DG KCC Presentation-RBI Initiatives

8/4/2019 DG KCC Presentation-RBI Initiatives

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Financial Inclusion Financial Inclusion

RBI InitiativesRBI Initiatives

A Presentation by Dr. K.C.ChakrabartyDeputy Governor, RBI

At National Seminar on Launching a National Initiative forFinancial Inclusion organised by DFS, GOI

at New Delhi on September 18, 2009
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Financial Inclusion RBIs Focus

Financial Inclusion (FI) has been RBIs policy priority

FI seen as a tool for inclusive growth ensuring equalityof opportunity for all

The focus has been in facilitating the process that arange of appropriate financial products and services isavailable to underprivileged sections at an affordablecost.

A Presentation by Dr. K.C.Chakrabarty, Deputy Governor, Reserve Bank of India


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Financial Inclusion Phases & Steps Taken

Steps Taken Co-operative Movement Setting up of State Bank

of India Nationalisation of banks

Lead Bank Scheme RRBs Service Area Approach Self Help Groups

Process: Phases

1) 1950-70: Consolidation of theBanking sector & Facilitationof Industry and Trade

2) 1970-90: Focus on channeling

of credit to neglected sectorsand weaker sections3) 1990-2005: Focus on

Strengthening the financialinstitutions as part offinancial sector reforms

4)2005 onwards: FinancialInclusion was explicitlymade as a policy objective
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Steps Taken by RBI- Credit Delivery Focus

From 1994-95, public sector banks in India have been formulating Special

Agricultural Credit Plans (SACP) with a view to achieve distinct and markedimprovement in credit flow to agriculture

The Kisan Credit Card (KCC) scheme was introduced from 1998-99

Credit innovations like micro finance have also evolved as socially

significant and commercially attractive models of credit delivery

The early 1990s saw the emergence of the Self Help Group concept -The pilot programme started by NABARD in 1992 and actively supported by the

Reserve Bank saw the banks taking a key interest in promoting the programmeThe SHG- Bank linkage programme has so far become the largest microfinance

programme in the countryAs on March 31, 2008, a total of 3.6 million SHGs with a total outstanding bank

loan of Rs.17,000 crore were credit linked with the banks As on March 31, 2008, a total of 5.0 million SHGs were having savings bank

accounts with the banking system of which the commercial banks had themaximum share (56.0 per cent) followed by the RRBs (28.0 per cent) and co-operative banks (16.0 per cent)
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Steps Taken by RBI-Other Measures

Facilitating Policy Stance

The Annual Policy Statement for the year 2005-06 that the Bank wouldimplement policies to encourage banks, which provide extensiveservices while dis-incentivising those, which are not responsive to thebanking needs of the community, including the underprivilegedBanks were urged to review their existing practices to align them with

the objective of financial inclusion

No-Frill AccountsOverdraft in Saving Bank AccountsRelaxed KYC NormsBC / BF Model -

From Jan 2006 banks were permitted to utilise the services of

intermediaries in providing financial and banking services through theuse of business facilitator and business correspondent (BC) modelsA Working Group constituted to examine the experience of date of the

BC model and suggest measures, to enlarge the category of persons thatcan act as BCs, keeping in view the regulatory and supervisoryframework and consumer protection issues


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Steps Taken by RBI-Other Measures..

KCC / GCC Guidelines

Liberalised Branch Expansion

Introducing technology products and servicesPre-Paid cards, Mobile Banking etc.

Allowing RRBs / Co-operative banks to sell Insurance and FinancialProducts

Financial Literacy Programs

Creation of Special Funds

100% Financial Inclusion -So far, 431 districts have been identified by SLBCs for 100 per cent

financial inclusionAs on March 31, 2009, 204 districts in 18 States and 5 Union Territories

have reported having achieved the target


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Financial Exclusion- A Few Indicators..

Estimates based on Various Studies and Market Surveys:

1. Only 17 Credit Accounts per 100 persons with all theinstitutions (June 2007)

2. Only 54 Savings Accounts per 100 persons with all theinstitutions (June 2007)

3. Only 13 per cent are availing loans from the banks in the incomebracket of less than Rs. 50,000

4. 53 per cent people are taking loans from the institutional andnon-institutional sources only for emergency purposes

5. Critical Exclusion in terms of credit is manifest in 256 districtsacross 17 states and 1 UT (Dadra and Nagar Haveli)

6. Even rich people are excluded and have to depend on non-institutional sources for loan purposes


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Financial Inclusion Some Statistics

Number of No-Frill Accounts 4.15 crore (as on June 30,

2009)Number of rural bank branches 31,727 constituting

39.7% of total bank branches (as on June. 30, 2009)Number of ATMs 47,953 (as on July 31, 2009)Number of POS 5,22,148 (as on July 31, 2009)Number of Cards 173 million (as on July 31, 2009)Number of Kisan Credit cards 76 million (Source: CMIE publication

2007-08)

Number of GCC issued by PSBs 1,52,824 (as on Mar 31,2009)

Number of Mobile phones403 million (as on Apr.30, 2009) out of which 187 million (46%) do not have a

bank account (Source: Cellular Operators Association of India)--- Still Weve Not Achieved Much!

--- Why?


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Financial Inclusion Reasons for FailureFinancial Inclusion Reasons for Failure

Absence of Appropriate TechnologyAbsence of reach and coverageLack of Adequate Supportive

Infrastructure

Lack of Suitable Financial Productsand its InflexibilityFlawed Delivery MechanismNot having a Business model

Less Participatory Involvement by AllStakeholdersRich having no compassion for poor



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Problems / Challenges Being FacedProblems / Challenges Being Faced

Bank-Branch delivery model not able

to cater to the needs of all Scaling up of activities Transaction cost too high - Technology

not leveraged fully

Appropriate business model yet toevolve BC model too restrictive Limitation of cash delivery points

Pro-Active Participation of BigTechnology Players Required Comprehensive Participation of All

Stakeholders Lacking



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Way Forward For Financial Inclusion

ICT based Appropriate and Efficient Delivery model instead of Focuson Branch-based Delivery Mechanism

Scalable, Platform independent and Customer-friendly TechnologySolutions

Use of IT to:

Reduce the transaction cost

Improve the allocation of financial Resources Increase the competitiveness and efficiency of financial institutions

Enable to take any product or service to the common masses ataffordable and cost-effective manner through multi-delivery channels

Mainstream banks determination and involvement

Strong Collaboration among Banks, Technical Service Provider, BCServices

Involvement of all Especially the state administration at grass-root level

Liberalisation of BC modelA Presentation by Dr. K.C.Chakrabarty, Deputy Governor, Reserve Bank of India


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Way Forward For Financial Inclusion..

Inclusion efforts should not only be concentrated towards the

rural areas A number of financially excluded people in the urban and

metropolitan areas, especially the migrant workers andslum dwellers should also be included

Thrust on

Greater Financial Literacy

Increased income generation

Overcoming regional imbalances

Revamping RRBs and Cooperatives and their more

proactive role by leveraging technology On Financial Side Focus on Micro-products-

Savings, Remittances-Instant Credits, Pensions,Insurance, etc.



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Global Meltdown -

An Opportunity Waiting!

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 (?) But we have to identify the Potential Areas where

Business Opportunities exist

We Are Committed to Make FinancialInclusion A Success For Inclusive

Growth of IndiaA Presentation by Dr. K.C.Chakrabarty, Deputy Governor, Reserve Bank of India


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Thank YouThank You

A Presentation by Dr K C Chakrabarty Deputy Governor Reserve Bank of India

Documents

DG KCC Presentation-RBI Initiatives