final financial inclusion

7/29/2019 Final Financial Inclusion

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FINANCIAL INCLUSION

A ROAD INDIA NEEDS TO TRAVEL

PRESNTED BY

ABODHA KU. SWAIN

ASISH RANJAN PRADHANSAMBIT KU. PANI

JAGDISH BEHERA

SATYAJIT MISHRA



Financial exclusion is the lack of access by certain

consumers to appropriate, low cost ,fair and safe

financial products and services from mainstream

providers.

Financial Exclusion



(a) people who do not have any access to a

regulated financial system;

(b) people who have limited access to

banks and other financial services; and

(c) individuals who have inappropriate

products .

There are three types of exclusions :



Financial Illiteracy

Financial Discrimination

Financial Exclusion

Stages of Financial

Exclusion

Financial

Exploitation



1. Poor

2. Socially under-privileged

3. Disabled4. Old as well as children

5. Women

6. Uneducated

7. Ethnic Minorities

8. Un-employed

Who are Financially Excluded ?



Inaccessibility, distance and lack of proper

infrastructure hinder financial inclusion

Lack of Banking habits, high transaction cost, lack of

banking knowledge and insufficiency of knowledge on

banking products prevents the unbanked people from

knocking the door steps of banks.



Financial exclusion means :-

No Bank

account and

No assets

No access

to money

advice

No

Savings

No

Insurance

No

affordable

credit



Most needed Services for Financially Excluded

1. Access to Small loans or overdrafts

2. Small Savings Products

3. Insurance4. Credit Card

5. Entrepreneurship credit



2.5 billion adults, just over half of world’s adult population, do not

use formal financial services to save 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 financial services in Africa,

Asia, and the Middle East, at least two-thirds, a little more than 800

million, live on less than $5 per day.

Extent of Financial Exclusion -Global



In India, almost half the country is unbanked.

Only 55 per cent of the population have deposit accounts

and 9 per cent have credit accounts with banks.

India has the highest number of households (145 million)

excluded from Banking.

There was only one bank branch per 14,000 people.

Extent of Financial Exclusion -India



6 lakh villages in India, rural branches of SCBs including

RRBs number 33,495. Only a little less than 20% of the population has any kind

of life insurance and 9.6% of the population has non‐life

insurance coverage.

Just 18 per cent had debit cards and less than 2 per cent

had credit cards.

Cont…



Absence of Banking Technology

Absence of Reach and Coverage

Absence of Viable Delivery Mechanism

Financial Exclusion –Why did We Fail?



Focus on Inclusive Growth

Banking Technology has arrived

Realisation that Poor is bankable

Why Are We Talking of Financial Exclusion

Now?



Definition of Financial Inclusion

Financial Inclusion is the process of ensuring

access to appropriate financial products and

services needed by all sections of the society in

general and vulnerable groups such as weaker

sections and low income groups in particular at an

affordable cost in a fair and transparent manner by

mainstream institutional players.



In an advanced economy , financial inclusion is

more about the knowledge and fair and

transparent financial products and a focus on

financial literacy.

In emerging economics , it is a question of

both access to financial products and

knowledge about their fairness andtransparency.



WHY FINANCIAL INCLUSION

Since a long time finance was not recognizedas a factor for growth and development.

It is now attributed as the brain of aneconomic system and most economics strives

to make their financial system more efficientand research shows that financial inclusion isimportant for an economy

RELATIONSHIP BETWEEN FINANCIAL



RELATIONSHIP BETWEEN FINANCIAL

INCLUSION AND DEVLOPMENT

INDICATOR• Economic growth follows financial inclusion. In order toachieve the objective of growth with equity, it isimperative that infrastructure is developed withfinancial inclusion.

• savings and credit accounts - indicators of financialinclusion.

• per capita income - indicator of economic development

• Electricity consumption and road length -indicators of infrastructure development.

• All the above influence economic development whichfollows adequate financial and credit facilities



BENEFITS OF INCLUSIVE FINANCIAL

GROWTH

• Growth with equity : In the path of super power wethe Indians will need to achieve the growth of ourcountry with equality . It is provided by inclusivefinance.

•

Get rid of poverty : To remove poverty from the Indiancontext all everybody will be given access to formalfinancial services . Because if they borrow loans forbusiness or education or any other purpose they getthe loan will pave way for their development .

• Financial Transactions Made Easy : Inclusive financewill provide banking related financial transactions in aneasy and speedy way .



• Safe savings along with financial services : People willhave safe savings along with other allied services likeinsurance cover , entrepreneurial loans , payment andsettlement facility etc,

• Inflating National Income : Boosting up businessopportunities will definitely increase GDP and whichwill be reflected in our national income growth .

• Becoming Global Player : Financial access will attract

global market players to our country that will result inincreasing employment and business opportunities



FINANCIAL INCLUSION SCOPE

Financial Inclusion should include access tofinancial products and services like,

Bank accounts

Immediate Credit

Savings products

Insurance - Healthcare

Financial advisory servicesEntrepreneurial credit



Financial Inclusion – Steps Taken in the

Past

• Co-operative Movement

• Nationalisation of banks

• Lead Bank Scheme

• RRBs (1975)

• Self Help Groups



What has been done so far?

• ICT based Business Correspondent (BC) Model for low cost door

step banking services in remote villages .

• Board approved Financial Inclusion Plans (FIPs) of banks for 3 years,

starting April 2010 .

• Roadmap to cover villages of above 2000 population by march 2012• Mandatory opening of 25 % of new branches in unbanked rural

canters.

• KYC documentation requirements significantly simplified for small

accounts..

• Pricing for banks totally freed . Interest rates on advances totally

deregulated.



• Introduction of financial inclusion fund(FIF)

• Introduction of financial inclusion technology

fund(FITF)

• UID

• Financial inclusion plan (FIP)

•

RRB were CBS enabled



Launched to educate and motivate people to

open account . Under this scheme banks will

get Rs.140 on opening of every no frill account

Govt. expecting that 73000 house holds will get

benefited in 2011-2012



INDEX OF FINANCIAAL INCLUSION

It is a measure of inclusiveness of the financial

sector of a country/ region.

It is constructed as a multidimensional index

that captures information on various aspects

of financial inclusion such as banking

penetration, avaibility of banking services and

usage of banking system.



Approach adopted by

• RBI has been undertaking financial inclusion

initiatives in a mission mode



Continued…

1.Relaxation on know-your-customer (KYC) norms What is KYC???

2. Opening of no-frills accounts

What is no frill account???

3. Engaging business correspondents (BCs):

What is BC model???

4.Use of TechnologyWhat is UHD???

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Continued… 5. Adoption of EBT

6.Opening of branches in unbanked ruralcenters

7. Banking services in unbanked villages witha population of more than 2,000

8. Financial inclusion plans of banks for threeyears: RBI

Financial Inclusion Plan???



Role of other Financial Institutions

• COMMERCIAL BANKS

• 1.SBI• 100% achievement in Andhra Pradesh

• Bank on Bike

• Population below 2000

• 2.PNB•

PNB has adopted branchless banking model supportedwith smart card based technology

• Six RRBs sponsored by PNB



3.CBIWorking with odisha government

4..YES bankWith NOKIA

5.SYNDICATE bankTarget of 1620

6.ICICI BANK

Merged with Bank of Rajasthan

• NABARD

FIF

FITP



SBI No Frills Saving Bank Account

Eligibility: Individuals of 18 years and aboveearning a gross income of Rs.5000/- p.m or less.

Mode of operation: Single/ joint

Minimum balance: NILInitial deposit amount: Rs.50/- to open

the account

Cheque facility: Available.

Internet Banking facility: Not available

Pass book: Will be issued



ISSUES AND CHALLENGES

1.Spatial Distribution of Banking Services

2. Regional Distribution of Banking Services

3. Bank Branches

4. Poverty levels

5. Overcoming Bankers’ Aversion for Financial Inclusion



MAJOR ROADBLOCKS TO FINANCIAL

INCLUSION

Poverty

Ignorance

Environment

Cultural and psychological barriers



CASE STUDIES OF

FINANCIAL INCLUSION

INITIATIVE



DRISHTEE Model of BC

A tri partite agreement by

DRISHTEE with a for profit

technology company A Little

World (ALW) and leading Public

sector and Private sector Banks.



Problems Faced by the Model

• Network Problems In Rural Areas

• BCs getting demotivated by low income

• People more interested in obtaining credit

instead of savings

• Resistance from local bank’s branch manager



IIBF: Capacity building of BCs

• Course Objectives:

1. Role / functions of banks

2. Basics of banking operations and procedures

3. Role / functions of BCs or BFs

4. Financial Advising and Counseling

5. Various forms and documents used in banks

• NABARD support to IIBF course



Suggestions

• Simplify Procedure

• Addressing Social Issues

• Financial Education and Consultancy

• Business Innovation



CONCLUSION

Banking on the poor can actually be a rich

banking proposition. Financial inclusion is a

win-win opportunity for the poor, for the

banks and for the nation. It is for the banks toconvert what they see as a dead-weight

obligation into an exciting opportunity and

move on aggressively on financial inclusion.

final financial inclusion

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