Risk Management For Financial Inclusion With Special Reference To Banks

SUMMARY

Introduction OperationalRisk Credit Risk Conclusion

The possibility of suffering harm or loss; danger The variability of returns from an investment.The chance of nonpayment of a debt.

HOW MANAGEMENT IS ATTACHED TO IT?

Every business faces risks that could present threats to its success.

Risk management focuses on identifying what could go wrong, evaluating which risks should be dealt with and implementing strategies to deal with those risks.

Businesses that have identified the risks will be better prepared and have a more cost-effective way of dealing with them.

OPERATIONAL RISK

Fraud.

Employment Practices andWorkplace Safety.

The risk of lossresulting from

inadequate or failedinternal processes,

people and systems, orfrom external events.

Clients, Products andBusiness Practices.

Damage to Physical Assets.

Business Disruption andSystem Failures.

Execution, Delivery andProcess Management.

CREDIT RISK

Risk due to anuncertainty in acounterparty’sability to meetits obligationsin accordancewith agreedupon terms.

• Loans.• Acceptances.

• Interbank transactions.• Market risk

• Forex transactions• Futures contracts

• Swaps• Equities

OTHER KEYS OF SUCCESS

A positivecorporate Effective useculture. of technology.

Actively Respect theobserved regulationspolicies and from theprocedures. Financial

ServicesCommunity

FINANCIAL INCLUSIONa. Financial Inclusion is defined as “the process of ensuring access to

appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair and transparent manner by mainstream institutional players.” RBI CIRCULAR 12.08.2011

b. Approach is based on the fundamental principle of 5A’s of ensuring i. Adequacy and ii. Availability of financial services to all sections of the society

through the formal financial system covering savings, credit, remittance, insurance, etc. and, at the same time,

iii. increasing Awareness of such services and iv. ensuring Affordability and v. Accessibility of the appropriate financial products

• through a combination of conventional and alternative delivery channels and technology enabled services and processes.

WHY FINANCIAL INCLUSION?a. Out of total 1065 million population, 514 million are

female.b. Out of 6,00,000 rural habitations across the country, only

30,000 rural habitations have commercial Bank Branches c. 60% of the population do not have Bank Accounts and life

insurance cover is less than 10%d. 51.4% of the farmer households are financially excluded

from both formal and informal sourcese. Out of the total farmer households,

a. 27% access formal sources of credit b. 73% of the farmer households access funds from informal

sources like local money lenders

FINANCIAL INCLUSION CONCEPT RELATED OR INTERELATED TO EACH

OTHER

AN EXAMPLE OF ORIENTAL BANK OF COMMERCE

Financial Inclusion – Who are these People?

Underprivileged section in rural and urban areas like, Farmers, small vendors, etc.

Agricultural and Industrial LabourersPeople engaged in un-organised sectorsUnemployed Women ChildrenOld peoplePhysically challenged people

Financial Inclusion – Steps Taken

Co-operative Movement Setting up of State Bank of India Nationalisation of banks Lead Bank Scheme RRBs Service Area Approach Microfinance Institutions Self Help Groups

Financial Inclusion – Why Have We Failed?

Absence of TechnologyHigh incidence of IlliteracyAbsence of reach and coverageDelivery MechanismNot having a Business modelRich have no compassion for poor

There is NO

Iin the Team