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Financial Inclusion in India  Presentation Transcript

1.FINANCIAL INCLUSION IN INDIA

2.Financial inclusion Definition The process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost” - The Committee on Financial Inclusion (Chairman: Dr. C. Rangarajan, 2008)

3.Financial Inclusion - Scope Financial Inclusion should include access to financial products and services like, Bank accounts – check in account Immediate Credit Savings products Remittances & Payment services Insurance - Healthcare Mortgage Financial advisory services Entrepreneurial credit

4.Underprivileged section in rural and urban areas like, Farmers, small vendors, etc. Agricultural and Industrial Labourers People engaged in un-organised sectors Unemployed Women Children Old people Physically challenged people

5.Coverage of (Estimates based on various studies and Market Surveys): Check in accounts - 40% Life Insurance - 10.0% Non-Life Insurance - 0.6% Credit Card - 2% ATM + Debit Card - 13% Geographical coverage 5.2% villages are having a bank branch Farmers coverage- - Out of 119 million farmers, small and marginal farmers are 97.7 million (82.1 %)

6.Co-operative Movement Setting up of State Bank of India Nationalisation of banks Lead Bank Scheme RRBs Service Area Approach Self Help Groups --- Still We Failed! --- Why?

7. Absence of Technology Absence of reach and coverage Delivery Mechanism Not having a Business model Rich have no compassion for poor

8.Focus on Inclusive Growth Banking Technology has arrived Realisation that Poor is bankable

9.Focus on Inclusive Growth Banking Technology has arrived Realisation that Poor is bankable

10.Number of No-Frill Accounts – 28.23 million (as on Dec. 31, 2008) Number of rural bank branches – 31,727 constituting 39.7% of total bank branches (as on June. 31, 2009) Number of ATMs – 44,857 (as on May 31, 2009) Number of POS – 4,70,237 (as on May 31, 2009) Number of Cards – 167.09 million (as on May 31, 2009) Number of Kisan Credit cards – 76 million (Source: CMIE publication 2007-08) Number of Mobile phones–403 million (as on Apr.30, 2009) – out of which 187 million (46%) do not have a bank account (Source: Cellular Operators Association of India)

11.Population Per Bank Branch

12.Number of Savings Accounts

13.Earners Having a Bank Account-2007

14.Sources of Loans

15.Purpose of Loans .. From various estimate sources and IIMS survey we find that still 50% of loans are to meet the emergency rather than for business needs Even rich people are excluded Even rich people have to depend on non-institutional sources for loan purposes

16.Problems / Difficulties Scaling up of activities Transaction cost too high Appropriate business model yet to evolve BC model too restrictive Limitation of cash delivery points Lack of Interest / Involvement of Big Technology Players

17. Pre-requisites For The Success of Financial Inclusion Appropriate Technology Appropriate and Efficient Delivery model Mainstream banks’ determination and involvement Strong Collaboration among Banks, Technical Service Provider, BC Services Involvement of all Especially the state administration at grass-root level Liberalisation of BC model

18.Report of the Financial Inclusion in India (Chairman: Dr. C. Rangarajan, 2008) Setting up of a National Rural Financial Inclusion Plan with a target of providing access to financial services to at least 50 per cent (50.77 mn) of excluded rural households by 2012 and the remaining by 2015 Encouraging SHGs in excluded regions, measures for urban micro-finance and separate category of MFIs RRBs to extend banking services to unbanked areas Use of PACS and other co-operatives as BCs and co-operatives to adopt group approach for financing excluded groups

19. Global Meltdown - An Opportunity Focus on Inclusive Growth Focus on Domestic Consumption and Investment Focus on increased Social Sector Spending Emphasis on giving benefits to poor clients Global (bigger) players looking Inward Reduction of Cost (?) Let us Give One Big Push to Financial Inclusion!

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