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FINANCIAL INCLUSION
A ROAD INDIA NEEDS TO TRAVEL
PRESNTED BY
ABODHA KU. SWAIN
ASISH RANJAN PRADHANSAMBIT KU. PANI
JAGDISH BEHERA
SATYAJIT MISHRA
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Financial exclusion is the lack of access by certain
consumers to appropriate, low cost ,fair and safe
financial products and services from mainstream
providers.
Financial Exclusion
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(a) people who do not have any access to a
regulated financial system;
(b) people who have limited access to
banks and other financial services; and
(c) individuals who have inappropriate
products .
There are three types of exclusions :
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Financial Illiteracy
Financial Discrimination
Financial Exclusion
Stages of Financial
Exclusion
Financial
Exploitation
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1. Poor
2. Socially under-privileged
3. Disabled4. Old as well as children
5. Women
6. Uneducated
7. Ethnic Minorities
8. Un-employed
Who are Financially Excluded ?
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Inaccessibility, distance and lack of proper
infrastructure hinder financial inclusion
Lack of Banking habits, high transaction cost, lack of
banking knowledge and insufficiency of knowledge on
banking products prevents the unbanked people from
knocking the door steps of banks.
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Financial exclusion means :-
No Bank
account and
No assets
No access
to money
advice
No
Savings
No
Insurance
No
affordable
credit
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Most needed Services for Financially Excluded
1. Access to Small loans or overdrafts
2. Small Savings Products
3. Insurance4. Credit Card
5. Entrepreneurship credit
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2.5 billion adults, just over half of world’s adult population, do not
use formal financial services to save 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 financial services in Africa,
Asia, and the Middle East, at least two-thirds, a little more than 800
million, live on less than $5 per day.
Extent of Financial Exclusion -Global
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In India, almost half the country is unbanked.
Only 55 per cent of the population have deposit accounts
and 9 per cent have credit accounts with banks.
India has the highest number of households (145 million)
excluded from Banking.
There was only one bank branch per 14,000 people.
Extent of Financial Exclusion -India
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6 lakh villages in India, rural branches of SCBs including
RRBs number 33,495. Only a little less than 20% of the population has any kind
of life insurance and 9.6% of the population has non‐life
insurance coverage.
Just 18 per cent had debit cards and less than 2 per cent
had credit cards.
Cont…
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Absence of Banking Technology
Absence of Reach and Coverage
Absence of Viable Delivery Mechanism
Financial Exclusion –Why did We Fail?
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Focus on Inclusive Growth
Banking Technology has arrived
Realisation that Poor is bankable
Why Are We Talking of Financial Exclusion
Now?
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Definition of Financial Inclusion
Financial Inclusion is the process of ensuring
access to appropriate financial products and
services needed by all sections of the society in
general and vulnerable groups such as weaker
sections and low income groups in particular at an
affordable cost in a fair and transparent manner by
mainstream institutional players.
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In an advanced economy , financial inclusion is
more about the knowledge and fair and
transparent financial products and a focus on
financial literacy.
In emerging economics , it is a question of
both access to financial products and
knowledge about their fairness andtransparency.
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WHY FINANCIAL INCLUSION
Since a long time finance was not recognizedas a factor for growth and development.
It is now attributed as the brain of aneconomic system and most economics strives
to make their financial system more efficientand research shows that financial inclusion isimportant for an economy
RELATIONSHIP BETWEEN FINANCIAL
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RELATIONSHIP BETWEEN FINANCIAL
INCLUSION AND DEVLOPMENT
INDICATOR• Economic growth follows financial inclusion. In order toachieve the objective of growth with equity, it isimperative that infrastructure is developed withfinancial inclusion.
• savings and credit accounts - indicators of financialinclusion.
• per capita income - indicator of economic development
• Electricity consumption and road length -indicators of infrastructure development.
• All the above influence economic development whichfollows adequate financial and credit facilities
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BENEFITS OF INCLUSIVE FINANCIAL
GROWTH
• Growth with equity : In the path of super power wethe Indians will need to achieve the growth of ourcountry with equality . It is provided by inclusivefinance.
•
Get rid of poverty : To remove poverty from the Indiancontext all everybody will be given access to formalfinancial services . Because if they borrow loans forbusiness or education or any other purpose they getthe loan will pave way for their development .
• Financial Transactions Made Easy : Inclusive financewill provide banking related financial transactions in aneasy and speedy way .
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• Safe savings along with financial services : People willhave safe savings along with other allied services likeinsurance cover , entrepreneurial loans , payment andsettlement facility etc,
• Inflating National Income : Boosting up businessopportunities will definitely increase GDP and whichwill be reflected in our national income growth .
• Becoming Global Player : Financial access will attract
global market players to our country that will result inincreasing employment and business opportunities
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FINANCIAL INCLUSION SCOPE
Financial Inclusion should include access tofinancial products and services like,
Bank accounts
Immediate Credit
Savings products
Insurance - Healthcare
Financial advisory servicesEntrepreneurial credit
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Financial Inclusion – Steps Taken in the
Past
• Co-operative Movement
• Nationalisation of banks
• Lead Bank Scheme
• RRBs (1975)
• Self Help Groups
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What has been done so far?
• ICT based Business Correspondent (BC) Model for low cost door
step banking services in remote villages .
• Board approved Financial Inclusion Plans (FIPs) of banks for 3 years,
starting April 2010 .
• Roadmap to cover villages of above 2000 population by march 2012• Mandatory opening of 25 % of new branches in unbanked rural
canters.
• KYC documentation requirements significantly simplified for small
accounts..
• Pricing for banks totally freed . Interest rates on advances totally
deregulated.
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• Introduction of financial inclusion fund(FIF)
• Introduction of financial inclusion technology
fund(FITF)
• UID
• Financial inclusion plan (FIP)
•
RRB were CBS enabled
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Launched to educate and motivate people to
open account . Under this scheme banks will
get Rs.140 on opening of every no frill account
Govt. expecting that 73000 house holds will get
benefited in 2011-2012
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INDEX OF FINANCIAAL INCLUSION
It is a measure of inclusiveness of the financial
sector of a country/ region.
It is constructed as a multidimensional index
that captures information on various aspects
of financial inclusion such as banking
penetration, avaibility of banking services and
usage of banking system.
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Approach adopted by
• RBI has been undertaking financial inclusion
initiatives in a mission mode
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Continued…
1.Relaxation on know-your-customer (KYC) norms What is KYC???
2. Opening of no-frills accounts
What is no frill account???
3. Engaging business correspondents (BCs):
What is BC model???
4.Use of TechnologyWhat is UHD???
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Continued… 5. Adoption of EBT
6.Opening of branches in unbanked ruralcenters
7. Banking services in unbanked villages witha population of more than 2,000
8. Financial inclusion plans of banks for threeyears: RBI
Financial Inclusion Plan???
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Role of other Financial Institutions
• COMMERCIAL BANKS
• 1.SBI• 100% achievement in Andhra Pradesh
• Bank on Bike
• Population below 2000
• 2.PNB•
PNB has adopted branchless banking model supportedwith smart card based technology
• Six RRBs sponsored by PNB
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3.CBIWorking with odisha government
4..YES bankWith NOKIA
5.SYNDICATE bankTarget of 1620
6.ICICI BANK
Merged with Bank of Rajasthan
• NABARD
FIF
FITP
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SBI No Frills Saving Bank Account
Eligibility: Individuals of 18 years and aboveearning a gross income of Rs.5000/- p.m or less.
Mode of operation: Single/ joint
Minimum balance: NILInitial deposit amount: Rs.50/- to open
the account
Cheque facility: Available.
Internet Banking facility: Not available
Pass book: Will be issued
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ISSUES AND CHALLENGES
1.Spatial Distribution of Banking Services
2. Regional Distribution of Banking Services
3. Bank Branches
4. Poverty levels
5. Overcoming Bankers’ Aversion for Financial Inclusion
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MAJOR ROADBLOCKS TO FINANCIAL
INCLUSION
Poverty
Ignorance
Environment
Cultural and psychological barriers
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CASE STUDIES OF
FINANCIAL INCLUSION
INITIATIVE
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DRISHTEE Model of BC
A tri partite agreement by
DRISHTEE with a for profit
technology company A Little
World (ALW) and leading Public
sector and Private sector Banks.
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Problems Faced by the Model
• Network Problems In Rural Areas
• BCs getting demotivated by low income
• People more interested in obtaining credit
instead of savings
• Resistance from local bank’s branch manager
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IIBF: Capacity building of BCs
• Course Objectives:
1. Role / functions of banks
2. Basics of banking operations and procedures
3. Role / functions of BCs or BFs
4. Financial Advising and Counseling
5. Various forms and documents used in banks
• NABARD support to IIBF course
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Suggestions
• Simplify Procedure
• Addressing Social Issues
• Financial Education and Consultancy
• Business Innovation
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CONCLUSION
Banking on the poor can actually be a rich
banking proposition. Financial inclusion is a
win-win opportunity for the poor, for the
banks and for the nation. It is for the banks toconvert what they see as a dead-weight
obligation into an exciting opportunity and
move on aggressively on financial inclusion.