ANDHRA PRAGATHI GRAMEENA BANKHEAD OFFICE::KADAPA

PLANNING & DEVELOPMENT DEPARTMENTCir No: 211-2011- BC-PDD Date: 17.08.2011

IMPLEMENTATION OF FINANCIAL INCLUSION IN THE BANK-ADOPTING OF COMPREHENSIVE GUIDELINES.

Inspite of large Banking network across the length and breadth of the country, the Banking facilities did not reach a sizeable chunk of population of the country, even after 42 years of Nationalization.

The Banking outlets are available in only 30000 out of 625000 villages in the country. The uncovered people are concentrated mainly in farming community, daily wage earners, petty traders etc.,

As a policy initiative to take care of the financial requirements of those who were hitherto deprived of formal Banking services, Government of India, through the Banking sector, is implementing Financial Inclusion Programme throughout the country.Financial Inclusion is a process of ensuring access to financial services, timely and adequate credit, when needed by vulnerable sections of the society such as weaker sections and low income groups, at affordable costs.Banking sector is a key driver of inclusive growth since integrated financial services such as affordable credit, remittance, savings, etc, are available under one roof. In fact, any person can have access to the banking services by opening a "No Frill Account", which should pave the way for delivery of entire gamut of financial services essential for economic welfare.The initiative of Financial Inclusion began in our Bank in the year 2010, with the allotment of 546 villages having population of above 2000, for coverage under Financial Inclusion to be completed before 31.03.2012. The Bank, initially, planned to engage, appoint and monitor the Business Correspondents. However, keeping in view the intricacies which may crop up during the process of implementation, the Bank floated RFP on 16.03.2011 under End to End modal (to provide both technical as well as BC services) and after undergoing the required process, has finalised “M/S HCL Infosystems Limited” as Technology Service Provider for implementation of Financial Inclusion in the Bank. The said company is expected to provide the technology services besides appointing, Training, maintaining and managing the Business CorrespondentsThe Bank has chosen the Brick & Mortar modal (By opening a Branch in the FI village) and Business Correspondent modal (By appointing a suitable person as BC in the FI village) for implementation of Financial Inclusion. The implementation of Financial Inclusion is progressing briskly in Kadapa and Prakasam districts. The implementation in Nellore, Kurnool and Anantapur districts will be taken up simultaneously.The Bank has issued guidelines to the branches on implementation of Financial Inclusion vide Cir No. 125-2010-BC-PDD, dated. 27.05.2010.

In the meanwhile, many developments have taken place and various systems and procedures have come in, with regard to the implementation of Financial Inclusion Plan. It has, therefore, become necessary to issue comprehensive guidelines to the branches/Offices putting in place various systems and procedures to be adapted for the implementation, Monitoring and regulating the process of Financial Inclusion Plan in the Bank. Accordingly, in order to give a clear perspective of various facets of Financial Inclusion to the branches and Administrative Offices, detailed guidelines have been prepared, incorporating all the important and latest developments of FI including the Grievance Redressal Mechanism, Monitoring Mechanism and weight-age while assessing the performance of the staff concerned, and the same are furnished in the Annexure enclosed to this circulator.All the Branches and Administrative Offices are advised to go through the contents of this circular, understand the need for timely implementation of the Financial Inclusion Plan in the Bank as directed by the RBI/GOI and initiate the required measures to accomplish the task.All the branches, to whom the villages in the Financial Inclusion are allotted are advised to identify a suitable person to act as BC (if not already identified) in the allotted FI village/s and communicate the same to the respective Regional Offices before 22.08.2011. However, the final selection/appointment of the person as BC shall be done by the Technology Service Provider only.Clarifications, required on this circular may be had from the Planning and Development Department, Head Office, through the respective Regional Office, as per extant guidelines.

(K.PREETAM LAL) CHAIRMAN

ANNEXURE Details of Financial Inclusion Programme:

1. BACKGROUND:Despite rapid expansion of banking network over the last 4 decades, there is vast majority of people in our Country who do not have access to basic banking services resulting in financial exclusion. A number of measures were taken in the past 40 years, such as Nationalization of Banks and opening-branches in remote/far flung areas, introduction of Lead Bank Scheme and Service Area Approach, adoption of villages by the Banks, strengthening the Co-operatives, opening Regional Rural Banks, etc. However, considering large geographical area and vast population, the Banking services could not be made available to a large number of villages as could be seen from the following data given by National Sample Survey Organization.

Out of 625000 villages, only 30000villages are covered by bank branches. Out of 203 million Households, 145 million are financially excluded. Out of 89.3 million farmer households, 45.9 million (51.4%) do not have access

to credit from institutional /non institutional sources. Rural India houses 72.2% of population and accounts for only 9% of Total

deposits, 7% of credit and 10% of life insurance business. Only 59% adults have Bank Accounts. Only 0.6% buy General Insurance Policies, 13% have Debit Cards, 2% carry

credit cards.

One of the bench marks employed to assess reach of financial services to the population of the Country is the quantum of deposit account (current and savings) held as a ratio to the adult population. The magnitude of exclusion as above is self explicit.Some countries, also measure FI on the basis of use of specific financial products, such as Debit Cards, Credit Cards, Life Insurance and Home Mortgages.

Reasons for slow take off on FI in the past:Absence of technology, absence of appropriate business models and delivery mechanism were the contributing factors for not achieving financial inclusion. However, increased focus on inclusive growth by Government of India, availability of suitable technology and a greater realization that Poor are bankable, have paved the way for making a serious attempt at achieving financial inclusion.Committees on Financial Inclusion:High Level Committee headed by Smt Usha Thorat, Dy.Governor, RBI, to review Lead Bank Scheme in August 2009, advised Lead Banks to constitute Sub-Committees to draw a road map by March 2010 to provide banking services through a banking outlet in every village having a population of over 2000. Banking services could be provided through any of the various forms of Information &Communication Technology (ICT) based models.

Dr Rangarajan Committee has defined financial inclusion as a process of ensuring access to financial services & timely and adequate credit when needed by vulnerable groups such as weaker sections and low income groups at affordable cost.

2. What is Financial Inclusion?Financial Inclusion implies access to a formal Bank Account that should pave the way for delivery of the entire gamut of financial services essential for economic welfare. FI entails bringing new customers with no credit history into the field of main stream banking by making available banking services in their own village without having to go to a different place which involves cost as well as loss of daily wage.Financial inclusion means connecting all individuals including those living in the remotest of rural areas to a well functioning financial system and would include-Easy access to bank accounts for safe parking of savings.Availability of cheap credit through appropriately designed loans for poor and low income households and small entrepreneurs.Availability of basic financial products like micro insurance covering not only life and death but also crops, assets and accidentsProvide safe money transfers.Provide financial counseling and advice.Provide add on services like agricultural portals.

Diagrammatic description of scope of financial inclusion activity:

3. STEPS IN FINANCIAL INCLUSION : i) Identification of the villages which are not having banking services and unbanked

households through a survey of villages is the first step in implementation of FI. To begin with, villages having a population of 2000 and above have been identified and allotted to Banks by the SLBC in different States. 100% of the households in these villages are expected to be covered by providing banking services before 31.03.2012. Further, all other villages with population of less than 2000 are to be covered before 31.03.2013.

ii) The banking services may be made available either by opening branches or by appointing Business Correspondents / Business Facilitators, so that they aid in opening of No Frill Accounts of all the eligible members of the households and identify their credit needs before the stipulated time.

Selection of a suitable technology and engaging Technology Service Providers (TSPs)

for increasing the scope and reach of financial services.

iii) Promoting financial literacy and financial awareness.

4. FINANCIAL INCLUSION PLAN:

Banks were advised by GOI / RBI that Financial Inclusion Plan (FIP) should be an integral part of their business plans. Further, FIP should have the following components:-

Types of products and services offered Extent of coverage of villages through Brick and Mortar model as well as BC

model. Outline strategies of Bank to cover urban centers.

Adopt to the solutions proposed by UIDAI List of villages and details of BC's village wise. Monitoring mechanism for reviewing progress in implementation of FTP

5. ROAD MAP : Financial Inclusion Plan of the Bank covers the following:i) 546 Villages having population of 2000 and above to be covered by March 2012.ii) 344 Villages (excluding Nellore District) having population of 1000 above and less than

2000 to be covered by March 2013. iii) Total of 890 Villages to be covered by 31.03.2013.

Savings& Investments Based on Household's Level of Financial Literacy & Risk Perception Financial Advice

6. MODELS AVAILABLE FOR IMPLEMENTING FINANCIAL INCLUSION:

RBI has advised Banks to follow any of the following models:

i) Brick & Mortar Branch Model,

ii) Engaging Business Correspondents

The Bank may adopt suitable Technology for implementation of FI from among the available alternatives such as conventional cards, smart cards, common service centers, low cost ATMs, handheld devices etc. No uniform or unique model is ideally suited to the whole country. Therefore, Bank has to choose from a range of available models and adapt any of them depending upon the requirement.

Even though advanced technology is available, there still exists the problem of last mile. Of course, there are alternatives to overcome the last mile problem.

7. TECHNOLOGY AVAILABLE FOR ADOPTION: a) Smart Cards: Features / uses of smart card:i) Smart card is used in Hand Held Machine for deposit and withdrawal of funds from

SB accounts and supports capturing of Bio metric details.iii) It bears the name, address, photo and account number of the account holder,i) It is a contact card of size 32 KB. ii) It holds 10 applications like SB, RD, Loan account, Health Insurance, Life

insurance, vehicle insurance, etc. iii) It can store latest 10 transactions of the account.

Features of Hand Held Machine (HHM)/Micro ATMs:i) Hand Held Machine is 10" x 5" x 3" in size (at present).ii) It consists of display system, Key Board, Finger Print reader and a printer.iii) Smart Card is inserted in HHM, to allow the customer to operate the account.iv) Key board is used for operating the machine.v) Finger Print reader is used for identification of the customer.vi) Display system /monitor show the details of the account, amount debited / credited

to the account.vii) HHM is voice enabled. Whenever the amount is debited / credited to the account

of the customer the HHM echoes the transaction details to the customer in local language.

viii) HHM updates the card with the latest transaction,

ix) Latest ten transactions are saved in the card.

Benefit of smart cards to the account holders:

i) Withdrawal of money from SB account and deposit into SB/ payment of pension / wages at door steps or in the villages in a transparent manner,

ii) Timely payment of pension / wages, iii) Saving of man days for visiting the post office / banks, iv) Saving of transport cost / out of pocket expenses. v) Operation of the account at leisure time. vi) Saving of precious time of the customer, vii) Operation of the account through Bio metric methods for security /authentication

purposes.

Benefit to the Bank by use of smart cards:i) Social objective of the Bank fulfilled.ii) No need for offering counter service to a large number of beneficiaries..iii) Correct identification with use of Biometric methods.'iv) Service at the doorsteps / villages by outsourcing the work to B C.v) Future customers for the bank as a part of financial inclusion.vi) Transactions in HHM are uploaded to the Banks CBS through the server of the

Technology Provider,vii) Checks the malpractices at ground level.

Aspects relating to extending services through Smart Cards:

i) Branch shall furnish full details of the account holder along with address in the format prescribed. Duly attested/scanned photograph of the account holder shall be sent for enrolment.

ii) Finger print of the account holder is captured by the technology service provider using finger print scanner. Subsequently, the embossed card shall be handed over to the account holder against acknowledgement by entering the details in a register to be verified by an officer.

b) Voice Based Mobile Technology: In voice based Mobile Technology, the voice and PIN are taken as authentication for identification of the customer and effecting transaction. Here a specialized mobile telephone is given to the Business Correspondent instead of a handheld machine. The machine asks for a PIN and voice for authentication from BC first and then from the customer. After the transaction is successful, the customer gets a printed receipt and if he owns a mobile, the customer gets a SMS message confirming the transaction.

8. BUSINESS FACILITATORS: Business facilitator model envisages the use of intermediaries / individuals to provide support services for Non financial services of the Bank. The services offered do not involve banking services that are otherwise offered through Business Correspondent model.

BF and EC's are more or less the same and the difference is only in handling cash. A Business Correspondent (BC) can handle cash, whereas a Business Facilitator (BF) cannot handle cash.Activities through Business facilitators include:i) Identification of borrowers;ii) Collection and preliminary processing of loan applications including verification

of primary information/data; iii) Creating awareness about savings and other products and education and advice

on managing money and debt counseling; iv) Processing and submission of applications to banks;v) Promoting, nurturing and monitoring of Self Help Groups/ Joint Liability

Groups/Credit Groups/ Others;vi) Post-sanction monitoring;vii)Follow-up for recovery.

Organizations/Entities eligible to be selected as Business Facilitators: (i)NGOs, (ii) Fanners' Club, (iii) Co-operatives, (iv) Community based organizations, (v) IT enabled rural outlets of corporate entities, (vi) Post Offices, (vii) Insurance agents, (viii) Well functioning Punchayats, (ix) village knowledge centres, (x) Agri Clinic and Agri Business Centres (xi) Krushi Vigyan Kendras (xii) KVIC, KVIB Units (xiii) other individuals approved by the Bank. The Bank has also adopted Business Facilitator Model in implementation of FI vide Circular No. 235-BC-PDD-2010, dated 09.11.2010.

9. BUSINESS CORRESPONDENT MODEL:Advantages: BC Model is a workable option to provide services in hitherto inaccessible areas and help Bank in taking their low value / high volume transactions out of the branch premises and to that extent, there is potential savings in cost. BC model has the potential to speed up the process of FI and bring vast majority of population within the banking fold.

Eligible individuals/entities for appointment as Business Correspondents: The Technology Service Provider (HCL) appointed by the Bank may engage the following individuals/entities as BC.

i) Individuals like retired bank employees, retired teachers, retired government employees and ex-servicemen, individual owners of kirana / medical /Fair Price shops, individual Public Call Office (PCO) operators, agents of Small Savings schemes of Government of India/Insurance Companies, individuals who own Petrol Pumps, authorized functionaries of well run Self Help Groups (SHGs) which are linked to banks, any other individual including those operating Common Service Centres (CSCs);ii) NGOs/ MFIs set up under Societies/ Trust Acts and Section 25 Companies as standalone entities or section 25 companies in which NBFCs,

Banks, Telecom companies and other corporate entities or their holding companies do not have equity holdings in excess of 10%;iii) Companies registered under the Indian Companies Act, 1956 with large and widespread retail outlets, excluding Non Banking Financial Companies (NBFCs).iv) Cooperative Societies registered under Mutually Aided Cooperative Societies Acts/ Cooperative Societies Acts of States/Multi State Cooperative Societies Act;

v) Post Offices andvi) Any individual subject to satisfaction of Bank's BC policy.

The selection of entities as above is subject to due diligence and fulfillment of eligibility conditions.

BC services to different Banks: While a BC can be a BC for more than one bank, at the point of customer interface, a retail outlet or a sub-agent of a BC shall represent and provide banking services of only one bank.

Scope of activities: The scope of activities include (i) identification of borrowers; (ii) collection and preliminary processing of loan applications including verification of primary information/data; (iii) creating awareness about savings and other products and education and advice on managing money and debt counseling; (iv) processing and submission of applications to banks; (v) promoting, nurturing and monitoring of Self Help Groups/ Joint Liability Groups/Credit Groups/others; (vi) post-sanction monitoring; (vii) follow-up for recovery, (viii) disbursal of small value credit, (ix) recovery of principal / collection of interest (x) collection of small value deposits (xi) sale of micro insurance/ mutual fund products/ pension products/ other third party products and (xii) receipt and delivery of small value remittances/ other payment instruments.Activities to be undertaken by BCs would be within the normal course of bank's banking business, but conducted through BCs at places other than bank premises/ATMs.

10 KYC NORMS: Ensuring compliance with KYC and AML norms under the BC model is the responsibility of bank's base branch. Account opening and enrolment process:a) BC has to obtain any one of the documents as specified under the Know Your

Customer (KYC) norms for opening SB Accounts, like, copy of any one of the following documents:i) Voter's identity Cardii) Employee identity Card with photograph and address of the employee (subject to satisfaction of the Bank)

iii) Driving Licenseiv) Pension Book issued by Government of India with photo and full address.v) Freedom fighter's pass issued by Home Ministry of GOI, with photo.vi) Passportvii)PAN Card

b) In case any of the documents listed above do not contain the address of the applicant and in case the address is different for genuine reasons, copy of any one of the following documents may be obtained from the applicant.

i) Telephone Bill / Electricity Bill with full addressii) Municipal tax assessment order / IT assessment order.iii) Rent Receiptiv) Latest Premium paid receipt from any insurance companyv) Current lease agreement / lease agreement for flat / housevi) Consumer gas connection card / bookvii) Certificate from the ward officer maintaining election roll, certifying address of the

applicantviii) Latest Certificate from the Post Office confirming address of the applicant.

c) Simplified KYC norms as applicable to the 'No Frill Accounts' are to be followed for opening accounts Introduction from another account holder who has been subjected to KYC procedure shall be obtained. The introducer's account with the Bank should be at least 6 months old and should show satisfactory transactions. Photograph of the customer who proposes to open the account and also his address needs to be certified by the introducer.

d) Branch should verify the originals of the documents submitted and authenticate the same on the copy of the documents.

e) Whenever the BC verifies the address & photo, an independent verification by the branch is essential to confirm the correctness of photo and address proof of the account holder. However, if such account is opened by obtaining additional introduction from our existing customer for whom full KYC norms have been applied, then in such cases the independent verification by the branch may not be required

f) Customer Confidentiality; Branch should ensure preservation and protection of security and confidentiality of customer information in the custody or possession of BC.

g) Distance criteria: With a view to ensuring adequate supervision over the operations and activities of the retail outlet/sub-agent of BCs, RBI has advised that BC shall be attached to a specific bank branch designated as the base branch. The distance between the place of business of a retail outlet/sub-agent of BC and the base branch

should ordinarily not exceed 30 kms in rural, semi-urban and urban areas and 5 kms in metropolitan centers. Relaxation in distance criteria within the District by the District Consultative Committee (DCC) and involving more than one district by State Level Bankers Committee (SLBC) could be considered on merits in respect of under-banked areas.

11. REDRESSAL OF GRIEVANCES: i) As part of consumer protection measures, Reserve Bank of India has advised Banks

to constitute Grievance Redressal Mechanism within the Bank for redressal of complaints about the services rendered by BC's. Accordingly, Bank has proposed for establishment of a three tier grievance redressal mechanism as follows.

ii) At First Level, Branch Level Customer Grievance Redressal Officer is the Base Branch Manager. The Branch shall ensure display of Name and address of the Branch Manager in BC premises and Branch Manager shall dispose of the complaints received within 15 days.

iii) At Second Level, the Regional Customer Grievance Redressal Executive is the Regional Manager of the Region under whose jurisdiction the village is situated. Name and address of Regional Manager shall be displayed on the notice board in Branch premises. Complaints received at RO shall be disposed of within 15 days.

Third Level of Customer Grievance Redressal Executive is the General Manager (Financial Inclusion) at Head Office, Kadapa, whose name and address are displayed on the Bank's website and on the Notice Board of the Branches and Regional Offices as per the following particulars. If the Grievance of the customer is not redressed within 30 days from the date of complaint either at Branch level or RO level the same may be referred to the Customer Grievance Redressal Executive at HO level (General Manager, FI) who is also the appellate authority.

Sri. P. Adinarayana Reddy,General Manager & Customer Grievance Redressal

Executive,Andhra Pragathi Grameena Bank,

Head Office, KADAPAPH: 08562-222 171. Cell: 9490158001

As per the guidelines, if a complainant does not get satisfactory response from the Bank within 60 days from the date of lodging the complaint, he /she will have the option to approach the office of the Banking Ombudsman for redressal of their grievance.

It may be mentioned here that the beneficiaries of BC services are generally illiterates and are prone to misguidance. At times customers tend to perceive the BC as Bank staff and not as agents functioning on behalf of the Bank. At stake will be the reputation and

standing of the Bank in the eyes of the public, if the BC is either not functioning as per the guidelines or has not been extending Banking services expected of him.

Branch Managers should therefore closely monitor the activities of the BC's and promptly redress grievance of the customers, besides extending prompt and courteous service to avoid complaints.

The Regional Managers during their Branch visits shall look into the Quality and adequacy of customer services being extended by BC's appointed in FI villages and also verify the complaints /deficiencies observed and take immediate steps to redress the grievances.

12. FI PRODUCTS

Providing financial products not necessarily promote inclusion. Such product should result in increased economic activity in the area. Interest should be generated amongst the unreached BPL households about "No Frill Accounts" in such a way that they should voluntarily approach the bank for the product; Access to formal Bank account through NFA should pave the way for the delivery of the entire gamut of financial services essential for economic welfare. Apart from providing the entire range of products available in base branch, the following products are offered to FI customers:

i) FI - PKCC - for meeting the credit requirements for crop production.ii) FI - GCC - for meeting expenses for taking up economic activities - Limit Rs 2000/-iii) FI - RD - For mobilizing micro savings in multiples of Rs.10/- with a minimum of Rs

10/-.

iv) Micro Insurance - Bank proposes to launch a micro insurance product for FI customers with a nominal premium. Negotiations are in Progress with the various Insurance Companies.

13. Training the BCs/Branch Managers and Nodal Officers:To ensure effectiveness of delivery system, Bank is proposing two officers as Master Trainer, one each from Planning and IT departments at Head Office. They will impart training to the staff of the Bank on various aspects of Financial Inclusion.Creating awareness about the importance attached to FI and the roles to be played by the implementing personnel is the focus of these training programmes. Bank has identified one Nodal Officer from each Region and they will be imparted training on Monitoring of Implementation of Financial Inclusion in the Region.The Corporate BC engaged by the Technology Service Provider shall impart periodical Training to BC agents.14. Monitoring Mechanism:

The Bank has designated Nodal Officers at the Regional offices to assist the Regional Manager in monitoring implementation of FI through the branches. The Regional Manager and other officers from Regional Office during their visit to branches having FI villages shall review the progress in implementation of FIP and provide the required guidance. The Regional Managers shall visit at least 30% of FI villages of the Region in a year. RBI has stipulated that 1% of the FI Villages shall be visited by CHAIRMAN and 5% of the FI Villages shall be visited by GM, FI, Head Office, to oversee the implementation of FIP. The Corporate BC engaged by the TSP shall ensure the appointment of BC supervisors according to the need to effective BC services.

15. Assessment of performance of Officers/Executives in FIP implementation

RBI has advised Banks to evaluate the performance of implementing officials while reviewing their annual performance and make suitable entries in their appraisal reports. Accordingly, the Bank proposes the following weight-age for key responsibility areas while assessing the performance of Officers / Executives in implementation of FI programme.

Functionaries Key responsibility areas Weight-age proposed

Branch Managers Achievement of targets under FI Plan consisting of opening of accounts, RDs,, issue of PKCC, GCC, Micro Insurance product and remittances.

40%

Nodal Officer of FI at RO Monitoring and guiding the branches and reaching of target under FI allotted to RO

25%

Regional Managers Achievement of targets under FI plan including opening of branches, appointment of BCs and monitoring their performance

20%

16. Measures for ensuring data security: Smart Card based transactions require two factor authentication and it is in progress in our Bank through the use of physical card with the photograph of the customer on the card and the finger print. Finger print captured and stored in smart card during

enrollment process shall be matched with the fingerprint impression captured on the HHM during authentication process. The message from the Hand Held Device is transmitted through the process of encryption / decryption from the sending and the receiving ends to ensure data security.

17. APPROACH TO BE ADOPTED BY THE BRANCHES TO ACHIEVE TOTAL FINANCIAL INCLUSION:

i) Undertake a quick survey of the village to identify the main economic activities that are being undertaken / having potential. Make efforts to promote viable activities with financial assistance from the branch to eligible persons.ii) Opening of 'No Frill Accounts' covering all eligible members of the households in FI village to be done on a mission mode by taking up door to door campaign so that 100% of the households are covered as per defined time frame i.e before 31.03.2012 for villages with population of 2000 and above and before 31.03.2013 for the rest of the allotted FI villages.

iii) Ascertain details of Government Sponsored Schemes that are in operation in the area and educate villagers about subsidy and margin money benefit available under various schemes of the Government. Special efforts may be made to form SHGs and JLGs. Having regular liaison and rapport with the Government agencies will greatly benefit in getting their support.

iv) Organize awareness camps and group meetings in the village about various facilities available from the Bank such as credit products like FI-PKCC , FI-GCC , FI-RD , inbuilt overdraft facility in the No frill account, micro insurance cover available, etc.

v) Identify the unemployed rural youth and sponsor them for training programmes organised by various agencies free of cost such as RUDESETI and SIRD.

vi) Identify the infrastructural gaps in the village such as school building, approach road, community pond, hospitals, etc and enlist the support and co-operation from Village Panchayat, other Government departments, voluntary agencies in approaching the concerned nodal agencies for making available the same over a period of time such as from MP's- Local Area Development Fund, etc. The role of the branch should be that of an enabler without actually committing bank funds.

vii) Popularize the micro insurance product to cover all No Frill Account holders in FI villages.

viii) Make determined efforts to facilitate inclusion activities that improve economic potential. Reach new customers and expand relationship with existing customers more profitably.

ix) Inculcate the concept of "saving for the rainy day" and to secure their future and guard against uncertainties through insurance.

18. FINANCIAL LITERACY:One of the important components of financial inclusion is promoting financial literacy. Financial Literacy is an integral part of Financial Inclusion. It does not necessarily refer to formal education in finance. Instead it encompasses an understanding of how to use credit responsibly, manage money and savings, minimize financial risks and derive long term benefits of savings. RBI has circulated a model scheme on establishing Financial Literacy and Credit Counseling centers (FLCCs) and the broad features of FLCCs are furnished below.i) To provide financial counseling service through face-to-face interaction as well as

through other available media like e-mail, fax, mobile, etc as per convenience of the interested persons, including education on responsible borrowing, proactive and early savings, and offering debt counseling to individuals who are indebted to formal and / or informal financial sectors;

ii) To educate people in rural and urban areas with regard to various financial products and services available from the formal financial sector.

iii) To make people aware of the advantages of being connected with the formal financial sector;

iv) To formulate debt restructuring plans for borrowers in distress and recommend the same to formal financial institutions, including co-operatives for consideration,

v) To take up any such activity that promotes financial literacy, awareness of banking services, financial planning and amelioration of debt related distress of an individual.

Grant assistance is made available from Financial Inclusion Fund administered by NABARD to support Lead Banks in 256 financially excluded districts and 10 disturbed districts for opening FLCCs subject to the following conditions.i) FLCC is to be located outside the premises of the lead bank of lead districts, ii) Bank may ensure that FLCC's are providing advice to all customers and is bank

neutral, iii) Third party evaluation may be done after two years to evaluate the performance of

FLCC. iv) Duties and responsibilities of FLCC may be prescribed, v) FLCC may have tie up arrangement with telecom providers to give financial

literacy programmes through mobile SMS.vi) FLCC activities may lead to opening of bank accounts and provision of other

financial services, vii) Possibility of having a call centre in the FLCC may be explored,

vii)Sufficient literature in local language may be made available on various products and process. requirements

19. FINANCIAL SUPPORT FOR IMPLEMENTATION OF FI: Based on the recommendations of "Committee on Financial Inclusion" set up by GOI (Dr C Rangarajan), two funds were set up with NABARD, with overall corpus of Rs 500 crores each. The corpus was enhanced by Rs 100 crores each in Union Budget 2010-11. The details of these funds are furnished below:

a) Financial Inclusion Fund (FIF) - For meeting cost and developmental and promotional interventions for ensuring FI. Support will be extended from FIF for opening FLCCs in identified districts for capital as well as recurring expenses for one year. The broad parameters are as under:

b) Capital Expenditure (CAPEX):i) Cost of vehicleii) Cost of furnitureiii) Cost of LCD and laptopiv) Cost of computerv) Public address systemvi) Screen for power point presentationvii) Cost of portable power system

c) Operational Expenditure (OPEXi) Rent of the premisesii) Salary of Staffiii) Electricity chargesiv) Telephone and internet chargesv) Cost of organizing campus / seminars at the field levelvi) Cost of printing and stationery and publications to be used for publicity purposesvii) Cost of conducting Training of Trainers (TOTs) and fees of faculty membersd) Financial Inclusion Technology Fund (FITF) - Assistance is made available for

meeting the cost of technology adoption.Overall corpus Rs 500 crore with initial funding contributed by GOI, RBI and NABARD in the ratio of 40:40:20. FITF will be in operation until 100% FI of rural families is achieved over a period of 5 years.

The FITF shall be used for the following activities / purposes:i) Encouraging user friendly technology solutions;ii) Providing financial support to technology solutions aimed at providing

affordable financial services to the disadvantaged sections of the society;iii) Creating a common technology infrastructure with comprehensive credit

information iv) Funding support to technologies facilitating the documentation for processing of

loans;

v) Providing viability gap / pilot project funding for unproven but potential technological interventions;

vi) Conduct of studies, consultancies, research, evaluation studies relating to technological interventions for financial inclusion;

vii)Promoting seminars, conferences and other mechanisms for discussions, dissemination relating to financial inclusion technological interventions

viii) Publication of financial inclusion technology literature, publicity material, etc

ix) Capacity building of personnel of banks, Post Offices, State Government Departments, MFIs, NGOs, VAs and other stakeholders; and

x) Any other activity as may be approved by the Advisory Board.

20. RBI OUTREACH PROGRAMME:i) Reserve Bank of India as part of its platinum jubilee year celebration during the

year 2009-10 has launched outreach programme involving the top management of the Bank visiting typicallya) Away from Main Roadb) Away from urban influencec) Unbanked villages.

ii) The main elements of the outreach programme are

a) Opening of No Frill Accounts in the selected villagesb) Extend credit and other support servicesc) Financial literacy and financial awareness

iii) As part of this initiative Regional Offices of RBI would associate with Lead Banks in ensuring completion of opening of accounts (NFA) within a year in the village selected under outreach programme.

iv) As part of financial literacy and financial awareness, RBI organizes awareness program involving bankers and public on Banking Ombudsman Scheme, Workshop on exchange of soiled and mutilated currency notes and coin distribution, currency exchange rules, detection of counterfeit notes, quiz for the students of High Schools and Junior Colleges, on the roles and functions of RBI.

v) Banks are expected to conduct the survey of the village in the RBI prescribed format and open No Frill accounts, appoint Business Correspondents and ICT based services such as issue Smart Cards or Mobile based banking services, provide non-credit development assistance and also create awareness among the public about financial literacy and financial education.

SOCIAL SECURITY SCHEMES BEING IMPLEMENTED BY THE GOVERNMENT HAVING RELEVANCE TO FI VILLAGE:

Social security is one of the important dimensions of the development process. It assumes significance where poverty, destitution and income inequalities exist in large measure. While growth is an important precondition for expanding the scope of social security, no less important is the need for adopting special social security policies. In the broader context, social security is needed by all vulnerable groups. The most vulnerable groups consist of those who have neither physical endowments nor financial resources for gainful employment and therefore they do not have the purchasing power to afford a minimum standard of living. A number of measures have been initiated by the Government to provide adequate means of livelihood, raise the standard of living, improve public health, provide free and compulsory education for children etc.

a) National Old Age Pension (NOAP) Scheme:One such scheme of GOI is the National Old Age Pension (NOAP) scheme. With the increase in ageing of the population, old age social security assumes special significance. While there are many policy dimensions of social security, issue of Old Age Security and Pension Funds is of key importance. The pension system has essentially three main goals.i) Prevention of poverty in old age.ii) Provide a savings mechanism that allows individuals to redistribute their

earnings over their life time to avoid poverty in old age. iii) Provision of insurance, in particular the provision of social safety nets, for

those deprived of opportunities to work.

Under the National Old Age Pension Scheme, Central assistance of Rs. 2007- per month is granted to destitute older persons above 65 years. The scheme also covers destitute persons having little or no regular means of subsistence from his / her sources of income or through financial support from family members or other sources.b) National Rural Employment Guarantee Scheme (NREGS):The National Rural Employment Guarantee Act (NREGA) passed by Parliament in August 2005 is a legislation that guarantees wage employment on public works to any adult who is willing to do unskilled manual work, subject to a guaranteed employment for 100 days per ;household per financial year. The objective of the Act is to enhance the livelihood security of the people in rural areas by generating wage employment through works that develop the infrastructure base of that area. The choice of works suggested addresses causes of chronic poverty like drought, deforestation, soil erosion, etc. Effectively implemented, the employment generated under the Act has the potential to transform the geography of poverty. 22. Reporting System / M I S: RBI has prescribed a Quarterly Statement on the progress made in implementation of FI and a copy of the format is enclosed (Annexure-III). This statement shall be submitted by the branches to ROs within 3 days and ROs shall submit a consolidated statement to Head Office, Planning and Development Department, before 7th of the succeeding

quarter. This is a very important statement and time lines stipulated shall be strictly adhered to since the review of the progress is done at the highest level in the meetings attended by the Prime Minister / Finance Secretary / Dy. Governor, RBI.Apart from the above, a Monthly Statement has to be submitted by the branches to ROs. A copy of the format is enclosed (Annexure-IV) and ROs will in turn submit the same to HO: PDD within 5 days from the close of the month.

ANNEXURE-1 CHECK LIST FOR REGIONAL OFFICES: vii.1. Whether the names of SLBC allotted FI Villages and details of FI Plan is made

known to the branches?vii.2. Whether the schedule for coverage of FI Villages is made known to the branches?vii.3. Whether all the Branch Managers and Business Correspondents (BCs) are

sensitized on financial inclusion. If not done, the sensitization programme shall be conducted by ROs.

vii.4. Whether branch-wise, village-wise list of implementing branches and contact numbers of BCs, is available?

vii.5. ROs to make available the operational guidelines for FI implementation to the branches including contact numbers and address of TSPs, BCs and sub-agents.

vii.6. ROs to communicate details of specific FI products for deposits and new customized credit products such as FI-PKCC, FI-GCC, FI-RD, Micro insurance to branches.

vii.7. Whether Micro Insurance Product details are informed to branches along with detailed guidelines. Whether the product awareness/ publicity is arranged.

vii.8. Whether progress made vis-a-vis branch-wise targets in opening No Frill FI accounts is being monitored?

vii.9. Whether monitoring of FI implementation is done by RO regularly at weekly intervals.vii.10.ROs to obtain monthly progress report from branches on FI implementation and take

follow up / corrective action.vii.11.ROs to monitor progress in coverage of villages by BC model and branch model

separately.vii.12.ROs to monitor the working of TSPs and BCs and report to HO: PDD: Kadapa.vii.13.Whether deviations / irregularities, disturbing features in BC working is brought

to RO notice by branches and prompt corrective action taken by RO?vii.14.ROs to put in place adequate control mechanism. Designate Nodal Executive,

Nodal Officer for FI, if not done already.vii.15.ROs to get reports on operational problems in the workings of TSPs in the field

and take up directly with TSPs or escalate it to HO, PDD.vii.16.Whether Pass Books are issued to all FI Accounts including No Frill Accounts?vii.17.Whether inspection and audit of BC outlets is being done?vii.18.Whether tallying of cash and reconciliation of accounts of BC being done and cash

limit fixed to the BCs?

vii.19.Whether surprise visits to verify the cash held by BC is being done?vii.20.ROs to set up Grievances Redressal Cells at ROs and confirm that it is done at

branch level.

ANNEXURE - II CHECK LIST FOR BRANCHES:

1. Branches to familiarize with the FI codes for opening No Frill Accounts and new customized FI products.

2. Branches should be aware of the list/details of villages allotted to them in the first phase/second phase for FI implementation before 31.03.2012 for villages with population above 2000 and before 31.03.2013 for villages with population less than 2000.

3. Branches to provide village profile / prospective customer data to TSPs for coverage.

4. Branches to obtain completed No Frill Account Opening Forms from BCs on daily basis.

5. Before opening accounts, branches shall verify adhere to KYC norms, since KYC compliance is the responsibility of the branch.

6. Branches with the IT support from RO shall open FI accounts under specific codes using the Bulk Account Opening facility.

7. Branches shall maintain contact address and telephone numbers of TSPs/BCs.

8. Branches to keep close rapport with TSPs/BCs and co-ordinate in achieving the expected progress in implementation of FI in the allotted villages.9. Branches to obtain status reports from BCs from the Field and give feedback to RO regularly.10. Branches to assist the TSPs in selection of suitable candidates to work as BCs.11. Branches to co-ordinate with TSPs in organizing sensitization programme for the BCs.

12. Branches to take steps to extend new customized products such as FI-PKCC, FI-GCC, FI-RD to eligible FI Clients and cover all eligible customers under micro insurance.

13. Branches to report the progress in opening of No Frill Accounts and extending GCC/KCC/RD and Micro Insurance to RO at Monthly intervals.

14. Branches to make efforts to solve the operational issues at their level. If it is not possible, the same shall be taken up with TSPs and ROs.15. Branches to ensure to tally the cash withdrawn by BC with the cash held by BC on daily basis.16. Every effort to be made to reach the FI targets and regularly monitor the progress vis-a-vis targets.17. Pass books to FI customers shall be issued invariably.

18. Branches to put in place a Branch level Grievances Redressal mechanism as advised and displayed details on Notice Board.

19. Branches will be responsible to oversee the working of Agent BCs. Any deficiencies shall be brought to the knowledge of TSPs /RO and immediate corrective action be taken.