Chapter 7

RESPONSE OF BANKING SECTOR TO REFORMS: SBM and ICICI

“We believe that the central challenge we face today is to ensure that globalization
becomes a positive force for all the world’s people. For while globalization offers
great opportunities, at present its benefits are very unevenly shared.”

United Nations Millennium Declaration

September 2000

This is the straight message from united Nations Millennium Declaration message on
resultant impact of globalisation on people. The MDG report suggests the implementation
plans of governments in empowering people are still not sufficient. There is disqualify of
resources distributions.

The inequality among people still prevails though, 21 st century has witnessed to
increased flow of goods, information and distribution of capital. Many governmental
initiatives to address these structural inequalities of people has still not gained the expected
results. Adopting to The Millennial Developmental goals have agreed among countries on
including comprehensive strategies to empower poor people and marginalized people.
Countries need economic growth to address these MDG’s. The growth in parallel to pro-
poor developmental activities, uplifting its disadvantaged men and women, increasing its
Human develop index is a prime responsibility of any government towards its social policies.
Social polices and developments go hand in hand if the institutions for the sake of
development has clear agenda in transformation.

Among these institutions, banking has got a prominent role to play in upbringing of
its people. These financial institutions can transform social developments through better
social growth projections and better quality of life. Welfare of a country can’t be achieved if
institutions doesn’t adequately provide access to employment and economic opportunities
to its vulnerable class of people.
7.1 Social Policies and Banking Sector in India

A countries economic growth and stability depends mainly on its public policies. Country
specific polices address the issues pertaining to its country and rightly standout to the
greater development of people. Public policies in general and social policies in particular,
addresses issues more related to social equalities and social welfare. The social welfare
directly affects the economic conditions of a country.

As Professor Ragnar Nurkse rightly remarks;

“Economic development has much to do with human endowments, social

attitudes, political conditions and historical accidents. Capital is a necessary but not a
sufficient condition of progress” 1

As UN mentions in its working paper “Regional Social Policy2” published in June

2007 highlights in the context of globalisation, the regional social policies plays a major role
in a counties economic growth.

In broader sense, social polices of a country refers to collective interventions directly

affecting transformation in social welfare, social institutions and social relations. There is
considerable difference between Public policy and social policy. Public policies cover
broader area of developmental concern of a country like agriculture, infrastructure,
industry, sustainability etc. Social policies in particular are part of public policy, focuses on
people development and welfare, which again help a country in its economic growth. The
two policy areas can overlap each other in many areas, especially in the fields of health and
education

In line with social polices, social securities are prime importance to countries
growth.The Economists Amartya Sen and Jean Dreze have distinguished social security in to
two aspects: “protection” and “promotion.”3

Sen signifies the protection against a fall in living standards and living conditions
through ill health, accidents. Jean Dreze focuses on enhanced living conditions, helping
everyone overcome persistent capabilities deprivation.
 In India’s context on social security benefits, considerable fraction of citizens are
deprived of “protection”. As per Tendulkar Committee report, still 30% of population in
India live below the poverty line, which means around 40 crore people live within Rs.32 and
Rs. 26 per day per person respectively in urban and rural areas. They absolutely don’t have
social securities and protection against any unforeseen events in their life.

In provisions aimed at “promotion,” social security through nutrition, work

entitlements for all, recent evidence gives reasons for cheer, but even these are being
threatened with fund cuts and further shrinking.

Social policy covers such areas or services which have direct impact on people
development, such as education, health, employment, social security, housing, utilities like
water etc. Social policy has greater responsibility of creating equality through redistribution
of resources, alter the unequal distribution to create congenial atmosphere for social and
economic growth.

Having said that, social policy is always a government action. “It refers to overall
programs of action towards a given goal as distinguished from specific government action” 4.
These social policies directly impact the economic growth of a country. A good policy
ensures better growth and a bad policy impacts the growth.1991 Globalisation in India has
transformed the way polices are looked in to. A major shift in process, structure and the
context of policeschanged. The responsibility of a welfare state through its social policies
contributing towards globalisation and globalisation intern contribute to the state
development. It is mutual and interdependent on each other. If globalisation can make up
states, it is equally clear that states can make Globalisation successful. It is mutual and have
equal responsibility to bring development.

According to The World Bank’s Social Development Strategy, social development is

“transforming institutions to empower people,”5 and defines further clearly that there are
three principles to it. These principles are, Inclusion, Cohesion and Accountability.

Inclusion, is promoting equal access to opportunities, enabling everyone to contribute to

social and economic progress and share in its rewards.
Cohesive enable women and men to work together to address common needs, overcome
constraints and consider diverse interests. They resolve differences in a civil, non-
confrontational way, promoting peace and security.

Accountability are transparent and respond to the public interest in an effective, efficient
and fair way.

The concept note for the conference (World Bank 2005b) tries to say: “As a working
definition, social development can be described as the process of increasing -the assets and
capabilities of individuals to improve their wellbeing, -the capacity of social groups to
exercise agency, transform their relationships with other groups, and participate in the
development processes, -the ability of society to reconcile the interests of its constituent
elements, govern itself peacefully, and manage change. Social Policies then are public
policies aimed at promoting equality of opportunity to benefit individuals, equality of
agency to benefit groups, and both horizontal and vertical social integration.” In the
glossary of the well-known text by Hall and Midgley (2004, p xv), finds the following
definitions: “Social development: A process of planned social change designed to improve
the welfare of the population as a whole in conjunction with economic development. Social
exclusion: The exclusion of certain groups from an acceptable standard of living or basic
level of political participation. Social policy: Measures that affect people’s well-being,
whether through the provision of welfare services or by means of policies that impact upon
livelihoods more generally.” Finally, consider Mkandawire’s (2001) perspective: “Social
policy should be conceived of as involving overall and prior concerns with social
development, and as a key instrument that works in tandem with economic policy to ensure
equitable and socially sustainable development…I define social policy as collective
interventions directly affecting transformation in social welfare, social institutions and social
relations.”

In the context of economic stability and growth, the public policy of a country plays
a major role. Key policies linked towards social upliftment through Banking sector can be
viewed to understand the effectiveness of policy implementation. Banks adoption of public
policies through priority sector lending is an important indicator to know the responsibility
of a bank towards public wellbeing. In India priority sector defined during 1972 when
National Credit Council facilitated through Dr. K S Krishnaswamy Committee defining
priority sector for the first time in India. banking sector help may be Education credit policy,
agriculture credit policy, social security, housing, health etc.

Constitution of India through its Article 41 of Directive Principles asks the state to
“within the limits of its economic capacity and development,” make effective provision for
securing the right to work, to education and to public assistance in cases of unemployment,
old age, sickness and disablement, and in other cases of undeserved want.” Article 42 says
the state shall make provisions for securing just and humane conditions of work and for
maternity benefits.

In a country like India, the social, economic and political justice has a mention in its
constitution, has significant importance towards government agenda. Also, social justice is
clearly having a mention in its preamble. It is a guiding principle under directive policies of
state. Article 38 states that, a State to secure a social order for the promotion of welfare of
thepeople6

It also has mention in Article 243G on the obligations of panchayat in the

preparation of plans for economic development and social justice

Social banking, complementing to Social polices defined by Institute for social

banking as “Social banking describes the provision of banking and financial services that
consequently peruse, as their main objective, a positive contribution to the potential of all
human beings to develop, today and in the future”7.

In brief social banking is “Banking with Conscience” by providing equal opportunity

for its society by investing in its community, supporting disadvantaged, joining
environmental agendas and ethical agendas. As described rightly by Benedikter in his book
Social Banking and Social Finance: Answers to the Economic Crisis8, he differentiates the
mainstream banks to social banks as mainstream banks focuses mainly on profit
maximization and social banking cares about 3 p’s – Profit, People and Planet. Humans and
environmental wellbeing is an important principle when they have economic activities.
Largely, the aim of social banking is to consider social and economic sustainability when
taking financial decisions. Sustainable investments towards lending to create quality of life,
uplift the disadvantaged has long enduring effect in producing and creating a society with
positive social and ecological impact for its citizens.

7. 2 The priority sector lending, indicator for social obligations

Complement to social policies and developments in India, banking sectors have a

target in the priority sector lending. Priority Sector is those sectors which are deprived of
timely and adequate credit facilities in an economy, which is playing a prominent role.
Priority Sector Lending is must in a country like India, where the targets are set by Reserve
Bank of India for every bank, through providing a specified portion of lending to these
sectors. The sectors like agriculture and its allied activities, micro, small and medium
enterprises, housing for poor, loans for students against education and loan facility for low
income groups and weaker sections of society.The purpose ofthis lending is to an all-round
development of the economy as opposed to focusing only on few sectors. A developing
economy like India, has clear political agenda of overall inclusive growth.

A meeting held on July 1968 by National Credit Council 9 has emphasised that all
commercial banks should show their involvement in financing to priority sectors for
necessary growth. The categorisation of these priority sector was made by a committee
formed by RBI in May 1971. The committee submitted its repost and RBI formalised priority
sector in 1972 on the basis of a report.

Based on this report certain guidelines were formed to indicate the scope and
category of sectors. However, there was not specific targets were fixed in initial days, but in
November 1974 the banks were advised to keep targets of aggregate advances to the level
of 33.33 percent by March 1979.

Again, during another meeting held by Union Finance Minister with the Chief
Executive Officers of all public sector banks which held on March 1980 has decided to raise
the proportion to 40 percent by March 1985 based on the recommendation of a working
group constituted with the chairmanship of Dr. K. S. Krishnaswamy. Committee also
specified on the sub-targets for lending to agriculture and the weaker sections within the
priority sector10.

These guidelines were again revised in 2007 based on the recommendations made
by an internal working group on September 2005 with the chairmanship of Shri C. S. Murthy
and a sub-committee headed by Chairman Shri Y. H. Malegam. These committees
specifically studied the concerns of Micro Finance institutions (MFI) sector to decide on the
priority sector lending.

A latest guidelines, on this regard was made by a committee headed by Chairman M

V Nair constituted by Reserve Bank of India in August 2011 11has made few observations on
classification of priority sectors. It has given clear targets among banks to perform under
Priority sector lending.

Priority Sector includes the following categories:

(i) Agriculture
(ii) Micro, Small and Medium Enterprises
(iii) Export Credit
(iv) Education
(v) Housing
(vi) Social Infrastructure
(vii) Renewable Energy
(viii) Others
 Table 7.1: The Targets and Sub-targets defined by RBI for banks onpriority sector
lending
Categories Domestic scheduled commercial banks and Foreign banks with 20 branches Foreign banks with less
and above than 20 branches
Total Priority 40 percent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off- 40 percent of Adjusted Net
Sector Balance Sheet Exposure, whichever is higher. Bank Credit or Credit
Equivalent Amount of Off-
Foreign banks with 20 branches and above have to achieve the Total Priority Balance Sheet Exposure,
Sector Target within a maximum period of five years starting from April 1, whichever is higher; to be
2013 and ending on March 31, 2018 as per the action plans submitted by achieved in a phased
them and approved by RBI. manner by 2020.
Agriculture 18 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Not applicable
Exposure, whichever is higher.
Within the 18 percent target for agriculture, a target of 8 percent of ANBC or
Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher
is prescribed for Small and Marginal Farmers, to be achieved in a phased
manner i.e., 7 per cent by March 2016 and 8 per cent by March 2017.
Foreign banks with 20 branches and above have to achieve the Agriculture
Target within a maximum period of five years starting from April 1, 2013 and
ending on March 31, 2018 as per the action plans submitted by them and
approved by RBI. The sub-target for Small and Marginal farmers would be
made applicable post 2018 after a review in 2017.
Micro 7.5 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Not Applicable
Enterprises Exposure, whichever is higher to be achieved in a phased manner i.e. 7 per
cent by March 2016 and 7.5 per cent by March 2017.
The sub-target for Micro Enterprises for foreign banks with 20 branches and
above would be made applicable post 2018 after a review in 2017.
Advances to 10 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Not Applicable
Weaker Exposure, whichever is higher.
Sections Foreign banks with 20 branches and above have to achieve the Weaker
Sections Target within a maximum period of five years starting from April 1,
2013 and ending on March 31, 2018 as per the action plans submitted by
them and approved by RBI.
Source: RBI Notifications dt. April 23rd 2015
 As per the targets, 40% by the end of year has to be parked in priority sector
lending. If a bank fails this 40%, suppose it end within this target, the remaining amount as
per target should be invested in Rural Infrastructure Development Fund (RIDF). RDIF is a
government organization operated by NABARD and it fund projects like rural roads,
infrastructure, irrigation, flood protection and mitigation etc. which has intention to support
rural areas.

To secure its citizens social security and benefits, government of India has
introduced various popular schemes time by time. These schemes are well supported by
banking sector through mobilization of required resources. Banking sector has been a
backbone for all such popular schemes in implementation.
 Table 7.2: Some Popular Social Schemes of Central Government since
Scheme
Midday Meal Scheme
National Social Assistance Scheme
Kishore VaigyanikProtsahan Yojana
Swarnajayanti Gram Swarozgar Yojana
Pradhan Mantri Gram Sadak Yojana
Antyodaya Anna Yojna
Sampoorna Grameen Rozgar Yojana
Deendayal Disabled Rehabilitation
Scheme
Kasturba Gandhi BalikaVidyalaya
Rajiv Gandhi Grameen Vidyutikaran
Yojana
Janani Suraksha Yojana
Mahatma Gandhi National Rural
Employment Guarantee Act
GraminBhandaran Yojana
Rashtriya Krishi Vikas Yojana
National Food Security Mission
RashtriyaSwasthyaBima Yojana
The Indira Gandhi MatritvaSahyog Yojana
Pradhan Mantri Adarsh Gram Yojana
Swavalamban
Sabla or Rajiv Gandhi Scheme for
Empowerment of Adolescent Girls
Liberalisation
Launch Year Purpose
1995 Education - Free Lunch for school children
1995 Pension Scheme to unemployed, old age, sickness and d
1999 Scholarship program to encourage students to take up r
careers
1999 Rural Employment - for poor families through Self Help G
(SHGs)
2000 Rural Development - Good all-weather road connectivity
unconnected villages
2000 Under the scheme 1 crore of the poorest among the (Be
Poverty Line)BPL families covered under the targeted pu
distribution system are identified.
2001 Rural Self Employment - Providing additional wage
employment and food security, alongside creation of du
community assets in rural areas.
2003 Social Justice- Equal opportunities for persons with disa
2004 Education scheme for SC, ST's, Minorities and BPL
2005 Rural Electrification & Household Electrification
2005 Mother Care- cash incentive to pregnant women or
institutional/home delivery
2006 Rural Wage Employment- Legal guarantee for one hund
days of employment with minimum wage of Rs. 120 per
2007 Agriculture - Creation of scientific storage capacity with
facilities in rural areas to meet the requirements of farm
storing farm produce, processed farm produce and agric
inputs. Improve their marketability through promotion o
grading, standardization and quality control of agricultu
produce.
2007 Agriculture- Achieve 4% annual growth in agriculture
2007 To increase production and productivity of wheat, rice a
pulses on a sustainable basis
2008 Insurance - Health insurance to poor (BPL), Domestic wo
MGNERGA workers, Rikshawpullers, Building and other
construction workers
2010 Mother Care- A cash incentive of Rs. 4000 to women for
2010 Model Village - Integrated development of Schedule Cas
majority villages
2010 Pension - pension scheme to the workers in unorganised
sector.
2011 Empowering adolescent girls (Age) of 11–18 years with f
on out-of-school girls, Merged Nutrition Programme for
Adolescent Girls (NPAG) and Kishori Shakti Yojana (KSY).
 Swabhiman 2011 Financial Inclusion- To make banking facility available to
citizens
Pradhan Mantri Jan Dhan Yojana 2014 Financial Inclusion - Banking Savings & Deposit Accounts
Remittance, Credit, Insurance, Pension in an affordable
Atal Pension Yojana 2015 Social sector Pension scheme
DeenDayalUpadhyaya Gram Jyoti Yojana 2015 Rural Power Supply Scheme
DeenDayalUpadhyaya Grameen 2015 Rural Development - For rural youth specially BPL and SC
KaushalyaYojna segment of population, in gainful employment through
training programmes
Pradhan Mantri Suraksha Bima Yojana 2015 Insurance- Accidental Insurance with a premium of Rs. 1
year.
Pradhan Mantri Jeevan Jyoti Bima Yojana 2015 Insurance -Life insurance of Rs. 2 lakh with a premium o
330 per year.
SukanyaSamridhi Yojana (Girl Child 2015 The scheme primarily ensures equitable share to a girl c
Prosperity Scheme) resources and savings of a family in which she is general
discriminated as against a male child.
Pradhan Mantri Kaushal Vikas Yojana 2015 Skill Development - train a minimum 40 crore skilled peo
2022
Pradhan Mantri Ujjwala Yojana 2016 Launched to provide free LPG connections to women fro
below poverty line families.
In addition to these national policies, each state in India has its own social policies
time to time. The popularity of the each policy depends on the manifesto what they have
promised to their people. We can review few such popular policies of Karnataka state.
Table 7.3: Some Popular Social Schemes of Karnataka State Governments since Liberalisation

Scheme Launch Purpose

Year
Ganga Kalyana 1997 Irrigation facility provided to the agricultural land through lift irrigation scheme
Scheme
Stree Shakti 2000 Empower women through participation in self-help groups for economy
generation activities
Santhwana 2001 Provide assistance to victims of domestic violence, rape, sexual abuse and
dowry harassment
Mid Day Meals 2002 Free meals for school children
Karnataka 2003 Ensure gender equality and to integrate women in the mainstream of
MahilaAbhivyudhi development
Yojane
Bhagyalakshmi 2006 Objective is to promote girl child birth by giving financial assistance
Niranthara Jyothi 2008 To provide 24 hrs power supply to non-agricultural activities in rural areas
Yojane
Arogya Kavacha 2008 To collect the facts about the emergency and assign the vehicle to provide
relief. To provide pre-hospital care while transporting the patient/victim to the
hospital for stabilization.
ShudhaNeeru 2012 Pure drinking water for rural areas, a campaign to provide purified water at 10
paise a liter
KsheeraBhagya 2013 150ml of hot Milk is given to all children
Yojana
Anna Bhagya 2013 Scheme aimed at distribution of food grains to the below poverty line (BPL)
families at free of cost
Manaswini 2013 monthly pension of Rs 500 to unmarried/divorcee poor women. In this scheme,
Scheme women who are either unmarried or divorcee and fall under the below the
poverty line are eligible for the pension
ShadiBhagya 2013 To provide financial assistance for the backward Muslim women during
marriage. Financial aid of Rs. 50,000 provided under this scheme
 Vidya Siri 2013 accommodation and food expenses for backward class students, who can't
afford to stay in hostels
RunamuktaBhagya 2013 Loan waiver scheme fo SC, ST, backward class and minority
ShaadiBhagya 2013 provide the financial assistance for the backward Muslim women during
marriage
Mytri 2014 Pension scheme for Transgenders
Krishi Bhgya 2014 Aims for efficient management of rainwater to improve agriculture productivity
Surya Raitha 2014 Harness Solar Energy to better Agriculture
Arivu 2014 Financial assistance to religious minority students for higher studies.
SouraBelaku 2015 Aim to provide solar-powered street lights
PashuBhagya 2015 Bank subsidy loan scheme for purchase of cow, sheep, goat, poultry and Pigs for
small farmers
Rajiv Arogya 2015 A cashless medical scheme for APL, where beneficiary pays only 30% of medical
Bhagya expenses and rest paid by government
MukhyamantriSan 2016 To provide free treatment to road accident victims for the first 48 hours in the
twana Harish nearest government or private hospital
Yojana
DantaBhagya 2016 Scheme to provide free dentures and treatment to BPL families aged 58 and
above
AnilaYojane 2017 A free LPG cylinder along with regulator, tube and stove will be provided to the
BPL card holders
7.3 Social Inclusions from Banking Sector in India and Karnataka

According to The World Bank Group Social Inclusion is:

1. The process of improving the terms for individuals and groups to take part in society, and

2. The process of improving the ability, opportunity, and dignity of those disadvantaged on the
basis of their identity to take part in society.

Eradicating poverty and boosting shared prosperity is the aim of any government. One in every
Indian is poor, accounting to 62 percent of total population, out of which 80 percent are living in
rural areas. According to world bank report, India accounts for the largest number of people living
below international poverty line in 2013, with 30 per cent of its population under the $1.90-a- day
poverty measure12.

Government of India has undertaken various measures to increase the level of social inclusion
in India,

Table 7.4: Priority sector lending by different category of banks as on March 2016.
( No. of Accounts in million & Amount in Rupees billion)
Bank Agriculture MSMEs Education Housing Loans to
Category Weaker
Sections
A/c Amt A/c Amt A/c Amt A/c Amt A/c Amt
SBI & 16 2804.09 1 1418.15 1 186.51 2 998.43 15 1595.93
Associate
Nationalised 36 6243.63 9 5922.40 2 406.77 3 1745.26 33 3881.95
Banks
Private 18 2668.57 10 2923.42 0 25.25 1 920.54 24 1361.23
Sector Banks
Foreign 0 65.46 0 287.75 0 0.00 0 35.69 0 40.21
Banks
Total 70 11781.76 20 10551.72 3 618.53 5 3699.92 72 6879.32
Source: Database on India Economy, RBI data wearhouse

Nationalised banks has clear lead in priority sector lending by 54.3% of amount
disbursed among other banks. Lending to Agriculture is still a top priority for nationalized
 banks. Loans for weaker section is another important category which has more money
disbursed.

Table 7.5: Progress under Financial Inclusion Plans in rural India among all
SCBsincluding RRBs

Variable Mar-13 Mar-14 Mar-15 Mar-16

Banking Outlets in Villages – Branches 40,837 46,126 49,571 51,830

Banking Outlets in Villages – Branchless Mode 227,617 337,678 504,142 534,477
Banking Outlets in Villages – Total 268,454 383,804 553,713 586,307
Urban Locations covered through BCs 27,143 60,730 96,847 102,552
Basic Savings Bank Deposit Account (BSBDA) through
101 126 210 238
branches (No. in million)
Basic Savings Bank Deposit Account (BSBDA) through
165 273 365 474
branches (Amt. in Rs. billion)
Basic Savings Bank Deposit Account (BSBDA) through BCs
81 117 188 231
(No. in million)
Basic Savings Bank Deposit Account (BSBDA) through BCs
18 39 75 164
(Amt. in Rs. billion)
OD facility availed in Basic Savings Bank Deposit Account
4 6 8 9
(No. in million)
OD facility availed in Basic Savings Bank Deposit Account
2 16 20 29
(Amt. in Rs. billion)
Kissan Credit Cards-Total (No. in million) 34 40 43 47
Kissan Credit Cards -Total (Amt. in Rs. billion) 2,623 3684 4,382 5,131
General Credit Card-Total (No. in million) 4 7 9 11
General Credit Card-Total (Amt. in Rs. billion) 76 1,097 1,302 1,493
ICT A/Cs-BC Total Transactions (No. in million) during the
250 329 477 827
year
ICT A/Cs-BC Total Transactions (Amt. in Rs. billion) during
234 524 860 1687
the year
Source: Database on India Economy, RBI data wearhouse

There is year on year progress in rural inclusion, many bank outlets being opened in
rural areas. There are targets set to banks to have inclusive growth among both rural and
urban areas. Banks have a network of nearly 40,000 ATM’s in rural sector and growing. 75
percent of these ATMs belong to Public sector banks and rest are private and foreign banks.
White label ATMs, are growing fast in rural areas.
 RBI being the central bank has driven banking sector in India towards achievement
of social inclusion agenda. It has facilitated to implement social inclusion policies through
banks by easing activities and providing necessary directions. Some key initiatives of RBI on
financial inclusion is given below.
1. By mandating banks to get all forms, whether account opening or loan forms to be
printed in vernacular languages, RBI has facilitated to social inclusion a personal activity
for its customers.
2. Facilitating education on financial products to rural areas through intermediaries and
bank correspondents. By 2014 RBI has deployed nearly 2,48,000 correspondents with
3,33,000 outlets which opened 117 million bank accounts
3. Implementation of technology in rural areas through Information and Communications
Technology (ICT)
4. Aadhar linked social benefit transfer through Electronic Benefit Transfer (EBT) which
reduced corruption in availing benefits for needy people
5. Allowing domestic commercial banks to open new branch and operate freely in rural
areas with population less than 50,000with minimum target of 25% branch in rural
areas.
6. Introduced Rupay cads
7. Introduction ofa scheme called Swabhimaan aimed to Financial Inclusion.
8. Opening Ultra Small Branches (USBs) to support rural areas
9. Introduction of Direct Benefit Transfer (DBT) which allows banks to transfer money
directly to beneficiary on various schemes.

Initiatives of SBM and ICICI Bank towards Social inclusion in India

Both State Bank of Mysore and ICICI bank have derived policies towards social
inclusiveness and priority sector lending. Both the banks have their own visionary, aims and
values towards its customers. Financial institutions play a major role in eradicating poverty
and economic development of a country by its services to the masses which majorly include
deprived and under privileged population.
 Rangarajan committee during 2008 defined financial inclusion as, "the process of
ensuring access to financial servicesand timely and adequate credit where needed
byvulnerable groups such as weaker sections and low incomegroups at an affordable
cost13."

Many financial services offered by banks like, loans, insurance, savings bank account by
offering no frill accounts, Kissan credit cards, branch and ATM expansion in rural areas,
mobile banking, change in banking technologies have considerable changed the social
status of under privileged people.However, in order to achieve sustainable growth, India
must attempt to include all its population across societies. Financial awareness and literacy
in banking sector is the most important task for the country for its desired economic
progress. The change is most evident in urban areas, but still real areas are still lacking in
basic banking facilities.

To overcome these challenges the central bank and government constantly making
effort in banking penetration and increasing financial literacy among people in India. Many
policies such as, no frill accounts, simplifying KYC norms, new banking license policy,
extensive use of mobile and banking technologies, credit counselling centers etc have
changed the way banking operated in India. Contributions towards social inclusions have
been made possible through these instruments.

According to the Planning Commission (2009), “Financial inclusion refers to universal

access to a wide range of financial services at a reasonable cost. These include not only
banking products but also other financial services such as insurance and equity products 14”.

So the progress towards branch penetration, credit penetration and Deposit

penetration can be used as measures to check the level of social inclusion.

State bank of Mysore, a privileged bank started in support to benefit the people, has
done many social inclusions polices since inception. The core values of this bank have driven
the agenda to uplift its target segment of people. For understanding purpose, some of the
latest initiatives of bank has been analysed below.

State Bank of Mysore Achievement by 2016

 By March 2016, the total Priority Sector Lending of the bank stood at Rs. 22,388 crs,
showing a year by year growth of 15.4%. Out of this the outlay towards Agriculture
increased by 14.8% from Rs.10,643crs. Bank has surpassed its benchmark of 18% to reach
22% adjusted Net Bank Credit
 A scheme of credit saturation approach initiated to cover alluncovered farmers for financing
their agricultural needs. This is initiated in coordination with NABARD.
 To support distressed farmers, a onetime Settlement scheme has been launched with
providing provision of freshadvance.
 Bank has channelized to provide gold loans for farmers on their various needs.
 Agricultural Knowledge Dissemination Centre (AKDC) at ADB, Mandya is a facilitation
program by SBM to farmers on knowledge sharing which helps to understand latest trends
in agriculture.
 Bank has achieved a coverage of 57.53% in implementation of RupayKissan ATM cards to
eligible farmers
 Credit Enhancement Guarantee Scheme for ScheduleCaste” (CEGSSC) introduced in 2016
with the help of Industrial FinanceCorporation of India Limited (IFCI). This ensures a
guarantee of loan for entrepreneurs from Schedule Castes to the extent of 5 crores.
 Bank has been awarded for its contribution to MUDRAScheme, "Best Bank Awardunder
MUDRA Yojna for Emerging Bank-Runner Up" by CIMMSE, New Delhi
 Devised a financial assistance program for MSME without any collateral forupto 100.00 lacs
 On account of financial assistance to the weaker sectionsof the Society, bank has extended
6,417 crores by March 2016. This constitutes 11.5% as against stipulated benchmarkof 10%
 Assistance to Women Entrepreneurs has touched 4,481crores, covering 2,43,119
beneficiaries, making the target achievement to 8%
 An outlay of 884 crores by March 2016 to improve theeconomic conditions of SCs/STs under
various schemes. The total beneficiaries covered are 1,10,327, which forms 4% of Priority
Sector Advances.
 42,011 beneficiaries with 2117 crores advance for minority communities which forms
9.5%of priority sector advances of bank.
 Under Prime Minister’s Employment Generation Programme (PMEGP)Bank’s credit
assistance stood 68.6 crores by March 2016 covering 1,752 beneficiaries.
 Under National Urban Livelihood Mission (NULM) scheme bank has disbursed 16.1 crores to
798 beneficiaries.
 Bank has funded and established Rural Self Employment Training Institute (RSETI)/ Rural
Development and Self Employment Training Institutes (RUDSETI ) at various locations to
impart entrepreneurial skill development and necessary guidance to unemployed rural
youth. Around 1851 participates trained during FY2016
 SBM is sponsoring Bank for credit of MGNREG wages to the accounts of beneficiaries in
Karnataka State

On the other hand, ICICI bank has shown some contributions towards priority sector
lending. As per the latest report of bank published in March 2015, the priority sector lending
has increased 16.1% compare to previous year from 1,130.07 billion to 1,311.90 billion by
March 31, 2016. The agriculture loans increased from 332.67 billion to 545.84 billion by March
31, 2016, making it to cross 17% against target of 18%. The assistances to weaker sections
increased from 94.89 billion to 204.35 billion by March 31, 2016,which helped reaching 6.3% of
target against requirement of 10% of ANBC. Advances to small and marginal farmers was has
been recorded at 3.9% reaching to 125.51 billion against the requirement of 7% of ANBC. The
allocations to micro enterprises was at 217.85 billion which is 6.8% against the requirement of
7% of ANBC.

However, ICICI bank has made the priority sector lending as an obligation to reach targets
rather a contributional aspect towards society. Though the outlay has significantly increased
time to time with achievement in its target allocations set by RBI, the overall initiatives and
agenda towards rural sector development is missing. The intentions to uplift rural areas
financial inclusion is still missing, the bank branch penetration in rural area is still not seen the
penetration which supposed to be.

The priority sector lending in ICICI bank is not very popular among farmers, the awareness
of various schemes running to support farmers are not so visible to the needy. Bank is not
approachable to people for the lower strata. Just to enter a branch and talk to the concerned
manager for any information itself is a challenge. Most of the informations are available
through website or through call centers and bench encourages its existing or new customers to
use these channels to do business. The technological advances bank strive to achieve is
ensuring the people with technological acumen or educated class tohave business with bank.

Unlike public sector bank State Bank of Mysore, which has more open approach to its
customers, where they can meet any hierarchy of officials in the bank, and mostly the all official
names are very much displayed or disclosed, its easy for any customer to make an attempt to
reach any level of bank official. But private bank like ICICI has more closed approach. It operates
in a mode of corporate setup with global perspectives. It competes with global players. The
focus of bank is more towards increase in market share and be market leader, targets to
increase profitability by which it gives value to its shareholders. Basically, the majority of
shareholders of ICICI bank are its foreign partners. Around 40% of its shares are held by
Deutsche Bank Trust Company Americas and 25% by NRI’s, foreign banks, foreign banks and
foreign nationals. So, bank constitution of 65% is not from India. The shareholders expectation
will be in line with global banks and global trends.Bank has emerged as a trend setter to new
technological innovations in the sector, creating a value chain for its customers to distinct
clearly the benefits to choose and retain with ICICI bank. The customer database is a set of
knowledge oriented individuals or group of organisations, which constantly seek and evaluate
bank on its selling propositions which should be unique. Banks focus and resolutions revolves
towards profitability and reduction in risk, makes it captious towards its advances towards
unprofitable segments of business.
 Table 7.6: Priority sector lending by SBM and ICICI bank as on March 2016

No. of Accounts in million & Amount in Rupees billion

Bank Agriculture MSMEs Education Housing Loans to Weaker

Category Sections
No. Of Balance No. Of Balance No. Of Balance No. Of Balance No. Of Balance
Accounts Outstanding Accounts Outstanding Accounts Outstanding Accounts Outstanding Accounts Outstanding
SBM 1 122.16 0 59.73 0 7.02 0 30.33 0 64.17
ICICI 2 545.84 0 494.30 0 0.35 0 265.65 1 204.35
Source: Database on India Economy, RBI data wearhouse
 Further for study purpose we can look at the lending done by various banks in
Mysore district as a sample, the data collected for both private and public-sector banks.
Mysore district having legacy of royal kingdoms ruled over years, the social policy reach to
uplift rural strata was evident through many schemes by the rulers wodeyars in centuries.
However, the cue of this legacy has been followed till date by various governments over
years.

Table7.7 : Pradhan Mantri Jan-Dhan Yojana implementation among Banks in Mysore District

Sl Number of accounts opened under PMJDY

Bank Name
No (Pradhan Mantri Jan-DhanYojana )
1 State Bank of Mysore 85544
2 Canara Bank 78052
3 Indian Overseas Bank 17932
4 Vijaya Bank 16444
5 Corporation Bank 15736
6 Syndicate Bank 15467
7 State Bank of India 13288
8 Bank of India 7881
9 Karnataka Bank 6317
10 Indian Bank 4009
11 Andhra Bank 2755
12 Union Bank of India 2281
13 IDBI Bank 2234
14 Bank of Baroda 2200
15 Oriental Bank of Commerce 2074
16 Central Bank of India 1510
17 State Bank of Hyderabad 510
18 Punjab National Bank 435
19 Allahabad Bank 431
20 State Bank of Travancore 110
21 Bank of Maharastra 31
22 Kavery Grameena Bank 100930
23 Kotak Mahindra Bank 2431
24 HDFC Bank 1557
25 ICICI Bank 1043
26 South Indian Bank 775
27 Federal Bank 610
28 Karur Vysya Bank 82
Reference from lead bank, Mysore
 It is clear from this sample that public sector banks has lead towards
implementation of government policies. Another indicator of implementation of one more
scheme, Pradhan Mantri Suraksha Bima Yojana given below also signifies the major role of
public sector bank in social inclusion. The State Bank of Mysore leading from front and
private banks like ICICI bank staggering in its approach to social inclusion has clear evidence
to its agenda of social upliftment.

Table7.8 : Pradhan Mantri Suraksha Bima Yojana implementation among Banks in Mysore
District
Sl Bank Name Number of accounts opened under Pradhan Mantri
No Suraksha Bima Yojana
1 State Bank of Mysore 37584
2 Canara Bank 37323
3 Indian Overseas Bank 21395
4 Vijaya Bank 20754
5 Corporation Bank 26190
6 Syndicate Bank 19504
7 State Bank of India 20348
8 Bank of India 2535
9 Karnataka Bank 13504
10 Indian Bank 1843
11 Andhra Bank 3345
12 Union Bank of India 1763
13 Oriental Bank of Commerce 5202
14 Central Bank of India 27
15 State Bank of Hyderabad 347
16 Punjab National Bank 3440
17 Allahabad Bank 889
18 State Bank of Travancore 7
19 Bank of Maharastra 914
20 Kavery Grameena Bank 61236
21 Kotak Mahindra Bank 3070
22 HDFC Bank 180
23 ICICI Bank 14492
24 Federal Bank 220
 Reference from lead bank, Mysore
 Another indicator is implementation of Pradhan Mantri Jeevan Jyoti Bima Yojana in Mysore
district among various banks highlights the role of banks on social inclusion as target.

Table 7.9: Pradhan Mantri Jeevan Jyoti Bima Yojana implementation among Banks in Mysore
District
Sl No Bank Name Number of accounts opened
under Pradhan Mantri
Jeevan Jyoti Bima Yojana
1 State Bank of Mysore 24998
2 Canara Bank 22963
3 Indian Overseas Bank 9539
4 Vijaya Bank 11125
5 Corporation Bank 13478
6 Syndicate Bank 7601
7 State Bank of India 8384
8 Bank of India 1673
9 Karnataka Bank 10279
10 Indian Bank 1415
11 Andhra Bank 483
12 Union Bank of India 1259
13 Oriental Bank of Commerce 1359
14 Central Bank of India 16
15 State Bank of Hyderabad 201
16 Punjab National Bank 1156
17 Allahabad Bank 472
18 State Bank of Travancore 6
19 Bank of Maharastra 468
20 Kavery Grameena Bank 31814
21 Kotak Mahindra Bank 1525
22 HDFC Bank 60
23 ICICI Bank 7543
24 Federal Bank 186
 Reference from lead bank, Mysore

Atal Pension Yojana is one more policy driven by government towards social inclusion has its
result in Mysore district. The banks among public sector have shown commitments in social
inclusion, rather than private banks still lagging behind the agenda.
 Table 7.10: Atal Pension Yojana implementation among Banks in Mysore District
Sl No Bank Name Number of accounts opened under Atal Pension
Yojana
1 State Bank of Mysore 1601
2 Canara Bank 155
3 Indian Overseas Bank 0
4 Vijaya Bank 110
5 Corporation Bank 43
6 Syndicate Bank 1069
7 State Bank of India 9
8 Bank of India 95
9 Karnataka Bank 357
10 Indian Bank 10
11 Andhra Bank 133
12 Union Bank of India 73
13 Oriental Bank of Commerce 29
14 Central Bank of India 0
15 State Bank of Hyderabad 23
16 Punjab National Bank 0
17 Allahabad Bank 26
18 State Bank of Travancore 10
19 Bank of Maharastra 0
20 Kavery Grameena Bank 1422
21 Kotak Mahindra Bank 0
22 HDFC Bank 0
23 ICICI Bank 346
24 Federal Bank 20
 Reference from lead bank, Mysore
Other than these social Insurance schemes of government, one more recent scheme of
Pradhan Mantri Mudra Yojana which is launched in April 2015 is targeted to bring people under
banking ambit. MUDRA means Micro Units Development & Refinance Agency. By this
government wants to each to populations engaged in small business with day-to-day business
needs. This scheme facilitates by credit up to 1olakh to small business owners. There are three
stages of this scheme. Shishu, Kishor &Tarun.
Shishu: this scheme caters to people who just started their business or first time
entrepreneurs. The eligible amount of loan is Rs. 50,000
Kishor: This category of people are already in to business, they may need additional money
to expand or improve their business. The rage of amount offered under this scheme is Rs.
50,000 to 5 lakh
 Tarun:This is the highest level of scheme offered with Rs. 10lakh to support an
entrepreneur.
MURDA is an ambitious scheme which initiates from PMO, to encourage budding
entrepreneurs in India.

Table 7.11: Implementation of MUDRA scheme among Banks in Mysore District

Shishu Kishore Tarun

Sl
Bank Name No of Amount No of Amount No of Amount
No
Accounts Sanctioned Accounts Sanctioned Accounts Sanctioned
1 State Bank of 1091 3.15 1843 38.00 480 36.54
Mysore
2 Canara Bank 2317 7.53 1359 19.67 84 6.26
3 Indian Overseas 1124 1.56 277 4.71 15 1.13
Bank
4 Vijaya Bank 750 3.20 440 8.50 90 5.8
5 Corporation Bank 134 0.51 282 6.03 148 9.87
6 Syndicate Bank 1073 2.44 709 14.52 126 10.02
7 State Bank of
India
8 Bank of India 82 0.27 0 0.00 0 0
9 Karnataka Bank 76 0.25 527 10.24 154 9.53
10 Indian Bank
11 Andhra Bank 116 0.43 93 1.72 19 1.82
12 Union Bank of 43 0.15 59 1.09 21 0.70
India
13 Kavery Grameena 1601 6.51 1363 15.87 19 1.49
Bank
14 ICICI Bank 235 0.78 7 2.34 2 0.12
Amount in Crores
 Reference from lead bank, Mysore
Having seen these statistics, the clear outcome is that public sector banks have really shown
their commitments towards social upliftment in India. the targets given by government to these
banks are taken seriously and implementation activities are being varied put in a structured
manner. However, the willingness of private banks to improve the social inclusion agenda is still
in dilemma. The banks though have better financial stability and growth in comparison to public
sector banks, their involvements in social growth is slow.
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