A P R E S E N T A T I O N B Y

D R K . C . C H A K R A B A R T YD E P U T Y G O V E R N O R

R E S E R V E B A N K O F I N D I A

OECD Information and Communication Technology

driven Financial Inclusion-The Financial Access and Education Challenge

Financial Inclusion -Definition

Financial Inclusion: The process of ensuringaccess to appropriate financial products andservices needed by vulnerable groups such asweaker sections and low income groups at anaffordable cost in a fair and transparent mannerby mainstream Institutional players.

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Simple Messages of Financial Education

Why should one save ? Best insurance for income fluctuation

Why open a Bank Account? Benefits of being part of Payment & Settlement System? Why should we borrow within capacity? Credit for

income generating activities. Why repay the loan? Repayment Ethics Why plan your financials? Risk return trade off – Key Message

Simple Messages of Financial Education…..

Do not take risk that you do not understand As and when income levels go up, for more secured and

hassle free life, investments in insurance, capital marke and other products should be explored. Create a mix of instruments in portfolio.

Creating Customer awareness on right to fair treatment and protection

Financial Inclusion- A Global Problem

2.5 billion adults, just over half of world’s adultpopulation, do not use formal financial services tosave 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 financialservices in Africa, Asia, and the Middle East, atleast two-thirds, a little more than 800 million, liveon less than $5 per day.

(Source: “Half the World is Unbanked”, 2009, Financial Access Initiative)

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Financial Education with Access-We are doing it together

Objective : All villages above 2000 populationbeing given access to basic banking service byMarch 2012 initially. Villages below 2000population to be covered in an integrated manner.Also to provide banking services to entirepopulation residing in Urban and Metro Centers.

TOTAL NO OF VILLAGES ~ 6,38,365

NO. OF VILLAGES > 2000 POP – 72,800

BANK BRANCHES: 84,064; RURAL: 32,494

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Financial Inclusion- Why we failed?

Absence of Technology

Absence of reach and coverage

Delivery Mechanism

Not having a Business model

Rich have no compassion for poor

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Why are we talking of Financial Inclusion Now?

Focus on Inclusive Growth

Banking Technology has arrived

Realisation that Poor is bankable

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Indian Approach

Broad based government-Central Bank commitment to financialinclusion

RBI advised banks to formulate a board approved Financial InclusionPlan (FIP) for the next three years

All banks have drawn up their financial inclusion plans. Currently, theyare under implementation. The plans are being fine-tuned based onground experiences and our discussions with them.

We are putting the financial inclusion campaign into mission modethrough this approach

Indian approach on achieving planned, sustained and structuredfinancial inclusion is spelt out in next few slides

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Technology – Fix it first

All Bank branches must be on Core Banking Solution(CBS)

Front-end devices transactions must be seamlesslyintegrated with the banks’ CBS

Front-end devices must be capable of transacting aminimum of four products

A provision for UID (Unique Identity) number in thesmart card

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Coverage - Transparency

What is meant by Banking Coverage?A village is covered by banking service if either abank branch is present or a BusinessCorrespondent (BC) of the bank is physicallypresent or visiting that village.

BC is an agent of the bank who provides banking services at the door step in unbanked areas through various ICT devices like mobile phones, micro-ATMs etc. He can be an individual, non-profit or for profit organisation.

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Minimum Need – 4 Simple Products

It is not enough to just offer No Frills Accounts*

At the minimum, four banking products need to beprovided for it to qualify as availability of bankingservices.

1) A Savings cum Overdraft Account2) A Remittance Product for Electronic Benefit Transfer and other

remittances3) A Pure Savings Product ideally a recurring or variable

recurring deposit4) Entrepreneurial Credit such as General Credit Card, Kisan Credit

Card

(* A No-Frills Account is one for which no minimum balance is insisted upon and for which there are no service charges for not maintaining the minimum balance)

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Operational Issues

Need for Intermediate Structure Supervision of BCs, redressal of customer grievances Cash Safe, CBS Terminal, Passbook Printing Processing of local applications, monitoring & physical follow

up. Can morph into a full fledged branch of the Bank in future

Going ahead, focus more on opening Brick and Mortar branches , even in villages < 2000 population.

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Other Issues

Urban Financial Inclusion

Should not be lost sight of

Monitoring

RBI to closely monitor

Banks also need to do structured monitoring

What have we achieved during the last year ?

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Financial Inclusion Plan Aggregates

Consolidated FIPSl. No.

Parameter As at end March 2010

As at end March 2011

1 Total Number of villages covered 54,757 99,6232 Villages covered through branches 21,499 22,6673 Villages covered through Business Correspondents (BCs) 33,158 76,6014 Other modes like Rural ATMs, Mobile Van,s etc. 100 3555 Number of villages > 2000 population covered 27,743 53,1806 Number of villages < 2000 population covered 27,014 46,4437 No. of BCs employed by banks 33,042 58,3518 Number of No-Frills Accounts (NFAs)opened (in million) 49.55 74.399 Amount in NFAs (Rs. in million) 48952 6565710 Number of NFAs with Overdraft(OD) facility (in million) 0.14 4.211 NFAs with OD- Amount outstanding (Rs. million) 91 198712 Number of Kisan Credit Cards (KCCs) issued (in million) 19.5 22.4913 Amount outstanding in KCCs (Rs. million) 10,77,366 14,38,62214 Number of General Credit Cards (GCCs) issued (in million) 0.60 0.8815 Amount outstanding in GCCs (Rs. million) 8,189 12,877

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Financial Education Aspects

“Financial literacy is a component of financial inclusion and a necessary condition for bringing a large proportion of the excluded population into the fold of the financial sector.”

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Simple Messages of Financial Education

Why should one save ? Best insurance for income fluctuation

Why open a Bank Account? Benefits of being part of Payment & Settlement

System? Why should we borrow within capacity? Credit

for income generating activities. Why repay the loan? Repayment Ethics Why plan your financials? Risk return trade off – Key Message

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Simple Messages of Financial Education…..

Do not take risk that you do not understand As and when income levels go up, for more

secured and hassle free life, investments in insurance, capital market and other products should be explored. Create a mix of instruments in portfolio.

Creating Customer awareness on right to fair treatment and protection

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Challenges

Access to Banking Services Demographic Spread Literacy Poor Income Digital and Physical Connectivity Large Rural Base Lack of Propensity to Save High Cost of Operations

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Approach to meet Challenges

Multi Agency Approach –Government, RBI, SEBI, IRDA, Banks and other Market Players, Industry Associations, NGOs and other constituents of Civil Society

Multi-disciplinary, Multi-dimensional Approach School Curriculum Campaigns Innovative Dissemination Channels-Films,

Documentaries, Pamphlets, Road shows, etc Training Programmes for bank staff

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Multi Agency Approach– Government and RBI Initiatives

Establishment of Financial Stability and DevelopmentCouncil to institutionalize the mechanism for maintainingfinancial stability. This council’s brief includes focus on financialliteracy and financial inclusion.

Financial Inclusion and Financial Inclusion Technology Fund setup.

We have urged all banks to include criteria regarding financialliteracy and financial inclusion in the performance evaluation oftheir field staff.

Committee to look into customer service in banks for enhancedconsumer protection.

Financial Literacy and Credit Counselling centres by banks.21

Financial Literacy Initiatives by RBI-excerpts

Outreach Programmes: 76 programmes have been conducted across the country focusing on twin

objectives of financial inclusion and financial literacy in which the Governor/Deputy Governors / Executive Directors of RBI participated.

Besides this, more than 150 Outreach programmes have been conducted ason date by the Regional Offices and Offices of the Banking Ombudsman aspart of the Financial Literacy initiatives.

160 remote unbanked villages selected for transformation into model villagescharacterized by 100% financial inclusion through ICT initiatives, leveragingon BCs and BFs.

Release of a book titled ' I can do Financial Planning‘ on financial education.

Organisation of Town Hall events and release of films on financial literacy.

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Key to Success – Collaboration

Governments- Central and State RBI, IRDA, SEBI, PFRDA, NHB and other

regulators Banks, Insurance Companies, MFs , other

FIs and Intermediaries, Industry Associations

NGOs and Consumer Organizations Global Co-operation

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For Financial Access and Education Imperatives to succeed ……

The key is establishing an appropriate Business Delivery Model through the involvement of all stakeholders to make Financial Inclusion a reality

Need to Upscale the Financial Literacy Drive Learning is the key Access to financial services and Financial

Education must happen simultaneously It must be continuous and must target all sections

of the population simultaneously

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Technological Innovation -Composite Hand Held Device

Receipt Generation Slot

Slot to capture thumb print

Slot to insert Operator / Customer card

Arrow Key for starting the device

F button

Programmed Mobile as a Hand Held Device

Operating Model - Customer

Data Collection SystemDemographic DetailsBiometric Details etc.

Issuance of Biometric Enabled Multi-Function Card

Financial TransactionsThrough Field DevicesSingle Device supports

multiple application

Transaction data loadingTo Integrated Core Banking SystemThrough phone line (PSTN)

PHOOLVANTI JOSHI

DoB: 05-AUG-1965D/o: JATINBHAI JOSHINear Railway Stn.V: Jamkhandoli, T: UmariyaD: Jamkhambaliya, P: 398252, Guj

Issued: July 2006

9 0 0 0 0 1 1 9 5 4 5 7 2 2 0 0 0

Thank you

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