FINANCIAL INCLUSION

CREDIT COUNSELLING
16th January 2009

&

College of Agricultural Banking, RBI, Pune

FINANCIAL INCLUSION CELL

PRIORITY SECTOR & LEAD BANK DIVISION ATMARAM HOUSE, 1, TOLSTOY MARG NEW DELHI 110 001

What is the magnitude of Financial Exclusion in India ?

Rural - 60 %
Urban - 39 % Exclusion from the payment system Exclusion from the credit
NSSO Survey 59th Round : 73% of farm households have no access to formal sources of credit; proportion is higher in North Eastern(95%), Eastern(81%) and Central Region(77%)

Rural Urban Divide

Rural Poor Income Level Urban Poor Income level

Share in economic growth Percolation of benefits

Share in economic growth Percolation of benefits

Consequences?

We are we assaulting at?

What are the Essentials of Financial Inclusion?

Access to payment systems Delivery of Banking & Financial Services Timings & other conveniences Cost Product Range Education - Health, Insurance, equity, etc. Penetration to deepest geographies Segmented approach Functional Financial Inclusion
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Financial Inclusion - A burden or an opportunity?

What is BoP? Why is it in focus? Where the future lies? Where are all roads leading

to?

Vast opportunities exist, where?

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The Opportunity lies : At the bottom of the pyramid In deepest geographies At last mile stone In remote corners In unreached villages Across untraveled roads Across underprivileged segments
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BANK ACCOUNT : KEY TO FINANCIAL INCLUSION

The first step:Opening of Account Smart Card

: Awareness : Empowerment : Providing Identity

Look beyond No Frill Accounts

Incentive to save transactions - banking relationship small credit facility creation of credit history and transparency in credit expansion. Customer becomes a productive assets of the society Leading to inclusive growth

Nationalization of RBI Nationalization of Imperial Bank of India Social control of commercial Banks Nationalization of commercial Banks Branch Extension Introduction of Lead Bank Scheme Regional Rural Banks Priority Sector Credit Other Govt. Schemes Creation of NABARD SHG Bank Linkage Pilot Introduction of KCC Specialized Agri Finance Branches Financial Inclusion No Frill Accounts Overdraft GCC BF/BC Model

Initiatives taken by GOI & RBI

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CHALLENGES IN FINANCIAL INCLUSION

Enormous Tasks Used Target Groups Vast Geographical Spread Small Value and High Transaction cost Limited Outreach Technology Infrastructure-Technological, Administrative, Organizational Business Model Products
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WHAT limits access to financial services?

Most Frequent Low income & literacy levels Nil or low savings Lack of awareness Lack of assets Unemployment/Under Employment Use of inappropriate products Financial illiteracy Poor financial habits Inadequacy of financial infrastructure

Less Frequent
Indigenous/ethnic issues Geographical remoteness Lack of time Psychological / disability issues Feeling of being excluded Lack of PC/Internet Access Availability of alternative products and suppliers

THUS SOCIAL EXCLUSION IS AN INTEGRAL PART OF FINANCIAL EXCLUSION

How to achieve financial inclusion?

Low Cost TECHNLOGY Convenient Accessible
Active /Direct support of Central/ State Govt. in building adequate infrastructure Technological Exp. Up-Scaling Exp.

GOVT.

HOW TO ACHIEVE FINANCIAL INCLUSION ?

SUPPORT

INSTITUTIO NAL SUPPORT

Civic Society Institutions like PRIs Micro finance Institutions NGOs/SHGs

FINANCIAL EDUCATION

Credit Counseling for improving prospects of repayment of loans as well as use of various financial services

Technology- An Essential Component

Smart Card (to be provided to every customer) Point of Sales Machines (PoS) for reading and writing Smart Cards for transactions

Laptop with webcam, biometric devices- for capturing the account opening details, thumb impression, photo and account details

Innovation becomes fruitful when it reaches the masses.

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TECHNOLOGY : AN ENABLER

Technology plays an important role in achieving financial inclusion by allowing branchless banking at the doorstep of clients in remote/low population density areas. Usage of Biometric smart cards/Mobile technology to increase the outreach and to reach the Last Mile Villages. Technology should help transact basic banking transaction in a :
Convenient

& Hassle free manner : easy to use Cost Effective : credit delivery at lower operational cost Accessible : at doorstep of customer
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TECHNOLOGY : AN ENABLER
Smart Card (to be provided to every Customer) and Point of Sales Machines (PoS) for reading and writing Smart Cards for transactions Laptop with webcam, biometric devices - for capturing the account opening details, thumb impression, photo and account details
Web Camera for Photograph

Optical Biometric scanner for Fingerprints

Pad for Signature capturing
Battery Power back-up for undisrupted enrolment 17

Process Flow Enrolments

Post sign-off from the Bank, the forms are sent for Data-entry to Service Provider. Biometric(finger print) of the customers are captured and cards are distributed by Agents.

Account opening forms are filled on the field by Agents.

Cards are personalized and accounts are opened.

Business Process - Transactions

Cash/

Cash

Customer

Instant Receipt Transaction stored on card

Bank Branch
Agent Transaction Data transferred via phone lines

Updates for Customer

Transaction Data

Bank Systems

Service Providers Systems

VARIOUS PROCESSES OF TRANSACTION

Pre Enrolment Process Enrolment Process

Enrolment Process

Transaction Process

Financial INclusion : An Opportunity exists

Financing the poor is?

POTENTIAL EXTISTS FOR.. Investment in agri. & allied activities Contract farming Growth in newer activities such as horticulture, floriculture, organic farming, Supply chain activities like sorting, grading, storage, etc Increasing rural incomes leading to opportunities for mass consumption Higher consumer financing in rural markets Huge opportunities in insurance to cover all kinds of risks faced by farmers.

Functional Financial Inclusion

Janmitra Rickshaw Project Integrated Development Project at PunpunPatna Bhamashah Financial Empowerment Project-for BPL families Common Service Centre Project- Financing VLEs Mother Dairy Tie up Project NREGA Projects PROJECT FOR CONSTRUCTION WORKERS AT BANGALORE
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Rickshaw Projects: Sustainable Community Development Economic Impact Enables rickshaw pullers to own the rickshaws Access to basic financial services which raises their income levels and hence the standard of living Improved sales for local businesses and corporations as they can advertise at the back space Social Impact Better health facilities Better law and order to the community Positive work environment
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Financial Literacy & Credit Counseling Centres

RBI advised SLBC FLCC at one district Objectives- Counseling through face to face interaction Financial Education - financial products & services Benefits-Savings, Managing Money, Credit Counseling and Debt Management Helping distressed borrowers FLCC setup by PNB Punjab 7, Haryana 2 Warning
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Organizational/Administrative Setup
Staffing Resources- Human, Technological Training MIS Monitoring Publicity

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HAPPENINGS
Promoting own Banks products As an additional duties No formal training Affinity to the parents Bank

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Towards better tomorrow

Dr. K. C. Chakrabarty, CMD along with Sh. Pawan Kumar Bansal (MoS for Finance, GoI), at the inauguration of FLCC at Chandigarh on April 3, 2008 27

Dr. K. C. Chakrabarty
Chairman & Managing Director
At

PNB, we believe that the poor are bankable, and are laying greater focus on implementing the Financial Inclusion Plan throughout the country in general and Indo Gangetic Plain in particular, where our Bank has major presence.
Our

vision is focused on widespread financial inclusion - deploying technologies, infrastructure and strategies to take banking to the unreached.
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PNB created history on 2nd October 2007

Launching of 1st Pilot Project at Neemrana, 30 District Alwar, Rajasthan

Dr. K. C. Chakrabarty giving a Biometric Smart Card to a Customer

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Launching of FI Smart Card Project

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Financial Inclusion through women SHGs

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PRESENT STATUS
No. of No Frill Accounts Amount Outstanding Overdraft allowed (No.) Amount Technological Vendors No. of GCCs Amount Business Facilitators (No.) Business Correspondents (No.) No. of Villages : 100% FI completed No. of Districts (100% FI in progress) No. of FLCCs : : 42.51 Lakh Rs 382 crore

Out of which IT Enabled Smart Cards

:
: : : : : : : : : :

24.85 Lakh
9183 Rs 43.87 Lakh 8 35378 Rs 64.23 crore 82 14 16227 212 9

Published TWO Booklets on Financial Inclusion Initiatives

TARGETS FOR 2013

To cover 1,00,000 villages, 12 million households and 60 million people To set up 1 Lac Touch Points under Brick & Mortar/ Branchless Banking No Frill Accounts, Overdrafts/Loans, insurance (life & health ), micro insurance, micro finance, pensions, remittances, Govt. payments (like NREGP) etc. To cover 1 Lac rickshaw puller in 5 years. To setup 57 FLCCs in all PNB Lead Districts

Challenges ahead
By 2012, out of next 250 million Indian wireless users, 100 million (40%) are likely to be from rural areas.

Mobile phones to act as local banks in a big way.; solve power and connectivity problem.

Accessibility : Remoteness of villages Connectivity Errors in Account opening and verification process Relaxation of KYC norms for migrant population Finding suitable BCs Pilot projects to go beyond experimental stage. Standardization of card specifications Interoperability among the different technological systems as the solutions being offered today are proprietary in 36 nature

Summing Up
Indian BPL 214 Million earning on an average Rs. 10 per day, out of which 16 million people are living in rural areas Of the worlds 6.4 billion poor, about 2.6 billion live on less than US $2 per day. The poor have largely untapped potential for consumption, production, innovation and entrepreneurial activity. The need is to do business with them so as to bring them out in the market place. This is a sure way of freeing them from the poverty. The more business models integrate and include the poor, the higher are the chances for the companies to increase their revenues while fulfilling the millennium development goals (MDGs). Report by UN Development Programme, Creating Value for All: Strategies for Doing Business with the Poor,

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WE HAVE PROMISES TO KEEP AND MILES TO GO BEFORE WE SLEEP

THANK YOU