Presentation by Shri U C Sarangi, Chairman, NABARD

8/7/2019 Presentation by Shri U C Sarangi, Chairman, NABARD

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National Seminar on

Launching a National Initiativefor Financial Inclusion

18 September 2009

U C Sarangi

Chairman

National Bank for Agriculture

And Rural Development


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11th

Plan emphasizes on

Inclusive growth

Growth to which the poor contribute

Growth from which the poor benefit


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Financial inclusion is defined as The process of ensuring access to financial

services and timely and adequate credit

where needed by vulnerable groups such asweaker sections and low income groups at anaffordable cost

---- The committee on financial

inclusion under Chairmanship of Dr C.Rangarajan


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Govt. policy initiatives for inclusive

finance

1904 Cooperative Society Act net work ofprimary credit delivery institutions

1954 Rural Credit Survey Committee,

Cooperation has failed but cooperation mustsucceed

1969 - Nationalisation of 14 major commercialbanks followed by 6 more in 1980 Expansion of the rural banking infrastructure Institutional rural credit provision Lead Bank Scheme Emphasis on priority sector lending

Ongoing policy imperatives for extending financial services in the remote areas


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Financial Inclusion efforts in the past 1975 - RRBs as low cost lending

institutions

to Reach the poorest in credit-deficient areas 1980 - Poverty Alleviation Programes

IRDP

1990s Microfinance SHG movement KCC


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India The Banking System - 1969

Commercial Banks Public Private Total

No. of Banks 8 81 89

Total Branches 6596 1666 8262

Rural Branches

(%Total Branches)

1504

(23)

329

(20)

1833

(22)

% share of agriculturein total credit 2.2 negligible 2.2

+ a large number of small sized cooperative bank


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Reserve Bank of India Government of India

NABARDNABARD

Public Sector

Banks (28)

RRBs (88)

LABs (4)

June 2008

Private

Banks (22)

Rural

Semi-urban

Urban

Metro

Total

18,557

12,776

11,336

10,501

53,190

11,498

2,612

607

63

14,780

1,052

2,468

2,504

2,245

8,269

Foreign

Banks (30)

0

2

50

227

279

TOTAL

31,127

17,858

14,497

13,306

76,518

+ the cooperative banks with more than 12000 branches and almost 100,000 primary

credit cooperatives linked to cooperative banks and now even commercial banks

Banking Network In India


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And still the level of exclusion is nearly 60

percent with marked regional variation

S.No

Social

Group

Households

(000)

% Excluded

1 SC 15592.6 49.77

2 ST 11924.1 63.68

3 OBC 37043.0 48.58

4 Others 24688.4 50.58

5 Total 89248.1 51.36

Occupation wise

Category - % Exclusion

Marginal farmers - 55.00%

Small Farmers - 49.00%

Medium Farmers - 39.64%

Large Farmers - 33.00%

Social Group wise Region wise


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the POOR requires.the POOR requires.Mechanism to keep their limited

resources safely Credit to meet emergencies Credit for micro Enterprise

Facility to receive remittances

Have access toHassle-free

financial

services

So we were

looking forSustainable approaches

Products that match

Needs & capacities and

Reduces transaction

costs and timeand time

Gap Analysis in Financial Services


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Steps taken to move in that direction

Simplifications ofSimplifications of

KYC normsKYC norms

GCC introducedGCC introduced

SLBC identifySLBC identify

Dist. for 100% FIDist. for 100% FI

BC/ BF modelBC/ BF model

Priority sectorPriority sector

redefinedredefined


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RBI took the initiative with its circular in 2005

RBI Annual Policy Statement for 2005-06. The termFinancial Inclusion was explicitly used

for the first time Concerns in regard to the banking practices that tended

to exclude rather than attract vast sections ofpopulation

Implement policies to encourage banks to provideextensive services

Banks urged to review their existing practices to alignthem with the objective of financial inclusion.

November 2005

Banks were advised to open no frills account


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Category March 31,

2006

March 31,

2007

March 31,

2008*

March 31,

2009*

Public Sector

Banks

3,32,878 58,65,419 1,39,09,935 2,98,59,178

Private Sector

Banks

1,56,388 8,60,997 18,45,869 31,24,101

Foreign Banks 231 5,919 33,115 41,482

Total 4,89,497 67,32,335 1,57,88,919 3,30,24,761

Progress of 'No frills' Accounts in

the Banking Sector in India

* Provisional


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FIF and FITF

- Funding Status

Particulars Contribution

(%)

Initial CorpusReceived ( Rs crore)

FIF FITF FIF FITF

GoI 40 40 10 10

RBI 40 40 * *

NABARD 20 20 5 5Total 100 100 15 15*Matching contribution of 40% to be received after disbursements.


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Financial Services

- A holistic approach

Micro Savings

Affordable Credit

Remittance/ funds

transfer

Micro Insurance/

Micro Pension

Financial Literacy

Credit Counselling


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Major initiatives

Advisory committee on financial inclusion constituted Guidelines for support from the fund finalised

Initiatives of several institutions already supported 250 rural household accounts by Commercial Banks and

RRBs every year; targets achieved for 2008-09 Focus on MFIs/ NGOs/ CSOs

Special attention to 268 critically excluded and disturbeddistricts

Dovetailing with other schemesinitiated and implementedby NABARD


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Major initiatives Banks to formulate suitable schemes for

extending financial support for Common

Service Centres Financial Literacy and Counseling Centres Financial Literacy related projects

Capacity Building of BC/ BF Pilots undertaken from FIF and FITF

support


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FI - Road map for Institutions

Financial

Inclusion

Banks/ Co-ops/ RRBs

Loan/ Credit A/c

Saving A/c

Payment &

Remittances

MFIs/ NGOs

Financial

Counselling/

Literacy

Micro Credit/

Saving

Insurance Cos Post Offices

Postal SavingsRemittancesStand Alone

Insurance

BC/BF

BC/BF


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Challenges/ Issues in Smart Card Model

Enrolling the large excluded number Over wide geographic spread

High Maintenance cost Less number of transactions to start with Illiteracy and use of vernacular Product and Service Pricing -

affordability and viability Trust and Acceptance Lack of electricity

Poor telecommunications


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Major Issues

Open standard for card andcost thereof

Smart card v/s plastic card

IBRDT initiative

Revenue generation/Sustainability of BC

Technology Obsolescence capacity building of BC

Regulatory direction

Reducing risk perception


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Other Major Issues

Sec 25 Co. as BC vs. Individual BC

Security/ Confidentiality issues

Common Tender Process for all district level Banks

Reduction in cost of components

Financial viability for RRBs and Cooperatives

Integration with existing systems of Banks

Interoperability/ Open Standard


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Banks InitiativeGovt. Support

Implementation of BC / BF Model

One Bank One District

Supported by Govt. forNREGS, Pension, etc.

Bank's own initiative forFinancial Services

Smart Card/Normal Card/

POS

Incentive by State Govt Possible support from FITF

Service Area of Bank

FI


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Future Strategies

Focus on Demand Side as well through Financial Literacy drive

Certification Program for BC/ BF On the Spot loan appraisal/ sanction/ rating

evaluation through Mobile van system Audio/ Visual display Partnership with reputed and experienced NGOs Sensitization programe through training

establishment

Inclusion of Financial Literacy in schoolcurriculum


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Future Strategies

Integrated approach of FinancialInclusion Projects involving micro insurance schemes

life, asset, accident, health etc Product for part saving of Govt. payments-

NREGP/ Social Security/ Pension

Involvement of MFI sector for FI (Microfinance Bill needs to be prioritised)

Last but not the least Integrate with proposed Unique

Identification Card of GoI.

One

Citizen

One

Card.


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Vision - 2012 Financial Inclusion of all Rural House holds (11.15 cr).

Last mile client should be able to use POS/ Smart Card/

Mobile Financial Services at doorstep of Rural Households.

KCC/ GCC/ SCC to all farmers/ artisans/ landless

labourers

Cash less transaction through cards for all Banking/

Payment transactions


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Vision - 2012 Every person wishing to open a savings account with

the banking system will have an option to do so in his

or her own neighborhood Every no-frills account will have an overdraft facility

thru a General Credit Card

Business Correspondents will support all transactions

for deposits and withdrawals, loan disbursements and

repayments and money transfers, micro- insurance


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Strategy Constitute an authority for National

Mission on Financial inclusion

Draw a road map for replicating thesuccessful pilots

Establish open standards for technology

to be used Source BC from diverse streams to get

at the required number


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Strategy Undertake a massive program for financial

literacy and credit counselling

Dovetail Govt. payments under variousprograms through bank accounts Strategic action plan for remittance facility

both inter bank/intra bank and post office

Implement a time bound plan for training ofBC

Include PACS and SHGs as BC


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Presentation by Shri U C Sarangi, Chairman, NABARD

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