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FINANCIAL INCLUSION

FINANCIAL INCLUSION. ANUJA KUMARI. The Definition. “The process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost” The Committee on Financial Inclusion 2008.

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FINANCIAL INCLUSION

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  1. FINANCIAL INCLUSION ANUJA KUMARI

  2. The Definition “The process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost” The Committee on Financial Inclusion 2008

  3. FINANCIAL INCLUSION ENVISAGES • Providing Financial Facilities • TO • Hitherto excluded /Disadvantaged group • AT • Affordable Cos • t • Financial Services Include • Deposits • Credits • Ancillary Services Include: • Remittances • Insurances • Face to Face Advice

  4. Need For Financial Inclusion • For inclusive growth • A necessity for sustainable overall economic growth • Lift financial condition & standard of life of underprivileged • Empower un served & underserved sections of society • In developed economies, focus is on small population • In developing economies (India), focus is on excluded majority

  5. EXCLUDED / DISADVANTAGED Marginal Farmers Landless Farmers Oral Lessees NER, Eastern & Central Regions Self Employed Urban slum dwellers Migrants Socially excluded groups • Women • Children • Old people • Physically challenged people

  6. Effects Of Financial Exclusion • High transactions costs of borrowers • High transactions costs of savers • General decline in investments • Small business suffer • Exclusion from formal credit markets leading to approaching informal/ exploitative markets • Increase of unemployment • Higher incidence of crime • Can lead to Social Exclusion

  7. Reasons for Financial Exclusion • Remote, hilly & sparsely populated areas with poor infrastructure and difficult physical access • Lack of awareness, low income, social exclusion, illiteracy • Distance from bank branch, branch timings, Cumbersome Documentation /procedures. • unsuitable products • Higher transaction cost • Ease of availability of informal credit • KYC – documentary proof of identity/ address • Rich have no compassion for poor

  8. Steps Towards Financial Inclusion • No frill account • KYC norms simplified • Introduction of GCC • OTS for overdue loans up to Rs.25,000/- • KCC • Usage of Biometric ATMs in Rural & Semi Urban areas • Bank utilising services of NGOs, SHGs, micro finance institutions.

  9. Steps Towards Financial Inclusion Cont..... • Bank accounts – check in account • Immediate Credit • Savings product • Insurance – Healthcare • Mortgage • Financial advisory services • Entrepreneurial credit

  10. Steps Towards Financial Inclusion Cont.. • Services of business facilitators/ correspondents (BC) for extending banking services • Credit Counselling & financial education • Multilingual website w.r.t. information on Banking • Banks to identify households with no bank accounts & to open at least one account per house • Revamping of RRBs and cooperative banks • Banks with insurance companies to provide, disability & health cover.

  11. Steps Towards Financial Inclusion Cont.. • Target group for Financial Education • School /college children, women, rural/ urban poor, defence personnel, senior citizens • Funds for Financialinclusion • Micro Finance Development and Equity Fund • Financial Inclusion Fund for Development and Promotional Interventions • Financial Inclusion Technology Fund to meet cost of technology

  12. Coverage -So Far • Geographical coverage • 5.2% villages have Bank branch • Farmers coverage- • Out of 119 million farmers, small and marginal farmers are 97.7 million (82.1 %)

  13. Coverage -So Far

  14. Challanges of Financial Inclusion • Scaling up of activities • Transaction cost too high • Appropriate business model yet to evolve • BC model too restrictive • Limitation of cash delivery point • Lack of Interest / Involvement of Big Technology Players

  15. Focus of Inclusive Growth The union budget 2009-10, has underlined the need to strengthen the mechanisms for inclusive growth for creating about 12 million new work opportunities per year, reduce the proportion of people living below poverty line to less than half from current levels by 2014 and to ease the delivery mechanism for primary health care facilities with a view to improve the preventive and curative health care in the country

  16. The First Steps.... • Appropriate Technology • Appropriate and Efficient Delivery model • Mainstream Banks’ determination and involvement • Strong Collaboration among Banks • Technical Service Provider, BC Services • Involvement of all • Liberalisation of BC model

  17. Banking services to every village with a population of over 2000 at least once a week on regular basis by March 2011 • State Govts to ensure development of Infrastructure where penetration by the formal banking system is required • Generate awareness of the various banking policies and regulations relating to the common person • Expedite use of IT solutions for various financial products like NREGA RoadMap to Financial Inclusion

  18. THANK YOU

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