A PRESENTATION BY DR K.C. CHAKRABARTY DEPUTY GOVERNOR RESERVE BANK OF INDIA OECD Information and Communication Technology driven Financial Inclusion- The Financial Access and Education Challenge
A P R E S E N T A T I O N B Y
D R K . C . C H A K R A B A R T YD E P U T Y G O V E R N O R
R E S E R V E B A N K O F I N D I A
OECD Information and Communication Technology
driven Financial Inclusion-The Financial Access and Education Challenge
Financial Inclusion -Definition
Financial Inclusion: The process of ensuringaccess to appropriate financial products andservices needed by vulnerable groups such asweaker sections and low income groups at anaffordable cost in a fair and transparent mannerby mainstream Institutional players.
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Simple Messages of Financial Education
Why should one save ? Best insurance for income fluctuation
Why open a Bank Account? Benefits of being part of Payment & Settlement System? Why should we borrow within capacity? Credit for
income generating activities. Why repay the loan? Repayment Ethics Why plan your financials? Risk return trade off – Key Message
Simple Messages of Financial Education…..
Do not take risk that you do not understand As and when income levels go up, for more secured and
hassle free life, investments in insurance, capital marke and other products should be explored. Create a mix of instruments in portfolio.
Creating Customer awareness on right to fair treatment and protection
Financial Inclusion- A Global Problem
2.5 billion adults, just over half of world’s adultpopulation, do not use formal financial services tosave or borrow.
2.2 billion of these unserved adults live in Africa,Asia, Latin America, and the Middle East.
Of the 1.2 billion adults who use formal financialservices in Africa, Asia, and the Middle East, atleast two-thirds, a little more than 800 million, liveon less than $5 per day.
(Source: “Half the World is Unbanked”, 2009, Financial Access Initiative)
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Financial Education with Access-We are doing it together
Objective : All villages above 2000 populationbeing given access to basic banking service byMarch 2012 initially. Villages below 2000population to be covered in an integrated manner.Also to provide banking services to entirepopulation residing in Urban and Metro Centers.
TOTAL NO OF VILLAGES ~ 6,38,365
NO. OF VILLAGES > 2000 POP – 72,800
BANK BRANCHES: 84,064; RURAL: 32,494
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Financial Inclusion- Why we failed?
Absence of Technology
Absence of reach and coverage
Delivery Mechanism
Not having a Business model
Rich have no compassion for poor
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Why are we talking of Financial Inclusion Now?
Focus on Inclusive Growth
Banking Technology has arrived
Realisation that Poor is bankable
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Indian Approach
Broad based government-Central Bank commitment to financialinclusion
RBI advised banks to formulate a board approved Financial InclusionPlan (FIP) for the next three years
All banks have drawn up their financial inclusion plans. Currently, theyare under implementation. The plans are being fine-tuned based onground experiences and our discussions with them.
We are putting the financial inclusion campaign into mission modethrough this approach
Indian approach on achieving planned, sustained and structuredfinancial inclusion is spelt out in next few slides
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Technology – Fix it first
All Bank branches must be on Core Banking Solution(CBS)
Front-end devices transactions must be seamlesslyintegrated with the banks’ CBS
Front-end devices must be capable of transacting aminimum of four products
A provision for UID (Unique Identity) number in thesmart card
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Coverage - Transparency
What is meant by Banking Coverage?A village is covered by banking service if either abank branch is present or a BusinessCorrespondent (BC) of the bank is physicallypresent or visiting that village.
BC is an agent of the bank who provides banking services at the door step in unbanked areas through various ICT devices like mobile phones, micro-ATMs etc. He can be an individual, non-profit or for profit organisation.
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Minimum Need – 4 Simple Products
It is not enough to just offer No Frills Accounts*
At the minimum, four banking products need to beprovided for it to qualify as availability of bankingservices.
1) A Savings cum Overdraft Account2) A Remittance Product for Electronic Benefit Transfer and other
remittances3) A Pure Savings Product ideally a recurring or variable
recurring deposit4) Entrepreneurial Credit such as General Credit Card, Kisan Credit
Card
(* A No-Frills Account is one for which no minimum balance is insisted upon and for which there are no service charges for not maintaining the minimum balance)
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Operational Issues
Need for Intermediate Structure Supervision of BCs, redressal of customer grievances Cash Safe, CBS Terminal, Passbook Printing Processing of local applications, monitoring & physical follow
up. Can morph into a full fledged branch of the Bank in future
Going ahead, focus more on opening Brick and Mortar branches , even in villages < 2000 population.
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Other Issues
Urban Financial Inclusion
Should not be lost sight of
Monitoring
RBI to closely monitor
Banks also need to do structured monitoring
What have we achieved during the last year ?
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Financial Inclusion Plan Aggregates
Consolidated FIPSl. No.
Parameter As at end March 2010
As at end March 2011
1 Total Number of villages covered 54,757 99,6232 Villages covered through branches 21,499 22,6673 Villages covered through Business Correspondents (BCs) 33,158 76,6014 Other modes like Rural ATMs, Mobile Van,s etc. 100 3555 Number of villages > 2000 population covered 27,743 53,1806 Number of villages < 2000 population covered 27,014 46,4437 No. of BCs employed by banks 33,042 58,3518 Number of No-Frills Accounts (NFAs)opened (in million) 49.55 74.399 Amount in NFAs (Rs. in million) 48952 6565710 Number of NFAs with Overdraft(OD) facility (in million) 0.14 4.211 NFAs with OD- Amount outstanding (Rs. million) 91 198712 Number of Kisan Credit Cards (KCCs) issued (in million) 19.5 22.4913 Amount outstanding in KCCs (Rs. million) 10,77,366 14,38,62214 Number of General Credit Cards (GCCs) issued (in million) 0.60 0.8815 Amount outstanding in GCCs (Rs. million) 8,189 12,877
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Financial Education Aspects
“Financial literacy is a component of financial inclusion and a necessary condition for bringing a large proportion of the excluded population into the fold of the financial sector.”
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Simple Messages of Financial Education
Why should one save ? Best insurance for income fluctuation
Why open a Bank Account? Benefits of being part of Payment & Settlement
System? Why should we borrow within capacity? Credit
for income generating activities. Why repay the loan? Repayment Ethics Why plan your financials? Risk return trade off – Key Message
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Simple Messages of Financial Education…..
Do not take risk that you do not understand As and when income levels go up, for more
secured and hassle free life, investments in insurance, capital market and other products should be explored. Create a mix of instruments in portfolio.
Creating Customer awareness on right to fair treatment and protection
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Challenges
Access to Banking Services Demographic Spread Literacy Poor Income Digital and Physical Connectivity Large Rural Base Lack of Propensity to Save High Cost of Operations
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Approach to meet Challenges
Multi Agency Approach –Government, RBI, SEBI, IRDA, Banks and other Market Players, Industry Associations, NGOs and other constituents of Civil Society
Multi-disciplinary, Multi-dimensional Approach School Curriculum Campaigns Innovative Dissemination Channels-Films,
Documentaries, Pamphlets, Road shows, etc Training Programmes for bank staff
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Multi Agency Approach– Government and RBI Initiatives
Establishment of Financial Stability and DevelopmentCouncil to institutionalize the mechanism for maintainingfinancial stability. This council’s brief includes focus on financialliteracy and financial inclusion.
Financial Inclusion and Financial Inclusion Technology Fund setup.
We have urged all banks to include criteria regarding financialliteracy and financial inclusion in the performance evaluation oftheir field staff.
Committee to look into customer service in banks for enhancedconsumer protection.
Financial Literacy and Credit Counselling centres by banks.21
Financial Literacy Initiatives by RBI-excerpts
Outreach Programmes: 76 programmes have been conducted across the country focusing on twin
objectives of financial inclusion and financial literacy in which the Governor/Deputy Governors / Executive Directors of RBI participated.
Besides this, more than 150 Outreach programmes have been conducted ason date by the Regional Offices and Offices of the Banking Ombudsman aspart of the Financial Literacy initiatives.
160 remote unbanked villages selected for transformation into model villagescharacterized by 100% financial inclusion through ICT initiatives, leveragingon BCs and BFs.
Release of a book titled ' I can do Financial Planning‘ on financial education.
Organisation of Town Hall events and release of films on financial literacy.
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Key to Success – Collaboration
Governments- Central and State RBI, IRDA, SEBI, PFRDA, NHB and other
regulators Banks, Insurance Companies, MFs , other
FIs and Intermediaries, Industry Associations
NGOs and Consumer Organizations Global Co-operation
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For Financial Access and Education Imperatives to succeed ……
The key is establishing an appropriate Business Delivery Model through the involvement of all stakeholders to make Financial Inclusion a reality
Need to Upscale the Financial Literacy Drive Learning is the key Access to financial services and Financial
Education must happen simultaneously It must be continuous and must target all sections
of the population simultaneously
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Technological Innovation -Composite Hand Held Device
Receipt Generation Slot
Slot to capture thumb print
Slot to insert Operator / Customer card
Arrow Key for starting the device
F button
Operating Model - Customer
Data Collection SystemDemographic DetailsBiometric Details etc.
Issuance of Biometric Enabled Multi-Function Card
Financial TransactionsThrough Field DevicesSingle Device supports
multiple application
Transaction data loadingTo Integrated Core Banking SystemThrough phone line (PSTN)
PHOOLVANTI JOSHI
DoB: 05-AUG-1965D/o: JATINBHAI JOSHINear Railway Stn.V: Jamkhandoli, T: UmariyaD: Jamkhambaliya, P: 398252, Guj
Issued: July 2006
9 0 0 0 0 1 1 9 5 4 5 7 2 2 0 0 0
Thank you
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