31/03/10 31/03/10
Cha nnel
BUDGET (Rs.) 69,500 65,600 65,600 75,000 73,000 20,400 20,400 34,000 77,500 19,400 19,400 65,500 76,000 20,400 49,000 65,600 20,400 20,400 20,400 20,400 69,500 20,400 20,400 27,800 20,400 20,400 29,800 31,800 42,000 63,600
FUNDING SOURCE NABARD KVIC KVIC NABARD NABARD DRDA DRDA NABARD NABARD DRDA DRDA NABARD NABARD DRDA NABARD KVIC DRDA DRDA DRDA DRDA NABARD DRDA DRDA NABARD DRDA DRDA NABARD NABARD NABARD KVIC
I I I I I II II I I I I I I I I I I I II II I I I I I I I I I II
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ANNEXURE VI
HELPLINE FOR FARMERS - A SELF-SUSTAINING MODEL
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ANNEXURE VII
DISHA FINANCIAL COUNSELLING CENTRE (WEBSITE HOMEPAGE)
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ANNEXURE VIII
DETAILED WORKING OF THE KIVA MODEL
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ANNEXURE IX
HOMEPAGES OF VARIOUS FINANCIAL EDUCATION WEBSITES A COMPARISION 01. RBIs website on financial education:
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REFERENCES
01. Alliance for Financial Inclusion - Workshop Report on Promoting Financial Inclusion through Innovative Policies, May 2009 02. C Rangarajan Report of the Committee on Financial Inclusion, Jan 2008 03. Chant Link & Associates, Australia Summary Presentation: Research on Financial Exclusion in Australia, Nov 2004 04. College of Agricultural Banking, Pune - Financial Inclusion and Financial Literacy: Union Banks Initiatives, July Sep 2007 - Some ICT Devices: A Primer, April June 2006 - Universal Financial Inclusion in India: The Way Forward, July Sep 2007 05. Commission for Rural Communities, UK Promoting Financial Inclusion in Rural Areas, Nov 2007 06. Department of Rural Development, Govt. of India Draft Guidelines for Rural Self Employment Training Institutes (RSETIs), 2008 07. Financial Inclusion Observatory Debate on Financial Exclusion/Inclusion Country Report: Germany 08. Financial Services Authority, UK Building Financial Capability, March 2007 09. H M Treasury, UK Financial Inclusion: An Action Plan for 2008 11 10. House of Commons, Treasury Committee, UK Financial Inclusion: Credit, Savings, Advice and Insurance, Nov 2006 11. Joseph Rowntree Foundation, UK Financial Inclusion in the UK: Review of Policy and Practice, July 2008 12. Leeds City Council, UK Financial Exclusion: Its Impact on Individuals, Disadvantaged Communities and the City Economy, Dec 2004 13. Rakesh Mohan, Reserve Bank of India Economic Growth, Financial Deepening and Financial Inclusion, Nov 2006 14. Reserve Bank of India - Annual Policy Statement 2009 10 - Annual Report 2005 06 - Annual Report 2006 07
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- Annual Report 2007 08 - Bulletin June 2009 - Bulletin May 2009 - Draft Guidelines on Outsourcing of Financial Services by Banks, Dec 2005 - Master Circular on Credit Facilities to SCs and STs, July 2008 - Master Circular on Priority Sector Lending Credit Facilities to Minority Communities, July 2008 - Master Circular on Priority Sector Lending Special Programmes: SGSY - Master Circular on Priority Sector Lending Special Programmes: SJSRY - Master Circular on New Self Employment Scheme for Rehabilitation of Manual Scavengers (SRMS) - Mid-Term Review of Annual Policy Statement for the year 2007- 08 - Report on Currency and Finance 2006 08 Vol. I & II - Report of the Internal Group to Examine Issues Relating to Rural Credit and Microfinance, July 2005 - Report on Trend and Progress of Banking in India 2007 08 - Working Group on Improvement of Banking Services in State of Jharkhand, 08 15. Scottish Council Foundation Financial Inclusion and Capability in Rural Scotland, June 2007 16. Scottish Executive Financial Inclusion Action Plan, 2005 17. Shyamala Gopinath, Reserve Bank of India Inclusive Growth: Role of Financial Education, Nov 2006 18. Usha Thorat, Reserve Bank of India - Financial Inclusion and Information Technology, Sep 2008 - Financial Inclusion: The Indian Experience, June 2007 - Financial Inclusion for Sustainable Development: Role of IT and Intermediaries - Inclusive Financial System for the Aged, April 2008 19. V Leeladhar, Reserve Bank of India Taking Banking Services to the Common Man Financial Inclusion, Dec 2005 20. Y V Reddy, Reserve Bank of India - Credit Counselling: An Indian Perspective, Sep 2006 - The Role of Financial Education: The Indian Case, Sep 2006