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in select districts of Jharkhand
A Project Report by
RBI Young Scholar 2009
Reserve Bank of India, Ranchi
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 Bank’s 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.
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.
July 15, 2009.
1 7 14 19 26 32 47 58 70 – 85 86 – 87 [iii] . 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.CONTENTS List of Abbreviations Chapter No.
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 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 centre’s website) Leaflet of Programmes Offered by BMIED.
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 Insurer’s 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 Minister’s Employment Generation Programme Prime Minister’s 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 Banker’s Committee Scheme of Liberation and Rehabilitation of Scavengers Small and Medium Enterprise Short Message Service [vii] .
SSI SSP UCBS UI UIN UTLBC Small Scale Industries Society Security Pension Urban Co-operative Banks User Interface Unique Identification Number Union Territory Level Banker’s Committee [viii] .
leaving the vast majority of the working population with irregular income streams. 1. 41 percent of the population is. This rapid expansion is expected to continue as growth in the services and high technology manufacturing sector accelerates. This process becomes self-reinforcing and can often be an important factor in social exclusion. the organized sector employment presently comprises less than 10% of the workforce.7% in the year 2009-10. In rural areas the coverage is 39 percent against 60 percent in urban areas. small enterprises and others. who may not have adequate access to the financial sector.7% in the second quarter of 2008-09. In addition. Agriculture. 59 percent of the adult population in the country has bank accounts.1 1. with the adult population per branch in these districts being above 20. On the assumption that each adult has only one bank account (which does not hold good in practice. Financial exclusion is thus a key policy concern. which continues to support around 60% of the population. unbanked. Introduction India is the fourth largest economy in the world on a purchasing power parity (PPP) basis and twelfth on a nominal basis. has grown by a mere 2. The unbanked . therefore. There is currently a perception that there are a large number of people. or a micro/small enterprise. the Indian economy is marching ahead. fair and safe financial products and services from mainstream providers.1 Financial Exclusion Broadly defined.000 and only 3% with borrowings from banks. Notwithstanding the rapid increase in overall GDP and per capita income in recent years. without mainstream financial services can often be expensive. financial exclusion signifies the lack of access by certain segments of the society to appropriate. potential entrepreneurs. a significant proportion of the population in both rural and urban areas still experiences difficulties in accessing the formal financial system. low-cost. which could lead to their marginalization and denial of opportunity to grow and prosper. With the real GDP forecasted to grow by 5. so that actual coverage is likely to be worse) on an all India basis. because the options for operating a household budget. Reserve Bank of India data shows that as many as 139 districts suffer from massive financial exclusion.
business finance skills as well as lack of understanding often constrain demand for financial services. Real and perceived risk in lending .A higher share of population below the poverty line results in lower demand for financial services as the poor may not have savings to place as deposit in savings banks. 3. Causes of Financial Exclusion Demand-side Barriers: On demand constraints and opportunities. 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.e. 2. Locational constraints – Absence of physical infrastructure in interior-most parts of the country leads to difficulties in accessing financial institutions (like banks.2 population is higher in the poorer regions of the country. . the following issues have a significant bearing on the extent of financial exclusion/inclusion: 1. 2.The feeling that there is no point in applying for financial products because he/she expects to be refused as banks are not interested to look into their cause has led to self-exclusion for many of the low income groups.The perceived risk of lending to the poor is higher than the real risk. Level of income . particularly financial literacy. Financial literacy and skills capacity – High information barriers. and is the worst in the North-Eastern and Eastern regions. Mistrust of financial institutions .. basic mathematics.Women are often disadvantaged by credit requirements such as collateral since in most of the cases property is registered under their husband’s name and they are to seek male guarantees to borrow. creating a supply barrier by triggering higher than necessary transactions costs due to stricter than needed prudential requirements. Cultural factors . low awareness and limited literacy. etc) resulting in a substantial proportion of households in rural and remote areas being kept outside the ambit of the formal financial system. i. 4.
4. particularly in the medium-term. from the societal or the national perspective.MFI practitioners encounter difficulties in having a “double bottom line”: at the same time aiming to be profitable and stimulating local economic development. allowing rural clients little access to services and information for making well grounded decisions. . First. Banks often avoid extending their services to lower income groups because of initial cost of expanding the coverage which may sometimes exceed the revenue generated from such operations. Individuals/families could get sucked into a cycle of poverty and exclusion and turn to high cost credit from moneylenders. 1. depending on the level of social. and also the extent of the recognition of the problem by authorities or governments. besides all round impediments in basic/minimum transactions involved in earning livelihood and day to day living. resulting in greater financial strain and unmanageable debt. the structure of stake holding in the financial sector.2 Financial Inclusion The definitional emphasis of financial inclusion varies across countries and geographies. which are intertwined. Approaches and products . Another cost of financial exclusion is the loss of business opportunity for banks. exclusion may lead to aggregate loss of output or welfare and the country may not realize its growth potential. the issue of cost of financial exclusion may be conceived from two angles. financial exclusion leads to higher charges for basic financial transactions like money transfer and expensive credit. economic and financial development. socioeconomic characteristics of the financially excluded segments. In terms of cost to the individuals. Second. poverty as well as all the other associated economic and social problems. the exclusion may have cost for individuals/entities in terms of loss of opportunities to grow in the absence of access to finance or credit. financial exclusion leads to social exclusion. Costs and Consequences of Financial Exclusion Broadly.Generally. Financial viability of MFIs . financial services tend to be concentrated in urban areas. At the wider level of the society and the nation.3 3.
micro-finance institutions (MFIs). and informal financial services. . depending on its usage of formal. Core and headline indicators place a given population along a continuum of access. Financial services or products rendered by banks.” Measurement of Financial Inclusion/Exclusion While the importance of financial inclusion has been widely accepted. but does not use bank services. Individual indicators. that are generally used as measures of financial inclusion. and other formal and quasi-formal non-bank institutions generally form the basis for measuring the financial inclusion.4 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. postal savings banks. semi-formal. and (v) The population which uses no financial services. There exists no single comprehensive measure that can be used to indicate the extent of financial inclusion across economies. viz. can provide only partial information on the level of financial inclusion in an economy. The access to finance could be divided into five segments: (i) The proportion of the population that uses a bank or bank like institution. Specific indicators such as number of bank accounts. number of bank branches. (iv) The proportion of the population transacting regularly through formal financial instruments. can provide only partial information on the level of financial inclusion in an economy. finance companies. and those excluded from the use of financial services. (ii) The population which uses service from non-bank ‘other formal’ financial institutions. number of bank accounts and number of bank branches that are generally used as measures of financial inclusion. credit unions. Scope of Financial Inclusion The scope of financial inclusion can be expanded in two ways: (i) Through state-driven intervention by way of statutory enactments ( for instance the US example. the Community Reinvestment Act and making it a statutory right to have bank account in France). much less is known about how inclusive the financial systems are and who has access to which financial services. (iii) The population which only uses services from informal financial service providers.
Benefits of Financial Inclusion Improvements in access to financial institutions accrue several benefits to the consumer. The economy benefits. small and medium sized enterprises. fuelled by domestic savings to the greatest extent possible. and work their way out of poverty. regulator and the economy alike.safe savings. The bank accounts can also be used for multiple purposes. Inclusive finance . Increasing the inclusiveness of financial sectors. such as. making small value remittances at low cost and making purchases on credit. Internationally. Establishment of an account relationship can pave the way for the customer to avail the benefits of a variety of financial products. manage risk. 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. appropriately designed loans for poor and low income households and for micro. for uses that have the highest returns.can help people help themselves to increase incomes. status and empowerment and provides access to the national payment system. Therefore. insurance cover and remittance services. it is considered to be critical for achieving inclusive and sustainable growth in the country. will. Rather. 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. Holding a bank account itself confers a sense of identity. bolster the poorer segments of the population as well as those segments of the economy that most affect the lives of poor people. as greater financial resources become transparently available for efficient intermediation and allocation. The scope of financial inclusion is much broader and hence.5 (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. Promoting financial inclusion can also help in the regeneration of local areas if money saved by increased access to financial services can be re-invested in the community. as the audit trail is available and transactions are conducted transparently in a medium that can be monitored. and appropriate insurance and payments services . over time. the regulator benefits. acquire capital. having a bank account becomes a very important aspect of . Furthermore.
While financial inclusion. Thus.and therefore better manage their life events like education.or by policy makers and practitioners in developing countries . 1. It prevents people from understanding how inflation affects the real value of money and what options they have to protect against erosion. which will further assist in percolating the benefits of inclusive finance throughout every strata of the society. and reduce the elite capture of community level institutions.6 financial inclusion. but to society as a whole. may be achieved to some extent by offering a single financial service/product. or keeping their savings under the mattress. With increased financial literacy. that provide financial services to low-income people. such as cooperatives. there will also be an increased demand for financial services from the poor. It also promotes understanding and acceptance of important political reforms. Many poor people opt out of formal financial systems due to misconceptions about price of credit.3 Financial Education/Financial Literacy Financial literacy allows people to increase and better manage their earnings . such as health care or pension reforms. including micro credit facilities where markets have become more competitive in recent years. the objective of “comprehensive financial inclusion” would be to provide a holistic set of services encompassing all of the above. It accounts for many low-income households not using insurance and deposit services. benefits of financial education can be enormous not only to individuals. for instance. job loss or retirement.measures to promote and improve financial education are becoming more frequent. Improved financial education can bridge these gaps. It has been noted that low financial literacy significantly contributes to financial exclusion in general and self-exclusion in particular. in the narrow sense. . While the significance of financial literacy has not yet been fully articulated and recognized by the international development community . Many are unaware of the best utilization of credit facilities and become over-indebted. It can also strengthen accountability and competitiveness across financial sectors. illness. And it can also contribute towards efficient use of public resources that are targeted to assist the poor in various ways.
self-help groups (SHGs) also meet the financial service requirements of the poorer segments. After Independence. emphasis is also placed on affordability (low cost) of financial services such as savings. viz. regional rural banks (RRBs). loan. urban co-operative banks (UCBs). the major focus of the Government and the Reserve Bank was to develop a sound banking system which could support planned economic development through mobilization of resources/deposits and channel them into productive sectors. several initiatives have been taken over time.7 2. Overall Approach Financial inclusion in the Indian context implies the provision of affordable financial services. In order to expand the credit and financial services to the wider sections of the population. Initiatives for Promoting Financial Inclusion – Pre 2005 India has a long history of banking development. savings.. Besides access. Specific financial instruments/products were also developed in order to promote financial inclusion. . 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. loans and insurance services by the formal financial system to those who tend to be excluded. primary agricultural credit societies (PACS) and post offices caters to the needs of financial services of the people. MFIs. Accordingly. post offices. the Government’s desire to use the banking system as an important agent of change was at the core of most policies that were formulated after Independence. a wide network of financial institutions has been established over the years. Furthermore. development of the institutional framework in recent years has focused on new models of expanding financial services involving credit dispensation using multiple channels such as Civil Society Organizations (CSOs). and panchayats. Besides. farmers’ clubs. The organized financial system comprising commercial banks. access to payments and remittance facilities. non government organizations (NGOs). and remittance to the underprivileged segments of the population. Accordingly. Although the term ‘financial inclusion’ was not in vogue in India then.
In the second phase beginning 1967 till the early 1990s. there was large concentration of resources from deposits mobilization in a few hands of business families or groups.1967. Special emphasis was also laid on weaker sections of the society. small industry and agriculture. institution of directed credit through introduction of priority sector lending norms and setting up of Regional Rural Banks. it was felt that the then commercial bank lending system had little social content and that it aided concentration of economic power. the focus was mainly on nationalization of private sector banks. especially agriculture and the spread of banking in the unbanked and rural areas. not only did the operating environment change but policies were also geared towards planned objectives. In the first phase during the early years of independent India from 1947 . Firstly. Banks raised funds and on-lent them largely to their controlling entities. The third phase from 1991-92 onwards till 2005 focused on improving the credit delivery system to the rural sector and SMEs. as it concentrated on lending to large customers. It was felt that the system was unresponsive to the needs of the weaker sections of the economy. This period also witnessed several controls such as the credit authorization scheme and selective credit controls to ensure that credit was not concentrated in the hands of a few and that it was well disbursed. agriculture was neglected insofar as bank credit was concerned. However. The Reserve Bank assumed a unique role in this context that was occasioned by the predominantly agricultural base of the Indian economy and the urgent need to expand and co-ordinate the institutional credit structure for agriculture and rural development. Lending to Agriculture and Spread of Banking to Rural Areas With independence. the focus was on channeling of credit to the neglected sectors of the economy. with the advent of planning for economic development and the growing social awareness of the role of bank credit in the economy. Secondly. 2.1 Developments during 1947-1967 The banking scenario that prevailed in the early independence phase had two distinct disquieting features. Regulation was aligned to the attainment of these objectives. the spread of banking. Banks were considered unique among financial institutions and were assigned a developmental role from the beginning of the planned era. .8 The initiatives undertaken for the purpose of promoting financial inclusion in India can be broadly categorized into the following four phases.
This was generally done by stipulating minimum rates of interest.2 Developments during 1967-1991 During this period. several initiatives were undertaken for enhancing the use of the banking system for sustainable and equitable growth. Inflation was high and at times. interest rate ceilings for credit to the weaker sections and creation of specialized financial institutions to cater to the requirement of the agriculture and the rural sectors having bulk of the poor population. The rising deficit and the accompanying inflation led to an administered structure of interest rates and several other micro controls. shortages also developed. . 2. The period during 1961 to 1967 was particularly difficult for the nation.9 Emergence of Administered Structure of Interest Rates This period was difficult for monetary policy as it had to accommodate fiscal policy that was under pressure on account of two wars and a drought. small business and the weaker sections within these sectors. Realizing that the flow of credit to employment oriented sectors was inadequate. branch licensing norms with focus on rural/semi-urban branches. the Reserve Bank relied on direct control over the lending rates of banks. RRBs. These included nationalization of private sector banks. self-employed. rather than indirect instruments such as the Bank Rate for influencing the cost of bank credit. The National Bank for Agriculture and Rural Development (NABARD) was set up in 1982 mainly to provide refinance to the banks extending credit to agriculture. the priority sector guidelines were issued to the banks by the Reserve Bank to step up the flow of bank credit to agriculture. introduction of priority sector lending norms. to the credit requirements of the rural poor. the Lead Bank Scheme. small-scale industry. The National Credit Council was set up in February 1968 mainly to assess periodically the demand for bank credit from various sectors of the economy and to determine the priorities for grant of loans and advances. The administrative framework for rural lending in India was provided by the Lead Bank Scheme introduced in 1969. In early years. The target for priority sector lending was gradually increased to 40 per cent of advances for specified priority sectors. were put on restructuring. which was an important step towards implementation of the two-fold objectives of deposit mobilization on an extensive scale and stepping up of lending to weaker sections of the economy. which were set up in 1975 to cater.
became the principal instrument for branch expansion. An enunciation of the need to channel the flow of credit to certain sectors of the economy. The National Credit Council (NCC) was set up in February 1968 to assist the Reserve Bank and the Government to allocate credit according to plan priorities.10 Nationalization of Banks and Spread of Banking The Indian banking system underwent major structural transformation after the nationalization in 1969. Banks were expected to play a more active and positive role in aiding sectors such as agriculture and small scale industries. scheduled commercial banks’ advances to agriculture. known as the priority sectors with the social objectives in mind.. specific emphasis was laid on making banking facilities available in the then unbanked areas. the financial sector reform process placed more emphasis on creating a strong.2 % (end March 1968) to 15. launched by the Reserve Bank with a view to mobilizing deposits on a massive scale throughout the country and also for stepping up lending to weaker sections of the economy. On the whole. 2. vibrant and . while those to industry declined.5 % during the same period. This was executed through two definite steps. The Differential Rate of Interest (DRI) Scheme was also instituted in 1972 to cater to the needs of the weaker sections of the society and for their upliftment.5 % to 37. Accordingly. by designing a specific branch license policy and by initiating specific schemes like the Lead Bank Scheme (LBS). The distribution of bank credit to the agricultural sector increased from 2. was first discussed in India in July 1961.8 % (end June 1989) whereas that for the industrial sector declined from 67. Institution of Directed Credit Programme Directed credit programme involving loans on preferential terms and conditions to priority sectors was a major tool of development policy in both developed and developing countries in the 1960s. viz. The LBS. exports and small scale industries showed a significant rise. To address the issue of urban orientation.3 Developments during 1991-2005 With the onset of economic reforms in the beginning of the 1990s. a strong and resilient financial sector was considered necessary for accelerating the growth momentum in the country and also for expanding the coverage of financial services in a sustainable manner.
functions and procedures of the financial system (Chairman: Shri M. it was felt that there was a need for better alignment of interest rates and mix of target and non target lending. On the eve of the 1991 reforms. decline in productivity and efficiency. were to provide the resources. organization. with policy support from the Reserve Bank. irrespective of location. 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. Improving Credit Delivery – Rural Sector Notwithstanding the impressive geographical spread.. the rural credit delivery system was again found to be in a poor shape. as indirect credit to agriculture.50000 and in case of agri-business and agri-clinics . (ii) treating investment by banks in securitized assets representing direct (indirect) lending to agriculture as direct (indirect) lending to agriculture. improved credit flow to agriculture and consequent decline in the influence of informal sources of credit. Given the significance of both the sectors. Narasimham). functional reach. The Reserve Bank initiated several measures to increase the flow of credit to the agriculture sector. and (iii) waiver of margin/security requirement for agricultural loans up to Rs. concerted efforts were made by the Government and the Reserve Bank to increase the flow of credit to these sectors. Banks. as wholesalers of credit.11 competitive banking system. rural financial institutions were characterized by several weaknesses. build their capacities and facilitate the process of empowering them. 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. (ii) strengthen the urban cooperative banks and resolve the issue of dual control. An important step to bring financially excluded people within the fold of formal financial sector was the promotion of microfinance in India. erosion of repayment ethics and profitability. while the NGOs were to act as agencies to organize the poor. These included (i) treating loans to storage units designed to store agricultural products. viz. In this context. Credit to the SME and agriculture sectors decelerated in the 1990s and early years of the current decade. The SHGbank linkage programme was launched by NABARD in 1992. to facilitate collective decision making by the poor and provide ‘door step’ banking. and (iii) bring a large segment of excluded population within the fold of the banking sector. The main issues faced in this phase were (i) increase the flow of credit to agriculture and SMEs.
systems and procedures. sponsoring specific projects as well as widely publicizing the successful working models of NGOs. In addition. Interest rates on deposits placed by foreign banks with SIDBI in lieu of shortfall in their priority sector lending obligations were restructured and the tenor of deposits was increased from one year to three years with effect from financial year 2005-06. savings and loans products. insurance. the Reserve Bank initiated several measures with a view to increasing the flow of credit to Small Scale Industry (SSI) units. the emphasis was on providing credit rather than financial products and services including savings. However. Therefore.12 for loans up to Rs. As a result National Bank for Agriculture and Rural Development (NABARD). Further. whose credit requirements were very small.5 lakh. and exploring new instruments for promoting rural industry. SHG – Bank Linkage Programme The problems in the beginning of 1990s were two fold i. the Reserve Bank also aligned repayment dates with harvesting of crops by treating loans granted for short duration crops as an NPA. institutional structure was neither profitable in rural lending nor serving the needs of the poorest. Reaching the poorest. need was felt for alternative policies. Improving Credit Delivery – SMEs Consequent upon the deregulation of interest rates. if the installment of the principal or interest thereon remained unpaid for two crop seasons beyond the due date.e. which would fulfill the requirements of the poorest. launched its pilot phase of the Self Help Group (SHG) Bank Linkage programme in February 1992. other complementary services and new delivery mechanisms. etc. Realizing the critical role of small industries in the economy. . there was an expectation that credit flow to the needy will increase. to the poor to meet their simple requirements. frequent and unpredictable. was found to be difficult. Several other measures were also initiated to increase the flow of credit to the SSI sector. credit to the SME sector decelerated in the 1990s and the first four years of the current decade. These included identification of new clusters and adopting cluster-based approach for financing the small and medium enterprises (SME) sector. sanctioning higher working capital limits to SSIs in the North Eastern region for maintaining higher levels of inventory. in India.
but also reduced the systemic risks. cooperatives or ‘not for profit’ companies or non banking financial companies registered with the Reserve Bank. trusts. Subsequent to the Monetary and Credit Policy announcement for the year 1999-2000. . increased competition. 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. appraisal. To further promote the SHG-bank linkage programme in the country. SHG-bank linkage programme has been promoting micro finance facilities to the poor. 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. 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. A growing component of inclusive banking is the lending by MFIs that are societies. assessment of credit needs. Interest rates on lending to MFIs/NBFCs have been completely deregulated. SHG-bank linkage programme is the predominant one. The MFIs cover millions of borrowers and the NBFC segment within this sector is the fastest growing segment. a multi-pronged strategy was followed to promote financial inclusion which not only served better the diverse demand for financial services. Bank lending to such entities for microfinance is treated as priority sector lending. disbursal supervision and repayment. viz. 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. reduction in the formal paper work involved and a consequent reduction in the transaction costs. On the larger scale. Though a variety of micro-finance models are followed in India. there have been several innovative experiments with various variants of micro-finance taking into account the highly localized needs. and improved efficiency. Subsequently. Along with the SHG-Bank Linkage Programme. 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.13 Since 1992. In India.
The Fund provides capital for lending to financially excluded customers. The Government worked successfully with the banks to bring these products to the market. International Experiences in Financial Inclusion While India has followed a multi-pronged strategy to promote financial inclusion. the greater is the thrust on empowerment of the common person and low-income groups. Since 2006. The problem of financial exclusion is found even in several advanced countries. The Government is also piloting Savings Gateway’s schemes in which those on low-income employment will receive £1 from the state for every £1 they . increases competition. An interesting feature which emerges from the international practice is that the more developed a society is. but also reduces systemic risks. and improves efficiency. the Social Exclusion Unit’s Policy Action Team 14 (PAT 14) recommended the creation of basic bank accounts. Diversity in approaches not only serves better the diverse demand for financial services.1 United Kingdom The Government of UK has been tackling financial exclusion since 1997. The measures initiated by governments of developed as well as developing/less developed countries have been discussed below. the global experience also suggests that countries that allow diversity in approaches are more likely to achieve better results. 3. the Financial Inclusion Fund (FIF) has provided Growth Funding of £42 million for third sector lenders. This enables cash withdrawals at post offices but does not offer an overdraft facility. These countries have also initiated specific measures to bring financially excluded people within the fold of the banking system. For example. and there are now basic bank accounts available from 17 providers.14 3. Many other countries have also followed more or less a similar approach. with revenue support to meet costs. A Post Office Card Account (POCA) has been created for those who are unable or unwilling to access a basic bank account. in 1999.
e. petrol pumps. The forthcoming Child Trust Fund (CTF). At that time. The Federal Reserve System’s recently redesigned financial education website. is dovetailed to increase the use of Federal Reserve educational materials and promote financial education in the classroom. Today. an additional 4 million have begun using banks for the first time through 27. post . Cumbrian Debt Rescue and Financial Advice. 3. namely Community Reinvestment Act (CRA) in the United States prohibits discrimination by banks against low and moderate income neighbourhoods. which will offer all households a fixed sum for long-term investment at the birth of their children. Ely Citizens Advice Bureau. up to a maximum of £25 per annum. small outlets with extended working hours that offered basic banking services.000 banking correspondents. banks are permitted to appoint a wide variety of institutions/entities as correspondents/ agents. some good and enterprising practices in rural financial inclusion includes the NatWest’s mobile bank. It provides easy access to free educational materials. and games for various ages and knowledge levels. 3.15 invested.org. is hoped to be most beneficial in lower income households. banks and regulators in Brazil created a network of "correspondents bancarios" or "banking correspondents". Under this arrangement. Farm Crisis Network and many others. super markets. The CRA imposes an affirmative and continuing obligation on banks to serve the needs for credit and banking services of all the communities in which they are chartered. which are easily accessible to people. Initiatives to promote financial inclusion have not been restricted to just the urban centres. small stores in neighbourhood. a resource search engine for teachers. 40 out of the 68 million economically active Brazilians had no access to formal financial services.2 United States of America A civil rights law.. FederalReserveEducation.g.3 Brazil In 1997. As part of the Commission for Rural Communities’ (CRC) work to tackle disadvantage in rural areas. drug stores. The US Community Development Financial Institution (CDFI) Fund uses Federal resources to invest in and build the capacity of CDFIs to provide capital and financial services to under-served people and communities.
the central bank of Philippines sanctioned two e-money products. product of a major commercial bank and the second was ‘G-cash’. and merchant PoS devices. take small deposits. offices and investment managers to Singapore residents including workers from overseas.5 Singapore A sophisticated example of global payments network operating via postal banks is the Singapore Post which regards payments and remittance services. the transaction costs are very low and thus. a non-bank product whose provider was ultimately licensed as a remittance agent. what was thought to be as ‘too costly to serve areas and people’ has become an attractive proposition. and sell savings bonds and insurance. BSP. 3. while the numbers of banks involved has grown rapidly.6 Philippines In 2004. Access to the affordable card based product is provided through a combination of existing service point outlets and physical branch outlets including own and shared ATMs. Post Offices. As it is a technology intensive product. insurance and investment products on behalf of banks and finance companies.4 South Africa The Financial Sector Charter in South Africa led to the establishment of the ‘Mzansi’ account. a National no frills Bank Account (NBA). Singapore Post’s remittance services. Some 8 million people use one or other of the two products. provide micro credits. The agents use kiosks or automated teller machines to accept payment. in partnership with banks and other financial entities in a number of countries. Apart from the larger commercial banks. The first was ‘Smart Money’. In its first year of operation itself. The Brazilian model is largely technology driven. All banks in South Africa are participants in this unique venture. The impact of these e-money products has been substantial.16 offices and even lottery shops. provides consumer loan services. it garnered nearly 2 million accounts. an important catalyst for enhancing financial inclusion. 3. There is a money transfer service associated with the Mzansi account which makes it possible to transfer money between un-banked/banked customers from any participating bank or South Africa Post Office. 3. increasing numbers of small rural banks . open accounts. without a cheque book facility.
7 Bangladesh The Grameen Bank (GB) in Bangladesh has reversed conventional banking practice by obviating the need for collateral. 3. this product allows clients to meet their "illiquidity" preference and protects their savings against the demands of petty spending . In order to obtain loans. Lower cost remittance channels have seen remittance costs fall markedly. GB’s success can also be gauged from the fact that it has 7. income-generating activities and housing for the poor. These advances have increased financial inclusion in the country with the convergence of e-money. All Jijenge savings account holders have guaranteed immediate access to an emergency loan of 90 percent of the amount in their Jijenge savings account. a borrower must join a group of borrowers. It has created a banking system based on mutual trust. All loans are to be paid back in instalments (weekly or bi-weekly). which could be weekly or monthly. accountability. 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. without any collateral. and provides service at the doorsteps of the poor. New loan becomes available to a borrower if his/her previous loan is repaid. participation and creativity. Grameen Foundation not only provides microloans in the USA itself but also supports microfinance institutions in Asia-Pacific.46 million borrowers in Bangladesh alone and has grown into over 2 dozen enterprises represented by the Grameen Family of Enterprises. a contractual savings product with an emergency loan facility. as opposed to consumption. Moving in this direction. 3.8 Kenya Recent international experience indicates that micro savings are as important as micro credit. It offers credit for creating self-employment. America and Africa. mobile technology and the traditional brick-and-mortar networks of financial institutions. Some banks have lowered interest rates. by up to 50bps/month.17 has also participated in these products. GB provides credit to the poorest of the poor in rural Bangladesh. As well as providing a disciplined way to save. A premium interest rate is offered to those who take out longer term contracts and there are significant penalties for premature withdrawals. on microfinance loans administered via the phone repayment platform. The client defines the length of the contract and the periodicity of the deposits. Equity Building Society in Kenya has developed the Jijenge Savings Account.
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.18 or "marauding relatives". . The technology allows settlement of bills by building up credit balance on the mobile phone and sending text message to make payments. The account is already proving extremely popular with existing as well as new clients. sustainability aspects. Although these international experiences come with their own merits and demerits. Commercial Bank of Africa in conjunction with local mobile operator Safaricom has enabled mobile subscribers to make micro payments from mobile phones. outreach considerations. The majority of the people in Kenya do not hold bank accounts but purchase prepaid mobile refill cards. 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. delivery mechanisms among others.
an increase of 25 per cent over March 31. and (iii) banks urged to review their existing practices to align them with the objective of financial inclusion. of basic banking services to the common person. in particular pensioners. scope and cost of services would be monitored to assess whether there was any denial. while disincentivising those which were not responsive to the banking needs of the community. SHGs had 5 million savings accounts with banks for Rs.6 million SHGs had outstanding bank loans of Rs.1 Microfinance Of the different models for delivery of microfinance. As on March 31.17000 crore. The recent approach focuses on financial inclusion on the individual and household level.3785 crore. 2007 in respect of number of SHGs credit linked. As at end-March 2008. 2008 3. including the underprivileged. The important difference in the recent focus on financial inclusion is the adoption of market oriented approach that recognises the importance of business consideration of banks and other financial institutions for the long-term sustainability of the process. implicit or explicit. It is being implemented by commercial banks. 4. RRBs and cooperative banks. Initiatives for Promoting Financial Inclusion – 2005 Onwards The objective of bringing financially excluded people within the fold of the banking sector received renewed emphasis in 2005-06 as the term ‘financial inclusion’ was explicitly used for the first time in the Annual Policy Statement for 2005-06. the SHG-Bank Linkage Programme has emerged as the major micro-finance programme in the country. It observed that there were legitimate concerns in regard to the banking practices that tended to exclude rather than attract vast sections of population. It also indicated that the Reserve Bank would (i) implement policies to encourage banks which provide extensive services. self-employed and those employed in the unorganised sector.19 4. (ii) the nature. the banks were advised in November 2006 to encourage microfinance institutions (MFIs) assisted by them to (i) focus on . Based on the findings of a joint study conducted by the Reserve Bank along with a few major banks.
is currently under consideration of the Parliament. As on March 31. and in order to give further impetus to financial inclusion.1585 crore. and (iv) follow practices that maintain the cohesiveness of the groups. 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. All banks were advised in November 2005 to make available a basic banking ‘no-frills’ account either with ‘nil’ or very low minimum balances as well as charges that would make such accounts accessible to vast sections of population. As announced in the Annual Policy Statement for the year 2008-09. 2007.3 Relaxation of KYC Norms The Reserve Bank in its Annual Policy Statement for 2005-06. All banks were also advised to give wide publicity to the facility of such a ‘no-frills’ account including on their web sites indicating the facilities and charges in a transparent manner. but made known to the customer in advance in a transparent manner. 2007. the number of MFIs that had outstanding bank loans was 550 amounting to Rs. (ii) desist from multiple lending. banks have opened more than 15 million no-frills accounts in the country.20 unbanked and underbanked areas. which envisages the regulation of the sector. 4. Significant progress has been made in this regard. 4. banks were advised in May 2008 to classify overdrafts up to Rs. A Micro Financial Sector (Development and Regulation) Bill.25000 (per account) granted against ‘no-frills’ accounts in rural and semi-urban areas as indirect finance to the agriculture sector under priority sector with immediate effect. (iii) engage in capacity building and empowerment of the groups. banks were advised in August 2005 . Furthermore. This led to banks financing NGOs/MFIs for on-lending under micro-finance. but also include their other credit needs such as housing and shelter improvements. The nature and number of transactions in such accounts could be restricted. Recognising the potential of microfinance to positively influence the development of the poor. emphasised that banks should empower depositors by providing wider access and better quality of banking services.2 ‘No-Frills’ Accounts The Reserve Bank reiterated the concerns of financial inclusion in its Midterm Review of Annual Policy Statement for 2005-06. and till now.
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.50000 in all their accounts taken together and the total credit in all the accounts taken together is not expected to exceed Rs. 2008. Based on feedback received on the extant KYC/AML/CFT regime. 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. relevant guidelines were revised on February 18. keep in mind the guiding principles of Personal Accident Insurance Scheme (PAIS). (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. 4. However.22 million (provisional) up to March 31. especially the aspects such as premium sharing formula and coverage. .4 Kisan Credit Cards The KCC scheme enabling farmers to purchase agricultural inputs and draw cash for their production needs was further extended by providing personal accident insurance coverage on an ongoing basis at competitive rates/terms. on account of difficulties in meeting the KYC requirements for opening bank account. while negotiating with the insurers.1 lakh in a year. to take advantage of the competitive offers. This “add on” benefit is expected to bring in an increasing number of farmers under the KCC fold. The cumulative number of KCCs issued by public sector banks aggregated 31. thus safeguarding the interest of the KCC holders.21 to ensure that customers belonging to poor sections of the society are not kept away from banking system. the banks have been advised that they may. The customer is allowed to exceed the threshold limit only after the full compliance with the KYC norms. Banks have been given the discretion to approach either any general insurance company which is a member of GIPSA (General Insurer’s [Public sector] Association of India) or any private sector general insurance company. The KYC procedure for opening accounts was simplified further for persons who intend to keep balances not exceeding Rs.54 crore.1. banks can obtain an identity document and a utility bill of the relative with whom the prospective customer is living. Banks can also use any supplementary evidence such as a letter received through post for further verification of the address. (iii) banks should review the risk categorization of customers at a periodicity of not less than once in six months. 2008 involving an amount of Rs. thereby leading to complete coverage.
Banks have also been permitted to engage retired bank employees. While appointing such individuals as BCs. 2008. The Reserve Bank further advised banks in May 2008 to classify 100 per cent of the credit outstanding under GCCs as indirect finance to agriculture sector under the priority sector with immediate effect. including RRBs.25000 based on the assessment of income and cash flow of the household to enable hassle free access to credit to rural and semi-urban households. The distance between the place of business of a BC and the base .22 4. The BC model allows banks to do ‘cashin/cash-out’ transactions at a location much closer to the rural habitation. the Reserve Bank advised banks to ensure that these individuals are permanent residents of the area in which they propose to operate as BCs and also institute additional safeguards as may be considered appropriate to minimise agency risk. the Reserve Bank advised all scheduled commercial banks. thereby increasing their outreach and leveraging on the postman’s intimate knowledge of the local population. exservicemen and retired government employees as BCs with effect from April 24. in December 2005 to introduce a General Credit Card (GCC) facility without insistence on collateral or purpose.5 General Purpose Credit Cards With a view to providing credit card like facilities in the rural areas. The Reserve Bank also advised banks to classify fifty per cent of the credit outstanding under loans for general purposes under General Credit Cards (GCC). With a view to ensuring adequate supervision over the operations and activities of the BCs. banks have been allowed to use the services of NGOs/SHGs. subject to appropriate due diligence. thus addressing the last mile problem. with a revolving credit limit up to Rs. MFIs and other civil society organisations as intermediaries in providing financial and banking services through the use of business facilitator and correspondent models. Banks are also entering into agreements with India Post for using the vast network of post offices as business correspondents. as indirect finance to agriculture under priority sector.6 Use of Intermediaries as Agents With the objective of ensuring greater financial inclusion and increasing the outreach of the banking sector. with limited point-of-sale (POS) and limited ATM facilities. in addition to the entities already permitted. 4. the Reserve Bank advised banks that every BC should be attached to and be under the oversight of a specific bank branch to be designated as the base branch.
women. from April 2009) in rural. in case a need is felt to relax the distance criterion. English and 11 regional languages (Assamese. the Reserve Bank has taken a number of measures towards imparting financial literacy and promotion of credit counselling services. Tamil. Marathi. banks.educating people in rural and urban areas with regard to various financial products and services available. schools/colleges using pamphlets. The comic books format has been used to explain the complexities of banking. Oriya. including. Bengali. finance and central banking to children in different age groups. act as investment advice centres. The Reserve Bank has undertaken a project titled “Project Financial Literacy” to disseminate information regarding the central bank and general banking concepts to various target groups. Telugu and Urdu). convenor banks of the SLBCs/UTLBCs were advised to set up. and formulating debt restructuring plans for borrowers in distress and recommending the same to formal financial institutions for consideration. a Financial Literacy and Credit Counselling Centre (FLCC) in any one district in the State/Union Territory coming under their jurisdiction. In May 2007. However.7 Financial Literacy and Credit Counselling Recognising that lack of awareness is a major factor for financial exclusion. among others. films. The Reserve Bank has also created a link on its web site ‘For the Common Person’ to give him the ease of access to information. ordinarily. rural and urban poor. In rural areas. providing face-toface financial counselling services. semi-urban and urban areas. brochures. Malayalam. A ‘Financial Education’ site link on the Reserve Bank’s website was launched on November 14. (further extended to 30 kms. on a pilot basis. FLCCs should not. the centres could concentrate on financial literacy and counselling for farming communities and those engaged in allied activities while the centres in metro/urban areas could focus on individuals . 2007. the distance could be up to 5 kms. local government machinery. as also. defence personnel and senior citizens. Gujarati. Kannada.23 branch. Punjabi. In metropolitan centres. school and college going children. however. finance and central banking in a simple and interesting way for children. 4. the Reserve Bank’s website. should not exceed 15 kms. in Hindi. The objectives of the FLCCs are to provide free financial literacy/education and credit counselling . It would be disseminated to the target audience with the help of. the matter can be referred to the District Consultative Committee (DCC) of the district concerned for approval. mainly aimed at teaching basics of banking.
housing loans. The FIF would be used for activities such as funding support for capacity building inputs to BCs/BFs. nurturing and credit linking of SHGs. in his Budget Speech for 2007-08 announced the constitution of the Financial Inclusion Fund (FIF) and the Financial Inclusion Technology Fund (FITF). personal loans. developmental and promotional interventions for ensuring financial inclusion. The FITF would be used for purposes such as providing financial support to technological solutions aimed at providing affordable financial services to the disadvantaged sections of the society. etc. 4. In all. the Union Finance Minister.500 crore each at NABARD.24 with overdues in credit cards. providing funding support for promotion. So far. funding support for setting up of Rural Credit Bureaus and credit rating of rural customers.9 Establishment of FIF and FITF In order to meet the costs of technology adoptions. among others. to the SLBC convenor banks to set up at least one Rural Development and Self Employment Training Institute (RUDSETI) in each district by 2010.8 Setting up of RUDSETIs The Reserve Bank has issued guidelines.1 crore per RUDSETI has been earmarked by the Planning Commission for setting up the institutes. with an overall corpus of Rs. 134 RUDSETIs have been set up as on December 31. providing promotional support to institutions such as resource centres. and supporting pilot projects for development of innovative products. providing viability . These institutions will train at least one youth in a family below poverty line (BPL) in various fields and enhance capacity building. 2008. 4. creating a common technology infrastructure with comprehensive credit information. A target for opening of 100 RUDSETIs by banks was set for the year 2008-09 and a grant of Rs. banks have reported setting up or proposing to set up 123 credit counselling centres in various states of the country. farmers’ service centres and RUDSETIs. over a period of five years from the date of commencement of the Fund or for such enhanced period as may be decided by the Government. The FIF/ FITF would be in operation until financial inclusion to the extent of 100 per cent of rural families in all districts is achieved. framed by the Government of India. The Regional Offices of the Reserve Bank have been advised to monitor the progress of setting up of RSETIs under their jurisdiction on a quarterly basis. processes and prototypes for financial inclusion.
retail trade. small enterprises. consultancies. The momentum gained in respect of micro-finance through SHG-bank linkage programme.1523. the largest of its kind in the world. 2007 have given special emphasis on agriculture. 2006.64 crore. .1746 crore for 234. physically challenged persons. Small and Medium Enterprises Development (MSMED) Act.165 beneficiaries. SC/STs and OBCs. Under the government sponsored schemes such as the SGSY. There has been significant improvement in the credit flow to the agriculture with the implementation of the Advisory Committee on Flow of Credit to Agriculture and Related Activities from the Banking System’s recommendations.944 beneficiaries received bank credit during the year 2007-08 amounting to Rs. micro credit. and the more recently developed Agricultural Debt Waiver and Debt Relief Scheme (ADWRS).25 gap/pilot project funding for unproven but potential technological interventions. Sections of population employed in the MSME sector have also benefited with the formulation of the debt restructuring mechanism for small and medium enterprises and enactment of the Micro. provision of assistance packages to the distressed farmers of Maharashtra and Andhra Pradesh. The revised guidelines on priority sector lending which became effective from April 30. and conduct of studies. which would not only expand banking outreach but also reduce the transaction costs and make the process of financial inclusion sustainable.20 lakh. 4. would also be maintained. Prime Minister’s Employment Generation Programme (PMEGP). a total number of 1.10 Other measures The Reserve Bank has continued with its endeavour to improve credit delivery through its various measures. 2008. SJSRY and SLRS. Efforts to promote financial inclusion have so far yielded good results with a large number of people having been brought within the banking fold.505. The beneficiaries of the above schemes included women. greater emphasis would be placed on leveraging technology through a multiagency approach. In future. The Government of India has decided to merge PMRY with REGP to form a new scheme viz. Assistance under the PMRY scheme as on March 2008 amounted to Rs. evaluation studies relating to technological interventions for financial inclusion. research. education loans and housing loans up to Rs.
and (iii) smart plastic card. Mobile phone-based services can be provided using various available connectivity technologies. can significantly reduce the cost of extending financial services. ensure reliable and uninterrupted connectivity to remote areas. (ii) ATMs and other point of sales devices. ICT solutions capture customer details. 5.26 5. the extent to which technology will be integrated into the financial service industry at the low end will depend on supportive government policies and the quality of the infrastructure. particularly in rural areas. Role of ICT in Enabling Financial Inclusion The use of Information and Communication Technologies (ICT) solutions for providing banking facilities at the doorstep holds the potential for scalability of financial inclusion initiatives. However. particularly in the rural and low income groups segments. which do not require uninterrupted electric supply and radio frequency network. offer multiple financial products through the same delivery channel. develop comprehensive and reliable credit information system. PoS and mobile phone applications are . enable use of multimedia and multiple languages for dissemination of information and advice. develop appropriate products tailored to local needs and segments. To be able to ensure that the challenges of banking the unbanked are met effectively and converted into growing and sustainable business for banks. each one of which has its own pros and cons (Table 5. Technology can play an important role in reducing operating cost of providing banking services. These are (i) pro-poor new information and communication technology.1 ICT Solutions and Technology Enablers The centralised data processing system and the non-conventional methods based on computer systems. provide customer education and counseling.1). While self-service solutions like ATMs. facilitate unique identification. there is no alternative to adoption of ICT solutions on a very large scale and range. primarily low-cost cell phones. There are three broad types of technologies that have been identified to drive the growth of financial services.
Mobile phones still costly Not built for mobile transactions Compared to PoS/ATM devices which are built and certified for banking activities .27 readily available and have been deployed widely in the country.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 operator’s 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 operator’s assistance in replacing existing SIM cards Operator lock-in for banks Technology may not be interoperable in multiple operator scenarios Mobile Application Development Development skillset is rare for CDMA Data security is a concern 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. financial Table 5. than bank accounts Still in nascent stages.
the high number of languages spoken and poor infrastructure. For a geographically divided country like India with the growing rate of mobile connectivity. Mobile banking applications can deliver banking facilities to the financially excluded population at low costs. Internet Connectivity: A person’s usage of Internet banking basically depends on access to Internet through computer or mobile phone either at home or in the office. nine million new Indians subscribe to a mobile service. Multilingual Software: There are about 1600 languages spoken in India and. 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. 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. access to the internet. In India. GUIs can also help to eliminate transactional errors through step-by-step guidance.28 inclusion presents some unique challenges. This creates a complex environment for the consistent delivery of any service. where home computer penetration is much lower 15. this has obvious and immediate benefits as a large section of the population cannot read or write. 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. GUIs increase confidence in performing a transaction and thereby encouraging adoption of new technology. communication issues and illiteracy. In most of Asia. overcoming regional barriers.3 percent. require enabling technologies to bring self-service closer to the unbanked population. according to the country’s constitution there are 22 ‘official’ languages of communication. It authenticates the user by scanning a thumb impression or retina of the account holder. Low levels of literacy. multilingual software provides a navigation solution in multiple languages. Wireless Connectivity: Every month. As an extension of IVRS. Biometric Recognition eliminates the need for a personal identification number (PIN). for example. banking through mobile phone presents a strong future for technology enabled financial inclusion. 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. For India’s poor and illiterate. is .
When the card with charged chip is brought close to the mobile phone. The beneficiaries hold smart cards with their photographs and images of their fingerprints pre-loaded at the time of their enrolment.2 Initiative by the Govt. in turn. When the card is brought close to the printer. Rs. the RFID chip embedded in the card gets charged.10000 per hand held device and 2 per cent commission on transactions. withdrawal and balance enquiry are generated in the mobile. India’s 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. Once authenticated. for the initial pilot agreed to pay Rs. The application has an off-line model also. each BC carries a pocket ATM to the village in which it operates. which enables its operation in remote areas where there is no connectivity. The photograph and fingerprint are used for identification and authentication of the beneficiary. The State Government. The cost of cards is a one-time exercise and enrolment of beneficiaries also involves an expense of Rs. message templates for deposit. processes the transaction and sends an update back to the mobile. The mobiles connect to a central data base server of the banks. Nevertheless. with the Government agreeing to meet a part of the infrastructure costs to kick start the project. of Andhra Pradesh The Rural Development Department of Government of Andhra Pradesh launched a pilot project in Warangal District for payment of Social Security Pensions (SSP) and National Rural Employment Guarantee Scheme (NREGS) benefits to the beneficiaries. in effect.1000 to the village organisation member in the village who is the representative of the BC of the bank. the SSP and NREGS benefits are being paid through post offices which are given a commission of 2 per cent. The banks pay Rs. which. The BC needs to select the relevant option and feed the amount of transaction through the mobile keypads and send the message to the back-end server. transaction report is printed in triplicate. a mobile and a printer to process the payments. The BC uses a fingerprint scanner cum identifier. The project involves payment through BCs with the use of smart card and mobile technology.90 per smart card. Presently. The server authenticates the message. 5. writes back to the card. .29 increasing via the wireless mobile phone networks. Thus.50 per person in addition to the card cost. The BC carries cash physically for making payments to the beneficiary.
the CSP collects the forms. microcredit.which operate on portable battery with a stand-by time of up to 10 days. this model is very likely to gain acceptance when more products of the banks are routed through them. The fingerprint unit matches the fingerprint on the card with client fingerprint. The BC carries portable equipment . the process followed is the same as in the case of Andhra Pradesh State Government (discussed in previous section 5. Prospective customers come to the CSP with filled forms. 100 and a terminal with the BC . various loans. multiple accounts. a banking outpost delivering banking services to the customers. Uttarakhand and Andhra Pradesh respectively.2). Customer identification takes place by matching of photo and fingerprint. fingerprint unit and transactions printer . Thus. A smart card is estimated to cost around Rs. who is a BC.4 Cost Considerations IT-enabled financial inclusion models can be acquired at relatively low costs. enters the data in a personal computer. Pithoragarh and Medak in the states of Mizoram.NFC mobile. SBI appointed a NGO named Zero Mass as its business correspondent (BC).3 State Bank of India Tiny Initiative SBI launched a project in Nov-Dec 2006 on making available banking facilities to the excluded people of Aizwal. among others. 5. Each village is served through a SBI-Tiny CSP. The collected forms are sent to nearest SBI branch for approval and enrolment data are sent to card production centre.30 The technology holds potential for a whole range of activities that banks can conduct through BCs and this includes other products like fixed deposits. last known balance and history of recent transactions. The BC keeps working capital in an aggregator account in a SBI core banking branch and carries cash physically for making payments to customers. captures one photo and two fingerprints of each customer. micro-insurance. The printed cards are dispatched to the CSP and the CSP hands over card to the customer after verifying the fingerprint and photo. The CSP is the face of BC in the village. The cards store extensive identity profile including bio-metric finger print data. cash withdrawal and can be used for routing Government payments too. and insurance. The process of enrollment of beneficiaries for issue of smart cards begin with the distribution of enrolment forms by the CSPs. Once authenticated. 5. The available services include savings product (SBI-Tiny no-frills pre-paid account).
. therefore. A wide range of technologies is available. The appropriate technology combined with an effective use of banking correspondents has the potential of creating a banking outpost/ATM in every village. types of accounts. Financial inclusion offers a huge potential for business in terms of resources and assets. handle even small size transactions. is to increase the use of technology to expand the outreach in the hitherto untapped areas. As compared to the cost of establishing and operating a physical bank branch in a rural area. which has successfully implemented mobile phone technology for providing banking services in remote areas in coordination with the Reserve Bank and IDRBT. is capable of being operated by persons having local presence and feel.31 between Rs. It will extend outreach at the doorstep of the farmers. The cost of the central processor would depend upon the configuration which in turn is dependent upon the number of accounts. 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. number of transactions. There are several other instances where it has been observed that technology has the potential to overcome the problem of high operating cost. banks need to ensure that the solutions are highly secure and amenable to audit. the system would be extremely cost effective. 20000 depending upon its features and accessories like printers. protect the interest of depositors and help expand the volume of business for the bank. as has been observed in the case of Andhra Pradesh. type of reports etc. have necessary checks and balances to avoid frauds.10000 to Rs. while selecting a technology. The need. However. It must have widely accepted open standards to ensure eventual inter-operability among the different systems as was highlighted in the Reserve Bank’s Annual Policy Statement for 2007-08.
our survey aims at evaluating the impact of these very initiatives in the sphere of financial inclusion. We also visited the under-developed Gumla district for .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. SBI. Survey on Extent of Financial Inclusion Substantial literature on financial inclusion in India with particular reference to groups with low incomes is very much available. (ii) To understand the drivers of financial exclusion/inclusion. a number of financial inclusion initiatives have been launched by the Reserve Bank of India. In order to address the needs of these underserved sections of the population. Pandra Krishi Market and Mesra all lying in rural and urban areas of Ranchi. Since these initiatives are relatively recent and remain at the early stages. 6. 6. Pandra. are working with people who are especially vulnerable to financial exclusion. significant changes on a much wider and larger scale can be brought about only by giving special emphasis to financial inclusion by Indian policy makers and practitioners.32 6. what they think and what needs to be done by government agencies to make them financially included. PNB. Households have been selected both in urban as well as rural areas. Although various organisations especially NGOs. and (v) Finally. (iii) To determine the level of awareness of people in various financial products and interest in undergoing courses in financial inclusion. Ranchi Main Road. Mahavir Chowk. (iv) To assess further thrust needed to achieve 100 percent financial inclusion so as to enable appropriate policy modifications. Survey of urban areas have been conducted both inside and outside of bank premises which include ICICI Bank.2 Methodology Primary data collected from 160 randomly selected households have been analysed and the results interpreted in this chapter. and a comparison has been drawn. to hear from the very people for whom various financial inclusion initiatives have been launched.
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.
6.3 Major findings from the survey
(i) Sample Data: Total number of households surveyed: 160 Urban households: 82 Rural households: 78 (ii) Households having at least one bank account: Out of the 82 urban households surveyed, 78 % of households were having a bank account whereas in case of rural households, it was a mere 41 %. More than half of the rural respondents, i.e. 59 % were not having any bank account. This reinforces the belief that financial exclusion is widespread in rural areas than it is in the urban ones.
Fig 6.1 Urban Households
Households with a bank account 78% Households without a bank account 59%
Fig 6.2 Rural Households
Households with a bank account Households without a bank account
(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
33 19 19 6 1 2 3 Urban 14 0 More than 3 Rural
Number of accounts
(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.
Fig 6.4 Reasons behind households opening a bank account
To receive Govt payments from NREGP To receive Govt payments from other schemes For receiving remittances For saving money To request a loan Others
7 5 3 12 30 49 3 7 6 8 20 30 40 50 60 70 80 70 Rural Urban
% of households
the primary reason for being refused of a bank account was their lack of identity proof. but by the bank’s manager who consulted the contents table and finally brought out the page where a two line note on no– frill account was mentioned. This finding is consistent with our observation of the different banks we visited. 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. so there were no respondents complaining of not having an account because of absence of a bank branch in their area. Since the areas we surveyed were having at least one bank branch in their vicinity. There were also people complaining that their application forms were outright rejected without bank authorities offering any explanation. birth certificates. the sole reason was – they had no or little money to put in. Although no one said they were not having an account as they thought it not important to them. 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.36 (vi) Reasons for not having a bank account: For a vast majority of households not having bank accounts. Even if it was present it was not an eye catching one. we can fairly estimate . And the supposedly easy task of finding the word ‘no-frill’ in the booklet was achieved not by us. This comes not as a surprise considering the indifferent attitude of officials towards the disadvantaged groups. not to the eyes of a person seeking one. there were many instances (17 % in urban and 20 % in rural) where people were put off just because of anticipated rejection. replying to our query on whether any notice on no-frills account was put up inside the bank premises. where we did not come across any notice or poster giving information on no-frills account. lengthy processes and the pre condition of maintaining a minimum balance in the accounts. Lack of legal identities like identity cards. (vii) Reasons for being refused a bank account: As pointed out by the respondents. let alone to one who is unaware of any such scheme. In one of our visits. we were pointed to a more than 30 page thick booklet placed near the notice board. for 63 % of urban respondents and 72 % of rural respondents. If this is the scenario prevailing in and around Ranchi.
households have a wider choice in the other category too which was seen to be dominated by the firms in which they worked. the majority prefers taking help from their relatives and friends. This can be explained when seen in the context of relationship lending. it is done mostly by moneylenders. In urban areas. only 40 % had availed credit from institutional and non-institutional sources. the percentage was 62 % but the majority was from non-institutional sources. 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). there is no doubt the scheme will take an indefinite period to take off in a full blown manner. in case of rural households. It has been observed that while financial institutions esp. The graph (Fig 6. (ix) Sources of availing loans for households: Of the 82 urban households surveyed.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 . It was also easier to repay such a borrowing as the installment was deducted from their salaries right at the source. Fig 6. When it comes to small and immediate borrowings. banks play a major role in fulfilling the credit requirements of urban households.5) below shows the different sources from where loans were availed by urban and rural households. With bank employees adopting such an indifferent and insensitive attitude towards the needs of the disadvantaged groups.37 the situation in far flung areas of a State like Jharkhand with large tracts of areas populated with tribal sections. In case of rural households. which they believed would be a complicated process. People found it much easier to approach their employers asking for loans than going to a bank.
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. However. for example while purchasing a house. This situation is obvious because poor households are more likely to have relatives who themselves are .38 (x) Reasons cited for borrowing from banks: The graph (Fig 6.7) below shows the various reasons for opting out of banks while availing credit. Borrowing sources. for majority of respondents in rural as well as urban households. which is also evident from the plot where % of households citing this reason was almost equal (35 % in rural areas and 32 % in urban). 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. 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.6) below gives an overview of the different reasons cited for availing loans from banks. 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. Borrowing from friends and relatives can be justified on the grounds of it being generally security free. other than banks are dominated mainly by friends. it was found that this was also because a larger amount of credit was involved. relatives and moneylenders. ‘low rate of interest’ and ‘bank being a trustworthy lender’ were the primary reasons behind availing of credit facilities from banks. This also shows that banks are generally averse in meeting the credit requirements of their rural customers and consider them as risky. In urban households. etc. a four wheeler.
borrowing from moneylenders at exorbitant interest rates of 2 % per month (which amounts to 24 % p. Most of these respondents have developed an aura of fear of stepping into bank premises.) speaks of the compulsions such people face which ultimately leads to their getting into such debt traps of these unscrupulous moneylenders. Fig 6. in poor households. Moreover.5 where 43 % of rural households had to borrow from moneylenders. creating procedural hassles for those who are in dire need of credit. finally fall into the clutches of such non-institutional financial intermediaries. In rural areas. this also highlights how much inaccessible some of our banks have become to poor households. documentation and indifferent behaviour . and even to pay off other debts (62 % in case of rural areas compared to just 23 % in urban areas). credit was availed for a number of reasons – housing (21 %). vehicle (10 %) as well as personal loans (23 %). esp. Ignorance and illiteracy kept aside. by the banks themselves.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. the scenario was completely different in rural households. This can also be ascertained from Fig. and who finding no other means. the majority of households surveyed borrowed just for consumption purposes – for marriages. 6. which has been facilitated to an extent. education (7 %). since banks tend to avoid doling out personal loans for consumption purposes.39 poverty stricken too.a. meeting medical expenditures. business (39 %). (xiii) Difficulties faced in availing a bank loan: Lengthy time-consuming processes.
whereas a large majority of households had to deal with some or other problem when availing a bank loan. (i. Thus. when it came to possessing a debit card. Insurance product in the graph provided below includes all types of insurance – life insurance. and miscellaneous others. thus adding to the inconveniences of the masses. but it didn’t. (xiv) Households using other financial products: The graph (Fig 6.8) below gives the distribution of households possessing an insurance policy. If potential bank customers are made to undergo such hassles.e. the number came down to a stunning 46 nos. 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). . of course) just because the loan application form was not available in the home branch. It was a bit surprising to us that not a single household faced even a minor difficulty in buying an insurance policy. The bank could have simply given him a downloaded print out of the loan application form. Similar was the difference between urban and rural households in insurance too (41 % in urban areas compared to a mere 7 % in rural areas). health insurance. the situation was worse. In rural areas.40 of bank personnel were cited as the major hurdles in taking out a bank loan. only 72 % of bank account holders had a ATM facility too). In one case. One aspect that the graph doesn’t bring to picture is the difficulties faced by households (if any) in availing the three products mentioned in the graph. only 26 % were having a debit card. vehicle insurance. there remains no doubt what poor households are made to bear while applying even for loans of a modest amount. we encountered a person who was sent to a branch 4 km away from his home branch (both branches of the same bank. leave no stones unturned in transforming simple processes to time consuming ones. Although 64 urban households had a bank account. 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. a debit card (ATM card) or a credit card. 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). This was in spite of technology making progress in leaps and bounds. we can see that banks faced with viable business opportunities too.
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) ‡. 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. .41 Fig 6. Most of the respondents both in urban as well as rural areas consulted their friends and family members. the number of people consulting bank officials was negligible. But in case of rural households. Even those who went to a financial adviser were the ones surveyed in Gumla district.8 Households using other financial products 80 70 60 50 40 30 20 10 0 72 % 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. 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. This also brings to light how such centres can go a long way in resolving the financial problems of the affected people.9) gives the different sources where households have sought advice on financial matters.
whereas for their rural counterparts. while 15 % would resort to taking a loan from sources other than a bank.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. Also rural households were more disposed to sell something in order to meet their emergency needs than their urban counterparts (22 % and 7 % respectively). 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. . urban households were more adept at managing their money with 29 % of respondents saying they were managing well. In urban areas. it was mainly from the firm in which they were employed (for servicemen only). As expected. While in urban households 23 % expressed their difficulties in managing their money. In case of urban households. 19 % rural households could not even decide how well they were at money management. those with credit cards were also more likely to use it in emergency.10) below shows how well respondents thought were they managing their money. it was a mere 11 %. Fig 6. With 5 % urban households possessing a credit card. But 30 % of rural households taking a loan from other sources meant mainly from moneylenders.42 (xvi) Managing money: The graph (Fig 6. 45 % households said the same in rural areas.11) below shows what respondents do when they are in need of money in case of exigencies. 3 % said they would use their credit cards in such a situation. Moreover.
11 Arranging money in times of emergencies Ask family or friends Draw on savings Take out loan (other than banks) Use credit card Sell something Others 0 4 5 0 3 7 7 10 15 20 25 30 35 40 22 14 15 30 Rural Urban 30 33 35 % of households (xviii) Level of interest in basic financial services: Table 6. 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 below shows the level of interest of households (both urban and rural households) in basic financial services. Urban households were more interested in availing a loan if it comes with a reasonable interest rate than rural households.43 Fig 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. . It can be seen that rural households were much more inclined in saving small amounts of money than their urban counterparts.
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) Support for taking a loan Support for various bankable products NOTE: Numbers without brackets are for urban households and those within brackets for rural households. rural households are more likely to participate in such events than urban households (be it support for numbers. (xix) Level of interest in courses and sessions: Table 6.2 below shows the level of interest of households in various courses and sessions. they are much willing to have one and operate it too. as well as other financial matters. Rural households were also more interested in welfare benefits. Table 6. 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. (xx) Level of importance given by households to financial products: Table 6. This shows that in spite of not having a bank account. It gives the general picture that whatever the course/session is.44 when compared to rural households. for whom it was mainly for meeting their consumption needs. 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. Having a bank account is of utmost .3 below gives the level of importance households attach to various financial products and services. 48 % of rural respondents were ‘very interested’ in knowing how to operate a bank account and 23 % ‘fairly interested’. with reading or writing).2).
However. whether rural or urban the consensus was on giving wide publicity to financial inclusion promoting initiatives through newspapers. only 32 % of respondents viewed possessing a credit card is ‘very important’ and among those having one. While rural households attached more importance to financial education. among many others.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. making available a number of retirement schemes. posters. . Other suggestions included reducing paper work or documentation. some equated it with status too. Even in urban areas. increasing social welfare benefits. in case of urban households the level of importance was distributed more or less uniformly in all the three matters. This is true for rural households too. simplifying borrowing procedures. etc. advertisements. (xxi) Suggestions by respondents to achieve financial inclusion: Across households. This may be because they viewed financial education as more of basic education than in purely financial terms. the level of importance to financial counselling and investment advice was much lower. relaxation of KYC norms (already in existence). public gatherings.45 importance in urban households (with 81 % of respondents considering it ‘very important’). awareness campaigns. rethinking on negative areas marked by banks. opening of financial advice centres. but to a lesser extent with 45 % respondents of the view that it is ‘very important’ and 24 % considering it ‘fairly important’. Table 6. Lack of any interest in credit cards in rural areas is self explanatory.
.46 The survey findings point out that although financial exclusion is widespread in rural areas. there is no lack of willingness on the part of the excluded sections to uplift themselves from their present status. Though financially excluded. 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 country’s economic growth to all and one. 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. it would be incorrect to say that urban households have been satisfactorily financially included.
we assessed the centre keeping in mind the framework proposed in the ‘Financial Literacy and Credit Counselling Centres: Concept Paper’ released by RBI. LDM and the manager of the local bank (the only commercial bank in the area) on the other. 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. can their desired goals be achieved. GOI. The SHPI in all these cases is the NGO ‘SUPPORT’. we tried to assess whether the financial inclusion initiatives that have been undertaken were working in accordance with the issued guidelines or not. The Mandu Block has around 400 . we gave a presentation on financial inclusion/financial literacy to students of St. Field Visits Apart from conducting financial inclusion surveys in and around Ranchi. by undertaking field visits and assessing the ground reality. because we believe that only with effective implementation of such schemes.1 Meeting members of SHGs and Farmer Clubs: Our interaction with members of SHGs and Farmer Clubs provided us a new insight in the working of such groups. and if not.e. and the LDO. Besides. their problems and their feedback on the scheme. i. In all these visits and sessions. Similarly. their activities. The interactive session was chiefly between members of SHGs and Farmer Clubs and representatives of the NGO named ‘SUPPORT’ on one side. Ranchi. in our visit to the FLCC in Gumla district.47 7. and their benefits realised by the targeted groups. This has been done. For example. 7. we also embarked on our journey to evaluate the myriad initiatives that have been launched to promote financial inclusion. . The session was conducted in the NGO’s office in Mandu block of Ramgarh district. what were the reasons holding it back. We went on to meet members of SHGs and farmers’ clubs in Ramgarh district. The entire block is having only one commercial bank. Bank of India and one PACS. while reporting on the RUDSETI/BMIED. Hazaribag our evaluation has been based on the ‘Guidelines for RSETIs’ issued by the MoRD.500 SHGs and 12 Farmer Clubs having 80% credit linkage with banks. Francis School.
10000 (under the SGSY scheme). 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. They were under the wrong notion that the revolving fund that was the subsidised amount. but the training program taught them that it could be done in smaller ones too. many of the SHG members were not having individual bank accounts. NABARD had sent some of the club members to Ahmednagar for nursery training.48 (i) Interaction with SHGs: The SHGs were involved in activities like poultry. they were of the opinion that lac cultivation was possible only on large sized trees. etc – poultry being the key activity. Although the area was having a good poultry market. they had started recognising the advantages of team work. Although all the groups were maintaining group accounts in banks. They cited many such examples of how the training program has benefited them. teaching them the basics and intricacies as well of poultry activities. the groups were not routing their savings through their group accounts. insurance companies were not willing to insure their livestock and this had led some groups to incur losses in those difficult times. The key activity among the Farmer Clubs. Post-farmer club formation. Instead of all the members visiting the market for seed purchasing (as was in earlier occasions). Prior to the training. This was resulting in their savings not being reflected in the bank accounts. rather than the interest on the revolving fund that was the subsidy. though. This has distributed and brought down their travelling expenses. Some SHG members were also harbouring confusion regarding the subsidy on the revolving fund of Rs. now only one of the group member visits the market. SHG members were imparted a one month duration training by the NGO. wormi-compost. was agriculture and pig farming. Farmer Club members were encountering difficulties in availing the Kisan . during the bird flu period. instead they were doing their transactions directly with the group members. This even led to improper grading of the groups. Moreover. brick manufacturing. (ii) Interaction with Farmer Clubs: There were relatively few Farmer Clubs in comparison to the number of SHGs.
This was amplified by the SHPI/NGO’s view that under the SGSY scheme. This was accentuated by the manpower crunch in the only bank present in the block. The centre is situated within the premises of the sponsoring bank’s Lead District Office and . 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. if they had to visit the branch for cash withdrawal or any such purpose. They even admitted of their living standard being improved. in Gumla. 2008. Gumla: The Credit Counseling Centre (CCC) named ‘Abhay’. they were in an advanced stage of micro-enterprise development. one officer and one cashier.2 A visit to ‘Abhay’. The SHPI’s preference for normal linkages rather than SGSY linkages.49 Credit Card (KCC) facility. Similarly. It was also noticed that linkages under the SGSY scheme were much lower than normal linkages. in spite of having a bank just one km away (since it was outside the service area). The bank has only three personnel – one manager. in order to give the KCC facility. after entering in the SHG fold. Jharkhand. Also. people were more interested in availing the revolving fund interest subsidy rather than undertaking productive activities with the credit availed. overall. This was so. One problem that was common to both the groups was the presence of only one bank in the entire block. (iii) Assessment: Although the SHGs were having some minor confusions regarding the revolving the credit subsidy and not routing the savings through bank accounts. This resulted in long standing hours and daily wage labourers had to lose their one day’s pay. Because of the Service Area Approach (SAA) followed in the Government sponsored schemes. sponsored by Bank of India was set up on 8th September. some had to travel as much as 5 – 6 km to reach their bank. 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. albeit to a somewhat little extent. as the farmers were not having the title deeds of their land which the banks sought. prevented villagers to fully exploit the benefits envisaged under the SGSY scheme. 7.
The Gumla centre provides counselling services to distressed people on their heavy debt burden.e. (ii) Working: The centre remains open thrice a week. is inconsistent with those provided on the centre’s website http://abhaycreditcounselling. 2009 and has arranged 21 seminars/meetings wherein 2647 persons were present. According to the Credit Counselling Centre’s performance report sent to CGM.‡ The days have been selected giving die consideration to the local conditions. (i) Organisational Set-up: The Gumla centre (as well as other three centres in Mumbai. The counsellor has also visited a few banks in the area for promoting the centre. Tuesdays and Saturdays being ‘market days’ and Thursdays being ‘non-ploughing day’ in the area. Farmer Clubs. Bank of India being the lead bank in Gumla district has taken the initiative of setting up the FLCC in its Lead District Office. ‡ The working days and working hours as told by the counsellor during our visit. i. Wardha and Chennai) is being run by the trust christened ‘Abhay’. which was formally launched at New Delhi on 25th August 2006. The counsellor also undertakes personal visits to local places where weekly meetings are held in the early morning hours.htm (can also be found in Annexure III). on Tuesdays.50 is manned by only one counsellor. Thursdays and Saturdays from 11 am till 4 pm. The centre does maintain liaison with local NGOs working in the field of farming and allied activities. creates awareness among the masses emphasising on financial inclusion. etc in order to spread awareness on credit counseling services as well as the ‘Abhay’ centre. attracts more people to the centre than any other day would have done.com/contact. Counseling and debt management services are provided free of charge to the customers so as to put no additional burden on them. On Wednesdays and Fridays. and offers counselling to people who come for advice on various financial problems. RBI Central Office (please refer to Annexure II for the full report). RPCD. the centre has handled 1237 cases till 31st March. . The debt counselling that is being done here is more curative than preventive. the counsellor accompanies the sponsoring bank’s LDM on his visits to nearby villages for meeting with SHGs.
apart from being sent to the bank’s zonal office and head office. There was not even a single case where a non-sponsoring bank had taken the initiative of recommending its customers to this counselling centre. it was on their own initiative. at an interest charged higher than the stipulated one. (iv) Qualification and Training – Counsellor: The counsellor has been a scale I officer in Bank of India’s East Singhbhum branch before opting for voluntary retirement. in applying for a refund . quarterly and annual performance reports of the centre are submitted to RBI Ranchi. computer and a fax facility. 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. In spite of the centre having counselled a number of clients. The monthly. and is not equipped with adequate communication and networking facilities. (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). The counsellor being a local person was given preference in manning this centre. Due to the bank’s computer fault. After induction. the counsellor was sent to the sponsoring bank’s Mumbai office in Dadar for a two day training programme on credit counselling services. The only interface the centre has is face to face. the client had been charged Rs. Whenever customers from other banks visited the centre. there still remains a few stumbling blocks which need to be cleared off. (v) Monitoring: The functioning of the CCC is monitored by the sponsoring bank’s head office. The counsellor helped his client in interest recalculation. Bereft of a phone.51 (iii) Infrastructure: The centre consists of a single room in the Lead District Office. 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). the proportion of clients from non-sponsoring banks to the sponsoring bank cannot be termed satisfactory. 14500 in excess.
The absence of modern facilities like phone and an internet enabled PC. there was an unsaid implicit directive/instruction from the bank’s management to counsel more number of clients from the sponsoring bank’s customer pool rather than other banks’ customers. A comparison of the centre’s performance report (to be found in Annexure II section 2 A (iv)) and our findings from the counsellor’s interview throws up a few mismatches. The counsellor is not even authorised to place an order for a time-table board from the local carpenter. the centre could have managed around 280 clients only. From 8th September 08 to 31st March 09 (even considering a period of 7 months) at a rate of even 40 clients per month. it also came to our notice that although the counsellor did not indulge in marketing the sponsoring banks products and services. with an initial contribution of Rs. it gets difficult for him to implement any such improvements he wishes to undertake for the centre’s upgradation. In one of the instances. This effort definitely deserves praise. he had to write a letter to the bank’s zonal office requesting for the same. in a way hampered the effective functioning of the centre. This is not to imply that the counselling centre restricts itself to the sponsoring bank’s customers only. when the number of persons attending the 21 seminars/meetings has been provided separately at 2647. With this little autonomy assigned to the counsellor. the centre has to counsel people at a rate of 176 people per month instead of 30 – 35 cases on a monthly basis. In order to handle 1237 cases in just 7 months. 51 lakh .52 and ultimately got the matter sorted out. Since the counsellor has not been provided any internet facility. Since the centre remains open only for three days a week. but the counsellor had no information on the topic. But we did not come across any such cases when clients were customers of some other bank. 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 bank’s communication to RBI. Also. For such a minor task too. In course of our interaction with the counsellor. which he wants to put up in front of the centre. this has caused much inconvenience to people who unknowingly land on the centre’s premises on non working hours/days. This is even so. a group of people approached the centre to know how to avail the subsidy from the National Horticulture Board in case of horticultural loans. and finally the group had to leave empty handed. 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. he is unable to keep himself updated with the recent developments.
Courses are offered free of cost to the trainees. they are also provided with breakfast. The analysis provided. one table and two chairs. The initiative the bank has taken in setting up the first ever FLCC in Jharkhand is highly appreciated and is worthy of praise. etc. the RUDSETI sponsored by Allahabad Bank has since trained more than 3000 unemployed youth towards self. 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. eligibility criteria of trainees and facilities provided at the institute) has been provided in Annexure IV. screen printing to electric motor winding. Hazaribag: Our visit to Birsa Munda Institute for Entrepreneurship Development (BMIED). . Training is imparted to candidates by people associated with the local NGOs. and readymade cloth manufacturing to two –wheeler repairing. 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. cooler and computers too). But this analysis is just to give a picture of the real ground situation. snacks and dinner (all free of cost) and out-station students can avail themselves of the free accommodation in the institute premises itself.employment. (i) Administrative Cost: The institute has been functioning since September 2001 on hired premises. Established on 14th September 2001. Along with the training. just aims to present a clearer picture.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. The institute offers a variety of courses for both the male and female youth. lunch. and now it has set a target of training 900 youth for the year 09-10. not to undermine the picture itself. it would be difficult to undertake corrective measures.3 A visit to BMIED. 7. Until and unless we have a fair and transparent picture before us. to know what has been done till now and what still needs to be done which is not at all an insignificant task. The BMIED leaflet (which includes the programmes offered. Hazaribag threw up some mixed results. ranging from mushroom cultivation to beautician course. is having phone.
The programmes already/to be organized are in the trades of agriculture. 11000 per month for a 3200 sq feet area. budget and funding source of each training program). skill development for PMEGP. For the financial year 09-10. duration. process and repair. In case a course falls short of this number. The annual training calendar of the institute for 09-10 can be found in Annexure V (it includes the period. 12. 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. This ensures that maximum number of youth avail themselves of the benefits of the programmes and simultaneously.54 The current rent being paid by the institute is Rs. one kitchen and one dining hall. 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. All the programmes are of short duration ranging from one to four weeks. NABARD has been refinancing 40 – 50% of the cost of running the training programmes. publicity of the institute also gets done. From October 2007 onwards.the . product manufacturing. accommodation provisions for 20 trainees with one common bath and toilet facility. 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. (v) Selection of trainees: The minimum qualification for enrolling in a programme is that the applicant should be literate. and is ready with 30 skill development programmes to be implemented in the year 09-10. SGSY-SHG. one Director’s room cum office and one personal room for the Director (the Director resides in the institute premises itself). the budget for running the courses has been pegged at Rs. Some other programmes require higher qualifications . (iii) Programme Structure: The institute has till now offered around 12 training courses.44 lakhs and the funding agencies for different programmes include KVIC and DRDA apart from NABARD. (ii) Infrastructure: The institute has one classroom.
This is in sharp contrast to RUDSETI. tables. Coming back to BMIED. and radio repairing classes) we encountered some students with qualifications much higher than the prescribed norms. to put it simply. 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).55 candidate to be Class VIII passed or having secondary education. in spite of constraints such as manpower crunch (one Director. NABARD. one staff and one faculty on contractual basis) and lack of modern infrastructure. Moreover due to shortage of rooms and facilities. 3200 sq feet. programmes for boys and girls are not run simultaneously. Since the institute is functioning from a smaller area. Still. the institute is in severe need of a LCD projector. the infrastructure standards are not at par with the guidelines for RSETIs. During our interaction with the trainees (in their T. it was closed. 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. But talks are ongoing with the district administration over land being allotted to the institute. we were informed by its sponsoring bank that training will commence from 6th July. First. There is facility of holding only one programme at a time and only in exceptional circumstances. the area of being larger than the minimum stipulated. so as to ensure smooth expansion in the future. And it seems likely to get postponed once again after this one week also passes away. the commencing date got postponed to one more week. The institute is having just one computer for official work only and that too is not having an internet connection. etc.e. GOI) to the maximum extent possible.V. Ranchi which we were willing to visit but could not do so because no training program was currently going on over there. PCs with internet connections and a fax machine other than the basic infrastructure facilities like chairs. it follows all the guidelines for RSETIs (issued by the MoRD. (vi) Assessment: Although BMIED is not officially a RSETI. does the institute hold two or more than two programmes side by side as was the case in March – April 2009. Some were even doing their under graduation while . i. 09 but when the day arrived.
understanding that they are in more need of such training than the others who are well-off and literate too. the major challenge facing the trainees was of credit – linkage. After the completion of each programme. Although the institute has been making repeated calls to the banks for trainee sponsoring. the institute sends the trainee list to all the nearby banks. Almost all the students present over there. it could not be judged whether the trainees were from BPL families or not. In spite of this. which was between 10 – 20 % of the total candidates trained in the institute. and thus are recommending the institute to their peers. This has led to trainees working as employees in garages or shops rather than starting their own micro-enterprise.56 simultaneously undergoing the training course. 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. 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. so as to ensure financial assistance to the trained youth. BMIED is continuing with its other programmes only. had come to the institute based on the recommendations they received from the passed out students of the institute. However. banks have only tried to put off the matter on the backburner. The institute has started training programmes for SGSY-SHGs from this academic year and has informed DRDA of this new course. But the Director is very much willing to enroll the BPL trainees. This conveys that the ones who were trained in the institute have found it effective and beneficial. From our interaction with the Director. In other cases. the banks have not shown any interest in sponsoring the candidates. staff and the trainees. 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. This situation highlights that banks are not giving due recognition to certificates issued by the BMIED/RUDSETI for extending credit to the trainees. Also this was not the criterion for selection of candidates. Although the institute has done whatever was in its scope to train the rural youth. trainees are provided with proper financial assistance. it has also led to a feeling of dejection among the trainees as well as the institute officials. Until and unless. . Since DRDA has not yet sponsored or sent any list of BPL candidates to the institute. The scenario was no different with the institute’s sponsoring bank too.
we switched over to the initiatives that have been undertaken by RBI and the GoI to promote financial inclusion and financial literacy. KCCs and GCCs. We spoke on Government sponsored schemes. who are in dire need of not just financial literacy but literacy in the broader context as well. Regulatory and developmental roles like regulation and supervision of financial intermediaries. Among the core functions. clarified their doubts. no-frill accounts. This was followed by our core topic ‘Financial Inclusion’.57 7. Finally. we gave a presentation on financial inclusion/financial education to students of class X in St. They will also act as a medium of further spreading financial literacy. why is it needed and who the target groups are. Through such sessions. is not at the cost of leaving behind those illiterate ones. To do away with these apprehensions. The immense response we received from the students was indicative enough of their desire to know more. Imparting financial literacy to the already literate will result in a considerable section of the Indian population being aware of various financial aspects of day to day life. and finally ended the session. But caution is to be exercised that our quest to make the literate ones financially literate too. we can create awareness among school going students of the recent developments going over in our economy as well as promote the cause of financial education. were also briefed on. we discussed currency management. monetary regulation. We started off with a brief introduction of the roles and functions of the Reserve Bank in our country’s economy. Ranchi. Francis School. the BC/BF model. of no-frills accounts being misused by the rich households and many others such queries. boys and girls combined. The question-answer session turned out to be extremely interactive with students expressing their doubts over the possibility of the BCs being robbed of their money on their way to villages. priority sector lending. relaxed KYC norms. RUDSETIs and the RBI’s financial education website. The group addressed comprised of 62 students.4 Presentation in St. exchange management and the Reserve Bank being the banker to the Government. Ranchi: As part of our project and in order to promote financial literacy among the school going children. we elaborated the schemes further. . etc. Francis School. After elaborating on what financial inclusion means. SHGs. FLCCs. we shed some light on the present financial inclusion scenario prevailing in Jharkhand. public debt management.
Training modules may be developed for the . 8. the major issue that came up was the lack of awareness among the masses (both literate and the illiterate ones alike).58 8. no mass sensitization has taken place yet. compared to just 21 % borrowing from banks. section 6 [ix] for further details on the different sources of availing loans for rural as well as urban households). This is evident from our survey findings. section 6. Sensitisation regarding the importance of financial inclusion has been limited to the banking sector’s top level officers only. Although Reserve Bank of India has undertaken a myriad of initiatives to promote the cause of financial inclusion. This is because financial exclusion. is not limited to rural areas alone. 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. The top-down approach may comprise of training programmes being conducted for branch managers. please refer chapter 6. branch staff and the like.3 [ii] and [viii]). (Please refer to chapter 6. Recommendations From the diversity of households covered in our survey. and it has yet to reach the line functionaries – branch managers. The top-down approach is to begin with sensitisation of staff at the rural as well as urban branches. The awareness approach has to be both top-down as well as a bottom-up one. in particular. Poor households are often apprehensive about the indifferent nature of bank personnel. (For more information on these particular findings. This is in spite of the fact that no-frill accounts have been in existence since the last three years. and thus expedite the process of financial inclusion.1 Raising awareness: Ensuring take up of services emerges as a vital area. if not more. There is exclusion among the poor urban households too. This leads them to the clutches of moneylenders who charge as exorbitant a rate as 24 % per annum. in general and the targeted groups (the ones financially excluded). This has also contributed to ignorance among the masses. 43 % of rural households borrow from moneylenders. though higher in rural households. Simultaneous adoption of both the approaches will lead to their convergence.
with a rural background and inclination towards serving rural people may be given preference while considering such postings. Since majority of rural households tend to borrow money so as to meet their consumption needs. Manpower crunch in bank branches of remote locations lead to long standing queues. The bottom up approach may comprise of different mechanisms from doorto-door leafleting. Jharkhand. This can be effectively done in partnership with NGOs working in the fields of poverty alleviation. SJSRY. Banks may also devise suitable incentive structures for rural posting including monetary benefits. Where resources are not put into an awareness raising campaign. section 7. The staff may be trained to develop a positive attitude towards their customers. as was the case in Mandu block. financial inclusion. although the other schemes too have been devised with the sole aim of poverty alleviation and ultimately. there is an urgent need to adequately staff those branches having just two or three personnel. Awareness of the GSSs and their benefits will also lead more people to opt for them. Except NREGS. (Please refer chapter 7 . there is hardly any news of the other GSSs in the media. (Please refer chapter 6 section 6. public meetings. with special emphasis on loans for agriculture and allied activities.59 rural staff. (Please refer chapter 7. results in work overload for the staff and makes bank customers impatient. and advertising through print as well as non-print media. This will also be beneficial to SHGs. Branch managers. PMEGP and SRMS can be made effective only if they are known to people whom they target. they need to be sensitised for availing credit in order create income generating assets. This is not the case in urban areas.They are to be made known of the various Government Sponsored Schemes (GSSs). which lead customers to visit branches even for cash withdrawal. The long list of schemes like SGSY. Ramgarh. where people visit bank branches for various purposes but rarely for withdrawing cash.3 [xii] for more information on types of loan availed by households).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. To mitigate such stress causing situations. some of whom are led by NGOs preferring direct linkages rather than SGSY linkages. there is a danger that knowledge of the financial services will remain restricted and target groups of financially excluded people not reached. so as to make them lucrative. in spite of being the only bank in an entire block as was the case in Mandu block of Ramgarh district.
And this is because some banks have tried their best not to let them know about no-frills account. But this belief is based on shaky grounds. since they are already financially included. carrying out transactions and yet they themselves don’t have a bank account. 3. and this be can be done by just putting up a no-frills poster on the banks’ display boards. Statistics also show that people prefer their regional language newspapers. . although they have put up huge boards showing their various schemes on credit cards. With 2130 dailies being published in the country and a circulation of more than 88 million. 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. personal loans. one may be of the opinion that people coming to bank branches need not be told about no-frill accounts or other financial services. 1. With high illiteracy levels prevailing in the country. it can be an effective medium of reaching the rural masses. The fast growing radio segment. AIR FM Rainbow and Big FM (in order of their rank): IRS 2009 Round 1 data. and hence awareness through such media can go a long way in bringing financial awareness to the grass-root level. Registrar of Newspapers for India (2005-06 figures). These people can be financially included at ease. The banks have displayed no such notices. They are regularly visiting banks. we encountered people who were standing in queues for depositing cash in accounts that were not their own. as we found out during our surveys.1 [iii] for the detailed reasons behind preferring normal linkages over SGSY linkages by NGOs). etc (the more profitable ones). Indian Readership Survey 2009 Round 1 data. 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. In some of the surveys conducted inside bank premises. 2. Also. The top 3 FM stations being Radio Mirchi. they didn’t have their own account.60 section 7. They had been sent to the bank by their employers and to our surprise. 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). non-print media too can be effectively used. 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. So there is an urgent need to immediately include these bank-coming-but-not-having-bankaccount people in the financial sector. With the top three FM stations having a combined 83 million listeners 3.
Since all the banks will mandatorily be a part of the project.61 8. In order to mitigate such apprehensions. This can help in assisting customers even from rural areas to get information on availability of credit and terms to comply. thus enabling financial counselling to be more neutral than it is being viewed of in the existing scenario. The helpline may be made toll-free for calls from rural areas. while charging a small fee for calls from urban centres. The expenditure may be shared among the participating banks. the banks. . thus garnering greater acceptability from its developers. the service can also be provided at some delay rather than instantaneously of a call being received.2 [iv] provides a complete assessment of the hurdles coming in the way of the ‘Abhay’ centre). Also chances of the service being used by a bank for its promotional and marketing purposes will also get drastically minimized. The contribution of banks can be in the basis of their customer base. they will show little hesitation in recommending their clients to this helpline.e.2 Financial Counselling Helpline: FLCCs being sponsored by a particular commercial bank are viewed with suspicion by the non-sponsoring banks. and if found more cost-effective than the instant service. it may be accordingly named ‘Financial Counsel-Line’ rather than a helpline. Considering the fact that people are not in an emergency situation when seeking financial counselling. With banks all over India contributing their share for this helpline. Jharkhand where we did not encounter any case of a non-sponsoring bank recommending its clients to the counselling centre. This was evident from our visit to the Credit Counselling Centre ‘Abhay’ in Gumla. Such centres can also have advanced networking and communication facilities like internet enabled PCs. In order to ensure that poor rural households who are in more need of such advice. Also there is a legitimate concern of the centre being misused by the sponsoring bank. and who have the least number of options available of accessing such advice. a national helpline may be set up for providing financial counselling. may be continued with. (Chapter 7 section 7. This will also reduce the cost of building the helpline. it will be possible to create one having the capacity of serving the entire country. to set it apart from other such services. Since the helpline is to provide financial counselling rather than financial help. instead of opening their own separate FLCCs. etc. ‘market segmentation’ can also be thought of. fax facilities. This approach can be adopted in the initial stages of the project. i. Commercial banks. may pool their resources for this new helpline.
we intentionally texted the centre from a Bihar mobile number. the project can also be made a selfsustaining one by adopting a ‘user-pays’ model. An article on this helpline has been provided in Annexure VI and can also be accessed at http://www. Hazaribag we were of the opinion that banks which sponsor such institutes benefit immensely from these. market segmentation remains a viable option. (The entire assessment of the institute is provided in chapter 7 section 7. One just needs to sms DISHA to 53030 and within 48 hours. These kinds of ‘digital inclusion’ will definitely a major step forward in promoting financial inclusion across the nation.dishafc. This kind of situation in the state’s oldest such institute begs attention. within 48 hours as was promised.businessstandard. charging Rs. . 4 A free phone counselling is already in existence provided by Disha Financial Counselling under the ICICI Trusteeship Services Ltd. can achieve. Instead of the sponsoring bank forming a major chunk of the credit being availed by its trainees. Since there is no compulsion on the part of banks to 4. 8. there is hardly any doubt. it may be time consuming and lead to a rather higher bill for distressed farmers. Since ‘Disha’ does not have a presence in Jharkhand or Bihar.com/bs_csr/news.3 Improving Credit Linkage to RUDSETI Trainees: Prior to our visit to BMIED/RUDSETI. we were contacted by a counsellor from Hyderabad. But this belief of ours was turned upside down when we visited the institute. With a single trust being able to provide such a service free of cost. Still. etc.62 Instead of banks building this service. Charging users a small fee per call can make the project self-sustaining. In this regard. 5 per call. The sponsoring bank’s indifferent attitude to the trainees’ credit requirements necessitates some strong actions to be taken. and to our extreme delight. etc.php?autono=302628 5. 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. RBI may instruct the sponsoring bank as well as other banks in the area to direct their lendings to the RUDSETI trainees. he/she id contacted by a financial counsellor.3 [vi]).org (Annexure VII). modern farming methods. 5 This service has been verified by us too. But counselling being not similar to just answering a question. thereby putting an additional burden. The financial counselling centre’s URL: www. what can a service provided by all the banks in the country. we found that the credit linkage from the entire banking sector was at a dismal 10 – 20 %.
Quick and hassle free loan to these trainee will boost their morale. The sponsoring bank. Also. those having a strong presence in rural areas. 8. if not willing to fund the entire project cost. introduction to financial markets. directives may also be issued to the other banks in the area so as to meet the entire project cost of the trainee’s enterprise. and initiatives taken to promote financial inclusion and financial literacy. it would be of immense help if they are provided loans right after their training gets over. a joint certification course introduced by NSE and CBSE for standard XI and XII is already in place. Elementary economics can also be incorporated in the course and continued till the secondary level. Since the trainees are expected to start off with their own micro-enterprises after the training is complete. developing a savings attitude. financial literacy as a whole was missing in the curriculum. computer applications in financial markets. economics. they continue to adopt a hands free approach. importance of bank account. Although simple interest and compound interest calculations. The course curriculum includes accounting for business.4 Financial Education in School Curriculum: Our interaction with students of class X during the presentation in Financial Inclusion/Financial Education brought out the wide gulf existing between financial literacy and literacy in general. RBI can join hands with the leading educational boards in the country.63 provide loans to such trainees. the Reserve Bank may review whether a loan to such a RUDSETI trainee be included in priority sector lending or any such GSS. The financial education course can start from class VI onwards. The subject may cover topics such as basic banking. . Financial Markets Management (FMM). to develop curriculum framework so as to promote basic financial education. thus finally translating into profits. may be directed to compulsorily lend a minimum of 60 % of the cost of the project to be undertaken by the trainee. etc were being taught in class. Similarly. But considering that so much is being done by the institute for the rural youth in providing such training. In this regard. BPO skills. increase the institute’s popularity and most importantly. problem on shares an dividend. increase banks’ lending. let’s not leave the last mile problem unaddressed.
5 Connecting donors/lenders and entrepreneurs: One of the survey findings that could not show itself in the graphs. Such a model.kiva. etc can be found on their website www. Once the loans are repaid over the course of 6 – 18 months. Since some people living in these areas are having high default rates. was of person with bad credit history (or staying in banks designated negative areas) not being able to get a traditional bank loan. This although may be justified to an extent. does punish the innocent too by denying them credit and treating them at par with the willful defaulters. This is a serious and complicated issue. The immense work still left to be done in financial inclusion. can free up those who have been labelled as negative. 8. In fact. journal updates keep the lenders informed about the progress of the entrepreneurs they sponsored. Considering the low reach of the FMM course because of its specialised nature.64 etc. After a loan is refunded. quick implementation of a basic financial education course has the potential to develop a large financially literate work force in the country. . The course was being offered in 58 schools in 07 – 08 and 120 more schools in 08 -09. There have been instances where people with bad credit history have been provided with small amount of loans. banks have declared them negative and do not conduct business with residents of those areas. microfinance or microcredit can play a significant role in addressing this problem. can come to the rescue. lenders can choose to withdraw their principal or re-loan to another entrepreneur. if people from these areas are not given an opportunity to prove themselves. if implemented in India. Also. the entire section is going to lead such a life forever.org (Please refer to Annexure VIII for more details). private donors contributing small sums of money and aggregating to larger amounts. In such a scenario. there are nonprofit organisations such as ‘Kiva’ which enables people to connect with and make personal loans of as little as $ 25 to low income entrepreneurs in the developing world. Reserve Bank’s focus should be to reach maximum number of schools so as to integrate them with the school curriculum quickly. Since banks are unwilling to serve these people. Sponsoring these poor households to purchase business related items such as sewing machine or livestock can empower them to earn their way out of poverty. How these organisations work by bringing together lenders and worthy entrepreneurs on the web. only to see it being repaid on time and with interest too.
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. 07 is one of the first sites on financial education. 2 % or 3 % whatever. 8.65 There are organisations such as ‘Microplace’ which even offer interest to such lenders with the interest rate being fixed by the lender. Even now. pointing out that the Reserve Bank’s financial education website needs an overall change. But has the site achieved its aim to promote true financial education. whether one wants to give an interest free loan or at an interest of 1 %. A comparative study of popular financial education sites available on the web throw some startling results. They get it repaid. Hindi and 11 other regional languages has comic books dealing with topics such as monetary policy. bank regulations. 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.6 Upgrading RBI’s Financial Education Website: The financial education site launched by Reserve Bank on 14th Nov. It has a games section too which aims to educate children through entertainment. currency notes. etc. . thus enabling financial inclusion. The site available in English. a Google search by the word ‘financial education’ displays result with the RBI’s site at the top slot. not a handout. 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.
de (a German site) seem to be much more popular in attracting visitors.org www.mymoney.org. www.66 Financial education sites such as www.in www. A comparison of the top keywords driving traffic to these sites from search engines.rbi.federalreserveeducation.gov and www.meine-schulden.gov www.mymoney.meine-schulden.de The German translation is as follows: schulden haushaltsplan inkasso eidesstattliche versucherung schuldnerberatung umschuldung meine schulden haushaltsbuch inkassoburo konto pfandung owe/liabilities budget law contract affidavit debt counselling rescheduling I owe budgetary accounting collection agency pledge account .org. Here is the list of keywords: www. gives us a fair idea of what users are looking for in these sites.federalreserveeducation.
Again. as well as materials specifically geared toward teachers and high school and college students.federalreserveeducation.de with the lowest number of sites linking in at 83 is also the one where people spend more minutes per day. The website has material intended for the general public. (Please refer Annexure IX for more details).org. a resource .org and www. FederalReserveEducation.67 The above comparison is clear enough to prove that people visiting RBI’s website are not looking for financial education. if we compare the time spent on the above four sites.meine-schulden. It was also observed that www.de is the only site specifically aimed at debt counselling. RBI’s website wins hand down (please refer the following graph). Comparing the daily reach of these sites. but in all the other three cases. This may be because meine-schulden. People visiting RBI’s website spend less time on the site than users visiting the sites www. and this is what we will have to capitalise on to popularize the financial education website. It provides easy access to free educational materials.meine-schulden.de. RBI’s website comes at a distant third (as evident from the following graph). is dovetailed to increase the use of Federal Reserve educational materials and promote financial education in the classroom. The Federal Reserve System’s financial education website. 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.
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.gov with articles on budgeting and taxes. services and guidance. credit card repayment calculator. should be geared towards adults as well with articles on credit and . retirement planning. home ownership resources. The RBI’s financial education website which is more inclined towards children. The site meine-schulden. financial planning. etc. and games for various ages and knowledge levels.de provides first information to people seeking advice on how to deal with their debt problems. credit.68 search engine for teachers. Similar in nature is the site mymoney. Typical questions from the debt counselling practice are answered here and first tips on how to deal with financial problems are given. among others. 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. On the service sites. On the information sites. model letters to apply for a Current Account for everyone and contact details of the banks’ dispute settlement and customer complaint offices. many model letters are published and a search module to find the next debt advice centre. It consists of three parts covering information. In case visitors have a concrete request they can search for support in the guide-book on the right side of the website. The site provides.
8. Each citizen of India having this UIN linked bank account can truly claim the target of 100 % ‘comprehensive’ financial inclusion we aspire to achieve. financial counselling. (Please refer chapter 6 section 6. Only then can the site aim to achieve its goal of spreading financial literacy. Unique Identification Number (UIN) can be a way to address the identification challenges of Indian banks and the financial sector. microfinance and microinsurance institutions. etc. general banking. Also the site can have a list of credit counselling centres in India. it should act as a repository of information related to customer education. Chennai like the one on NBFC fraud named ‘Mani Loses Money’. considering that a large section of the Indian population does not have a bank account. The programme can be dovetailed with financial inclusion with all Government cash transfers for instance NREGP. and act as a one-stop site for people looking for anything related to financial literacy. The impact on inclusive growth and India’s saving arte from implementing this would be massive. In all. The national ID when integrated with SHGs. It may also have online tools like financial health check-up and debt test. etc. deposits. 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. through the UIN linked account.3 [vii] for further details). safe banking. loans.69 debit cards. would link financing options for the poor more closely with bank accounts. the primary reason for respondents being refused of a bank account was their not having any identity proof. The UIN programme will be the first step towards a universal financial inclusion.7 Integrating UIN with Financial Inclusion: As was observed in our survey. . . Videos prepared by RBSC.
70 ANNEXURES .
(please specify) ___________________________ 4. Is your household having a one bank account? 2. of family members: ___ adults ___ children Date: _____________________________ Age: ______________________________ Occupation: ________________________ A. Is the bank account with a cheque book? Yes No 5. SAVINGS: 1. 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) ___________________________ 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. Which type of account do you have? Savings Bank a/c Current a/c Recurring Deposit a/c Fixed Deposit a/c If others. What were the reasons that your household opened the account? To receive Govt. No. (please specify) __________________________ . (please specify) ___________________________ 6.71 ANNEXURE I RBI YOUNG SCHOLAR SURVEY ON FINANCIAL INCLUSION (QUESTIONNAIRE) Place of Survey: ________________________ Name: ________________________________ Gender: M/F No. of accounts in your household: 1 2 Yes 3 No 4 More than 4 3. Who helped you open the account? Village Panchayat Officials Bank Officials Neighbour Friends/Relatives If others.
(please specify) ___________________________ Neighbours Village Meetings Yes No 12. please specify? _____________________________________ B. (please specify) ___________________________ 10. unemployed Had to have a minimum amount Had debts Thought I was a risk Not lived here long enough . Reasons for not having a bank account: I have no money/little money to put in No bank in this area No point . from where? Banks Relatives Friends Moneylenders If others.use spouse's account Don't know .72 8.did not say If others.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. balance accounts for everyone? 11. Reasons for being refused a bank account: No ID Previous bad credit history No job.benefits received in cash No point . (please specify) _____________________________ 9.no credit history . Do you have any grievances in your ‘no-frills’ a/c? No If yes. Have your household ever borrowed or taken a loan? No If yes. 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. BORROWINGS: 13. (please specify) ___________________________ . Are you aware that banks are opening zero min.
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. OTHER FINANCIAL SERVICES 20. If loan was availed. purpose of the loan Household items Computer Day to day living expenses or bills To pay off other debts If others. which of the following reasons led to this choice? Low rate of interest Good deal. what was the type of the credit/loan? Housing loan Business Loan Training/Education loan Vehicle loan If p ersonal loan. been given credit I wanted Not asked for any credit 19. then which one: Insurance Credit card Debit card If others. (please specify) ________________________ 17. If you were refused. do you know why you were turned down? Please give details.73 14. If borrowed from sources other than banks. (please specify) __________________________ . In the past three years. have you been refused a loan or credit? Yes. If borrowed from banks. what difficulties were faced in the process? __________________________________________________________________________________ __________________________________________________________________________________ 18. (please specify) ___________________________ 15. (please specify) ___________________________ 16. good rate Was offered/arranged by the banks It is easy (vague) Trustworthy lender If others. (please specify) ________________________ If others. __________________________________________________________________________________ __________________________________________________________________________________ C. If ever borrowed. Are you using any other form of financial service or product? No If yes. been refused credit No.
can't afford it Just don't bother. In the past three years. nothing valuable I am in process of doing it No insurance men coming to door now Have to have bank account If others. If already having insurance. (please specify) ___________________________________ 21.74 21. no where Family/friends Bank Financial Adviser Social worker If others. __________________________________________________________________________________ __________________________________________________________________________________ 26. then please give reasons. have you been anywhere for advice about money matters? No. If you are not satisfied with its working. Is there any financial advice centre/credit counseling center in your area? Yes No 29. What were the reasons for not availing any form of insurance? Too expensive. If you were refused. been refused credit No. no real reasons No need for it I don't have much. And would you say this advice was Very helpful Helpful Very unhelpful Not sure Neither helpful nor unhelpful 28. which of the following type is it? Life insurance Health insurance Vehicle insurance If others. how satisfied are you with its working and the advice it provides? Completely satisfied Satisfied Just ok Unsatisfied Completely unsatisfied 30. If yes. __________________________________________________________________________________ __________________________________________________________________________________ . (please specify) ___________________________________ 27. (please specify) ____________________________ 22. Reason for using the above said financial service(s)? __________________________________________________________________________________ __________________________________________________________________________________ 23. have you been refused any of the above financial product(s)? Yes. What difficulties were faced in the process of accessing the above financial service(s)? __________________________________________________________________________________ __________________________________________________________________________________ 24. do you know why you were turned down? Please give details. been given credit I wanted Not asked for any credit 25. Over the past couple of years.
75 31. Not at all interested 5. 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. Fairly important 3. Level of interest in courses or sessions (same system of marking as in Q. Level of interest in local financial services (1. At present how well do you think you are managing your money? Managing well Just getting by Getting into difficulties Not sure 32. Level of importance in the following (1. At present how worried are you about getting into debt? Very worried Fairly worried Not at all worried Not sure Not very worried 33. banks. satisfied No. Very interested 2. Not at all important 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. Not very important 4.34 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. Not very interested 4. 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. not satisfied (please give reasons) ________________________________________________ __________________________________________________________________________________ 38. Fairly interested 3. Are you satisfied with the BC/BF model or you feel the need of a bank branch at your place? Yes. Very important 2. local bodies. (please specify) ___________________________________ 34. NGOs and others might need to do to further achieve financial inclusion? _______________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ . What do you think that the Government.
76 ANNEXURE II PERFORMANCE REPORT OF ‘ABHAY’ CREDIT COUNSELLING CENTRE .
78 ANNEXURE III WORKING HOURS OF ‘ABHAY’ FLCC AS DISPLAYED ON THE CENTRE’S WEBSITE .
ANNEXURE IV LEAFLET OF PROGRAMMES OFFERED BY B.M.I.E.D, HAZARIBAG
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
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
Rs. 12.44 lakh
HELPLINE FOR FARMERS - A SELF-SUSTAINING MODEL
82 ANNEXURE VII DISHA FINANCIAL COUNSELLING CENTRE (WEBSITE HOMEPAGE) .
83 ANNEXURE VIII DETAILED WORKING OF THE ‘KIVA’ MODEL .
84 ANNEXURE IX HOMEPAGES OF VARIOUS FINANCIAL EDUCATION WEBSITES – A COMPARISION 01. RBI’s website on financial education: 02. German debt counseling/financial literacy website (www.de): .meine-schulden.
federalreserveeducation.gov): . U.S. Financial Literacy and Education Commission’s site (www. Federal Reserve Education Website (www.org): 03.85 03.mymoney.
Disadvantaged Communities and the City Economy. Nov 2007 06. UK – Financial Inclusion: An Action Plan for 2008 – 11 10. C Rangarajan – Report of the Committee on Financial Inclusion. Financial Inclusion Observatory – Debate on Financial Exclusion/Inclusion – Country Report: Germany 08. UK – Financial Inclusion in the UK: Review of Policy and Practice. May 2009 02. Australia – Summary Presentation: Research on Financial Exclusion in Australia. H M Treasury.Workshop Report on Promoting Financial Inclusion through Innovative Policies. Nov 2006 14. Commission for Rural Communities. Chant Link & Associates. UK – Building Financial Capability.Annual Policy Statement 2009 – 10 . Financial Deepening and Financial Inclusion. Reserve Bank of India – Economic Growth.Some ICT Devices: A Primer. House of Commons. Financial Services Authority. Department of Rural Development. Nov 2004 04. Pune . July – Sep 2007 05. Leeds City Council. Advice and Insurance. 2008 07. Savings. April – June 2006 .Annual Report 2005 – 06 . Rakesh Mohan. UK – Financial Inclusion: Credit. Treasury Committee. Reserve Bank of India . Nov 2006 11. College of Agricultural Banking. March 2007 09.Universal Financial Inclusion in India: The Way Forward. UK – Financial Exclusion: It’s Impact on Individuals. Govt. Jan 2008 03. Dec 2004 13. July 2008 12. Alliance for Financial Inclusion . of India – Draft Guidelines for ‘Rural Self Employment Training Institutes (RSETIs)’.Annual Report 2006 – 07 .86 REFERENCES 01. Joseph Rowntree Foundation. UK – Promoting Financial Inclusion in Rural Areas.Financial Inclusion and Financial Literacy: Union Bank’s Initiatives. July – Sep 2007 .
Reserve Bank of India .08 .Annual Report 2007 – 08 . 08 15. Sep 2006 .Mid-Term Review of Annual Policy Statement for the year 2007.Draft Guidelines on Outsourcing of Financial Services by Banks. Nov 2006 18. V Leeladhar. Scottish Council Foundation – Financial Inclusion and Capability in Rural Scotland. I & II . Sep 2008 .Inclusive Financial System for the Aged. Reserve Bank of India – Inclusive Growth: Role of Financial Education. Shyamala Gopinath. Dec 2005 20.Report on Trend and Progress of Banking in India 2007 – 08 .Master Circular on Credit Facilities to SCs and STs.Bulletin May 2009 .Credit Counselling: An Indian Perspective. July 2008 .Master Circular on Priority Sector Lending – Special Programmes: SJSRY . 2005 17. July 2005 .Master Circular on New “Self Employment Scheme for Rehabilitation of Manual Scavengers” (SRMS) . Reserve Bank of India . Reserve Bank of India – Taking Banking Services to the Common Man – Financial Inclusion.Bulletin June 2009 .The Role of Financial Education: The Indian Case. Y V Reddy.Financial Inclusion and Information Technology.Report on Currency and Finance 2006 – 08 Vol.Financial Inclusion for Sustainable Development: Role of IT and Intermediaries .Working Group on Improvement of Banking Services in State of Jharkhand. Sep 2006 .Master Circular on Priority Sector Lending – Special Programmes: SGSY . June 2007 16. April 2008 19. July 2008 .Master Circular on Priority Sector Lending – Credit Facilities to Minority Communities. Dec 2005 . Scottish Executive – Financial Inclusion Action Plan.Financial Inclusion: The Indian Experience. Usha Thorat. June 2007 .87 .Report of the Internal Group to Examine Issues Relating to Rural Credit and Microfinance.