Economy: 6 pillars + theory + current + BES17 (pre cum Mains)

1.Banking, Fin, 2.Budget 3.BoP

Insur. • V1:c2,3, 6,9,11(GST),13 • V1c:5
Banking,
• V1:c3,4 Finance, Insurance, Fin.
Inclusion

4.Sectors 5.Infra 6.HRD

• V1c:7,11(Agri) • v1c:12, 14; Budget^Rail • V1c:10
 insurance
Loans
e,
om es
Inc sidi nts
b e
Su em
titl
En

Pension
Old age
 Financial inclusion | वित्तीय समोवेशन: 4 Pillars

Credit
Banking

Investme
nt Insurance
• Small • PM SB,
Savings, JJ
• Pension
Post independent India: Banking Penetration (non-exhaustive)
Nationalization of Banks
(‘55, ‘69, ‘80)

‘61: DICGC Act

’66: Cooperative Banks under

RBI’s Ambit

‘69: Lead Bank Scheme

‘ 71: State level Bankers’

Committee

‘76: Regional Rural Bank (RRB)

Banking measures for financial inclusion: Timeline in Recent Years

2005: RBI 2011: Swabhiman

permitted no- 2006: RBI to increase
frills account with permits BCA banking presence
zero balance in rural area

2013: eKYC 2014: JDY, new 2015: SFB, PB <

permitted Pvt.CB, BMB LINK>

2016: IMPS,
BHIM & other <
LINK>
 Genesis of Jan Dhan Account?

NACHIKET 6 Vision Statement

points
Bank account A UEBA by 1/1/2016
15 minutes walking
distance (400)
Access to bank Payment Banks
Small Finance Bank

Nachiket Mor
Member of RBI Board
Committee on Financial
inclusion (2014)
FinMin: Dept of Financial services: PM-JDY: 6 pillars x 2 phases
Phase-I: 15 August 2014-15

Financial literacy Banking within 5 kms Account for every family

• Sub service area SSA @1-1.5k with 5k overdraft, Rupay
households with Bank mitra/ Card
Bank
Phase-2: 2015-18

Credit guarantee Fund DBT Micro insurance,

• Overdraft defaults Unorganized pension
What exactly is Jan Dhan Account?

Basic Savings Bank Deposit Account

(BSBDA)
• Age 10/>
• Zero balance. But, Chequebook only with
“balance”.
• Max. 4 withdrawals / month (incl. ATM)
• Overdraft only with balance history of min. 6
months.
Overdraft (1 per family)
• Only one account holder in household (preferably
woman)
• Min. 6 months history: 4x the or 5k whichever
lower.
• Interest: Base rate+2% or 12% whichever lower.
• Tenure: max. 3 years
 EVERY Jan dhan account comes with
Insuran Premiu
Who?
ce m
But, Rupay should be used every 90 days
[initial rule 45 days] - even for checking
balance, if not for transaction. All
Accident eligible-
NPCi
Rs.1 lakh hubby,wif
e
If opened
Life 30k Govt by
31/1/15
Union Government employees, and income tax payers not
eligible
 Jan Dhan accounts of a family

5k Overdraft*
A.insurance*
LPG subsidy..
MNREGA..
MNREGA
A.insurance
*
overdraft

Scholarship
A.Insurance
*
Overdraft
GSM4: will you do it not, if pressure from above?
Paper Ans. No. <But real life PSB bank manager, will have to do  else
punishment transfer in “खोपचे वाला” village, So what’s the point of GSM4!?
• Predicted
2008
Subprime • Happened
crisis
(IMF)
2005
BCA “Bank Mitra”
model 2%

• Multiple accounts 2016 commission,

misconducts by RBI
for free insurance
• Smurfing using
• Happened during report. 47%
demonetization. untraceable.
Money mules
• Money
Laundering
2014
 Hawala Operators
30 0 0
,6 00 ,0
30
Western Union
Bank Transfer – charges
Illegal migrant..US Bank?
Income Tax

What if they
don’t have
account?
 Jan Dhan Money Mules and Smurfing?

Money Mules
to r s
p era
wa la O
Ha

0 0 00
00 00 10
0
30 10 10
,60
0

“Smurfing” : hawala operators would spilt the

whole amount into several small units beyond the
threshold using several Jan Dhan account holders
as money mules.
 >50k, source of deposits will be
verified.

Money Mules

ck ack a ck
+ withdrawal limit of 10k per Bl
a
Bl Bl
month
Aadhar linking of JDY…DATA
analytics
Jan Dhan for money-laundering post-Dem? (Rs. Crore)

9 x 87100
.
1 e
ris

45000

Before Dem Post Dem

 News after two months!!

Mainly 9 Tricks were used: SBN: total 15

1.Backdated FD in lakh Rs.54,0
cr.
cooperative banks (soln: 00 cr
CBS between PACS & D 97% black
CCB returned money
) destroye
2.Jan Dhan Money mules d
(Soln: Aadhar Seeding)
There are 7 more...<Black
Google gives you free account, then how does it make
money?
 SBI monthly average balance (MAB) WEF 1/4/2017
Cross MAB Stopped in 2012 to get new
subsidization customers
Area MAB Penalty (+ service tax
extra)
Metro 5,000 • Rs.50: (if upto 50%
below LAB)
• 100 (if 75% below
MAB)
Urban 3,000  
Semi- 2,000  
Urban
ZERO Balance account, Rural Limits on cash deposit,
1,000 20-50
“1 rupee account” but withdrawal, locker usage [else
CBS – data, server, extra charges ]
documents
 Financial inclusion | वित्तीय समोवेशन: 4 Pillars

Credit
Banking

Investme Insuranc
nt e
• Small
• PM SB,
Savings,
• Pension JJ
Financial Inclusion: Loan / Credit <list not exhaustive>
• Farm loans: NABARD refinance, 3%
subvention by Department of financial
ISS services.
• Affordable Home Loans (PM-Awas Yojana-
Urban. more in infra lecture)
• 40% SCB | 75% on RRB & SFB
PSL- RBI • BMB: loans without collateral to women <
<LINK>
MERGED>
MUDRA • Shishu, Tarun,Kishor upto Rs.10 lakh <
Yojana (Dept Link>
of • Credit (+) approach = training also given.
Fin.Services)
• Each bank branch to give 10k to 1 cr. Loan
Stand up
to 1 SC/ST and 1 Women for green-field
India (SIDBI)
non-farm.
Padho • Edu Loan scheme for Minorities by
Pardesh Minority Affairs Ministry
List is not exhaustive, since fifty dozen loan schemes
from women, weavers to exporters. But these are
 Financial inclusion | वित्तीय समोवेशन: 4 Pillars

Credit
Banking

Investme Insuranc
nt e
• Small
• PM SB,
Savings,
• Pension JJ
 Small Savings Schemes: TOTAL 8 (Dept of Economic
Affairs)
• Post Office schemes: monthly,
Govt savings
bank act
4 5 year, savings, time deposit
[1873]
Government • National Savings Scheme
Savings Certi 1
act ‘59 (NSC) ‘ 59
• Public Provident Fund (PPF) ;
PPF act 1
68
Govt savings
bank act 1 • Senior Citizen Savings 2004
Government
• Kisan Vikas Patra 1988-11,
Savings Certi
1
act ‘59 2014
• Sukanya Samriddhi Yojana
No act &
(BBBP)
National Savings Institute, Ministry of Finance (DEA),
Nagpur
Money goes to national small savings fund (NSSF)

• SSS offer high interest rate (9%)->

expensive for states to borrow.
• 1/4/16: only selected states can
borrow: Arunachal Pradesh, Delhi,
Kerala and Madhya Pradesh [with
caveats]
• Deposited money to union
borrowing. + one time lending to
 Directorate Small
savings, via post
office
8 years 4
months
 t ( 9. 1.%
e int e res
l ta x fre %)
Ann ua tly 8 . 4
p r es e n

Enrollment: 0-10 Deposit 50% 100%

withdrawal withdrawal
years only after 18 age @21 (or
Annual deposit: upto 14 (if not before 21 if
1k to 1.5L
Sukanya age.
Samriddhi Yojana married)
2015 [Dept of Economic Affairs)
married
decides interest]
 SBI: 5 year term-deposit

Nominal Minus Real Interest

Year
Interest Inflation Rate

9.25%
2012 -11% -1.75
SBI
7.00%
2015 -5.4% +1.6
SBI
8.7%
2015 -5.4% +3.3
KVP
Finance ministry -> dept of Economic affairs-> quarterly update

Inflation controlled-> even if nominal interest ▼ still real interest

=/▲
Align with bank deposit rates => monetary policy transmission.
 Financial inclusion | वित्तीय समोवेशन: 4 Pillars

Credit
Banking

Investme Insuranc
nt e
• Small
• PM SB,
Savings,
• Pension JJ
NEXT: “Social Security”