FINANCIAL INCLUSION Achievements So Far and Road Ahead

A PRESENTATION BY DR K.C. CHAKRABARTY DEPUTY GOVERNOR RESERVE BANK OF INDIA

2 6 TH S K O C H S U M M I T MUMBAI

Why are we talking of Financial Inclusion* Now?

Focus on Inclusive Growth Banking Technology has arrived Realization that unbanked villages and poor provide business opportunity for banks and other financial intermediaries

( * Financial Inclusion: The process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair and transparent manner by mainstream Institutional players.)

Financial Inclusion- What are the barriers?

Absence of Technology Absence of reach and coverage Absence of viable Delivery Mechanism Not having a Business model

Indian Approach
y Broad based government-Central Bank commitment to financial

inclusion

y All villages above 2000 population being provided access to financial

services by March 2012

y Villages below 2000 population to be covered in an integrated manner.

Also to provide banking services to entire population residing in Urban and Metro Centers Urban Financial Inclusion

y Approximately 3,50,000 villages could potentially be provided financial

services by March 2013 under FIPs of banks submitted to RBI financial inclusion is spelt out in next few slides

y Indian approach on achieving planned, sustained and structured

Multi Agency Approach Government and RBI Initiatives

y Establishment of Financial Stability and Development

Council to institutionalize the mechanism for maintaining financial stability. This councils brief includes focus on financial inclusion as also literacy.

y Financial Inclusion and Financial Inclusion Technology

Fund set up.

y RBI advised banks to formulate a board approved Financial

Inclusion Plan (FIP) for three years up to Mar 2013.

y We have urged all banks to include performance under

financial inclusion in the performance evaluation of their field staff.

y Financial Literacy and Credit Counseling centres by banks.

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What is needed ?
y Delivery Model is the key. What is needed is a

complete Eco-System
y Last years efforts directed towards Eco-System

Development
y Main issues that were discussed / sought to be

addressed are highlighted in the next five slides

Technology Fix it first

y All Bank branches must be on Core Banking Solution

(CBS). All RRBs to be on CBS by September 2011 Micro-ATMs, Branches, Kiosks, etc.) devices transactions integrated with the banks CBS minimum of four products card

y Multi-channel approach (Handheld devices, mobiles, cards, y Front-end

must

be

seamlessly

y Front-end devices must be capable of transacting a y A provision for UID (Unique Identity) number in the smart

BC Model Strengthening
y Strengthening of the Business Correspondent (BC) Model

- Corporates have been allowed - Pricing has been allowed - Interest rates on advances totally deregulated - Know Your Customer (KYC) documentation requirements significantly liberalized for small value accounts

Coverage - Transparency
y What is meant by Banking Coverage?

A village is covered by banking service if either a bank branch is present or a BC is physically present or visiting that village.
y The names of villages covered and the name of the

branch / BC should be available on the banks website.

Products Minimum Four

y It is not enough to just offer No Frills Accounts* y At the minimum, four banking products need to be

provided for it to qualify as availability of banking services.

1) A Savings cum Overdraft Account 2) A Remittance Product for Electronic Benefit Transfer and other remittances 3) A Pure Savings Product ideally a recurring or variable recurring deposit 4) Entrepreneurial Credit such as General Credit Card (GCC), Kisan Credit Card (KCC)
(* 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
y Cost-centric Approach leading to unviable Business Model y Need for Intermediate Brick and Mortar 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 y Policy prescription already made in the recent annual policy

wherein banks are mandated to open 25% of all new branches in unbanked rural areas. y Going ahead, focus on having a combination of opening Brick and Mortar branches and BC outlets for providing banking services at all villages. y Accounting issues are being resolved BCs Cash is Banks Cash.
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Financial Inclusion- What we could achieve?

Villages Covered- Population Group wise
120000

100000 80000 53397 60000 Villages Covered <2000 40000 20000 27014 0 Mar '10 Period Mar '11 27743 46443 Villages Covered >2000

Villages with above 2000 population covered by banking services increased from 27,743 at end Mar 10 to 53,397 at end Mar 11.
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No. of Villages

Financial Inclusion-What we could achieve?

Villages Covered- Mode wise
120000 355 22684 No. of Villages 80000 60000 40000 20000 100 21499 76801 Villages covered through BCs Other modes like Mobile vans, rural ATMs etc. Villages covered through branches

100000

33158

0 Mar '10 Period Mar '11

No of villages covered through BCs increased from 33,158 at end Mar 10 to 76,801 at end Mar 11.
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Share of Rural Branches in Total Branches

Commercial Bank Branches incl RRBs
YEAR
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

RURAL 1
34791 35206 35269 35389 35329 33004 32995 32915 32878 32857 32734 32562 32380 32303 32121 32082 30579 30551 31002 31646 32494

SEMI-URBAN 2
11324 11344 11356 11465 11890 13341 13561 13766 13980 14168 14407 14597 14747 14859 15091 15403 15556 16361 17724 18969 20494

URBAN 3
8042 8046 8279 8562 8745 8868 9086 9340 9597 9898 10052 10293 10477 10693 11000 11500 12032 12970 14397 15439 16761

METRO 4
5595 5624 5666 5753 5839 7154 7384 7529 7763 8016 8219 8467 8586 8680 8976 9370 11304 11957 13019 13877 14855

TOTAL 5
59752 60220 60570 61169 61803 62367 63026 63550 64218 64939 65412 65919 66190 66535 67188 68355 69471 71839 76142 79931 84604

RURAL / TOTAL (%) 6 (=1/5)

58.2 58.5 58.2 57.9 57.2 52.9 52.4 51.8 51.2 50.6 50.0 49.4 48.9 48.6 47.8 46.9 44.0 42.5 40.7 39.6 38.4

Share of rural branches in total branches has been showing a declining trend
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Financial Inclusion-What we could achieve?

No Frills Accounts (in millions)
80.00 70.00 No. of Accounts (in millions) 60.00 50.00 40.00 30.00 20.00 10.00 0.14 0.00 Mar '10 Period Mar '11 4.18 No Frill A/Cs (in millions) No Frill A/Cs with OD (in millions) 49.55 74.39

Number of No Frills Accounts increased from 49.55 million at end Mar 10 to 74.39 million at end Mar 11.
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Financial Inclusion-What we could achieve?

25.00

KCCs and GCCs

22.49 19.52

20.00 No. of Accounts (in millions)

15.00

10.00

Kisan Credit Cards (No. in millions) General Credit Cards (No. in millions)

5.00 0.67 0.00 Mar '10 Period Mar '11 0.95

No of KCCs/GCCs increased from 20.19 million at end Mar 10 to 23.44 million at end Mar 11.
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Financial Inclusion Plan- What we could achieve?

Consolidated FIP Data of SCBs excluding RRBs Sl. No. Parameter 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
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As at end March 2010 54,757 21,499 33,158 100 27,743 27,014 33,042 49.55 48952 0.14 91 19.5 10,75,187 0.67 8,398

As at end March 2011 99,840 22,684 76,801 355 53,397 46,443 58,351 74.39 65657 4.2 1987 22.49 14,38,622 0.95 13,077

Total Number of villages covered Villages covered through branches Villages covered through Business Correspondents (BCs) Other modes like Rural ATMs, Mobile Van,s etc. Number of villages > 2000 population covered Number of villages < 2000 population covered No. of BCs employed by banks Number of No-Frills Accounts (NFAs)opened (in million) Amount in NFAs (Rs. in million) Number of NFAs with Overdraft(OD) facility (in million) NFAs with OD- Amount outstanding (Rs. million) Number of Kisan Credit Cards (KCCs) issued (in million) Amount outstanding in KCCs (Rs. million) Number of General Credit Cards (GCCs) issued (in million) Amount outstanding in GCCs (Rs. million)

Road Ahead- What we plan to achieve by 2013 *?

400000 350000 300000 254,653 No. of Villages 250000 200000 150000 100000 50000 0 2012(Targets) Period 2013(Targets) 89657 133816 93,630 223473

Coverage of Villages - by 2013

348,283

Number of villages > 2000 population covered Number of villages < 2000 population covered Total Number of villages covered

Total Villages covered by banking services projected to increase to 2,23,473 in Mar 12 to 3,48,283 in Mar 13.
* Based on FIPs submitted by Banks. May undergo a revision.

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Road Ahead-What we plan to achieve by 2013?

180 160 No. of Accounts (in millions) 140 120 100 80 60 40 20 0 2012(Targets) Period 2013(Targets) 36.31 53.28 109.62

No Frills Accounts (in millions)

153.33

No Frill A/Cs (in millions) No Frill A/Cs with OD (in millions)

Number of No Frills Accounts projected to increase to 109.6 million at end Mar 12 and 153.3 million at end Mar 13.
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Road Ahead- What we plan to achieve by 2013?

45.00 40.00 No. of Accounts (in millions) 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2012(Targets) Period 2013(Targets) 4.68 8.11 32.25

KCCs and GCCs

40.73

Kisan Credit Cards (No. in millions) General Credit Cards (No. in millions)

No of KCCs/GCCs is projected to increase to 36.9 million at end Mar 12 and 48.8 million at end Mar 13.
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Road Ahead- What we plan to achieve by 2013?

Consolidated FIP Data of SCBs excluding RRBs Sl. No. Parameter Mar 12 Targets 2,23,473 24,618 1,97,494 1361 89,657 1,33,816 1,25,988 109.6 93,110 36.3 14,458 32.3 15,21,135 4.68 32,291 Mar 13 Targets 3,48,283 25,694 3,20,412 2177 93,630 2,54,653 1,87,972 153.3 113,233 53.3 22,282 40.7 17,92,548 8.11 56,697

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
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Total Number of villages covered Villages covered through branches Villages covered through Business Correspondents (BCs) Other modes like Rural ATMs, Mobile Van,s etc. Number of villages > 2000 population covered Number of villages < 2000 population covered No. of BCs employed by banks Number of No-Frills Accounts (NFAs)opened (in million) Amount in NFAs (Rs. in million) Number of NFAs with Overdraft(OD) facility (in million) NFAs with OD- Amount outstanding (Rs. million) Number of Kisan Credit Cards (KCCs) issued (in million) Amount outstanding in KCCs (Rs. million) Number of General Credit Cards (GCCs) issued (in million) Amount outstanding in GCCs (Rs. million)

Challenges
y Perceived more as an obligation than a business

opportunity. Business Model yet to evolve

y Delivery Model yet to be perfected especially when there is

a glitch , hence, we are unable to scale up

y Banks are still engaged in Eco-System Development y Need for more BCs y Need for Training BCs and ensuring their financial viability y Corporate BCs still need to be stabilized
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Challenges
y Physical capacity of banks to deliver needs to be enhanced y Infrastructure necessary for scaling up capacity -

availability of handheld devices, cards, technology partners, vendors, etc. y Need for Intermediate Structure y Digital and Physical Connectivity- needs to be strengthened y Ensuring Collaborative Approach involving Govt, Banks, Technology Vendors, Service Providers, NGOs/Civic Society and Customers
These need to be tackled , and this year our efforts will be focused on these aspects. Whatever issues emerge in todays Summit, let them be deliberated and shared with us.
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Thank you

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