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Financial Inclusion in India
1. Financial Inclusion stands for delivery of
banking/financial services to vast section of
low income groups (disadvantaged
persons), at an affordable cost.
OBJECTIVE
:- To introduce low income groups to the
Banking System
:- Assist them in building financial
capacity
:- Making them bankable customers
:- Develop the banking business
2. The scope of financial inclusion can be
expanded in two ways.
through state-driven intervention by way of
statutory enactments.
through voluntary effort by the banking
community itself for evolving various
strategies to bring within the ambit of the
banking sector the large strata of society.
3. Opening of no frills accounts.
Relaxation in KYC in opening such a/c.
Lending under govt. sponsored scheme.
new branch authorization policy of Reserve
Bank
Financial inclusion plan (FIP)- It started in April,
2010, and banks were asked to prepare another three-year
FIP for the period 2013-16. Under which all state-run and
private sector banks have to submit a board-approved, three-year
financial inclusion plan (FIP)
5. • AWARENESS
Ration card / Electoral ID cards of the families were taken for
fulfilling the simplified KYC norms.Photographs of all the
persons who opened bank accounts were taken on the spot
by a photographer accompanying the bank team.
“No frills” accounts.
the farmer’s credit card or KCC is being used ensuring first to
credit rather than savings.
no frills account was followed by small overdraft facility or a
general purpose revolving credit upto pre-specified limit.
Recognizing the need for providing social security (life,
disability and health cover).
6. In Aug,2014 Indian Prime Minister
(Narendra Modi) launched an initiative to
bank the poor.
Scheme promises a bank account,a debit
card, and an insurance cover of 1 lakh for
poor families.
1.5 crore bank accounts on the first day of
the programme on 28 August 2014
9. Bank of India’s ‘Abhay’ – Credit Councelling
Centre
Pragathi Gramin Bank, Bellary, Karnatak
(Sponsor: Canara Bank)
A survey on financial access in 2011 revealed
that India had 10.6 branches and 8.9
automated teller machine (ATMs) per 0.1
million population. Compared to this, China
had 23.8 branches and 49.6 ATMs, while
Brazil had 46.2 branches and 119.6 ATMs per
0.1 million people
…………… a lot needs to be done..!!
When bankers do not give the desired attention to certain areas, the regulators have to step in to remedy the situation. This is the reason why the Reserve Bank of India is placing a lot of emphasis on financial inclusion.
In order to ensure that persons belonging to low income group, both in urban and rural areas do not encounter difficulties in opening bank accounts, the know your customer (KYC) procedures for opening accounts has been simplified for those persons with balances not exceeding Rs 50000/- (about GBP 600) and credits in the accounts not exceeding Rs.100000/- (about GBP 1200) in a year. The simplified procedure allows introduction by a customer on whom full KYC drill has been followed
Banks have been asked to consider introduction of a General purpose Credit Card (GCC) facility up to Rs. 25000/- at their rural and semi urban braches. The credit facility is in the nature of revolving credit entitling the holder to withdraw upto the limit sanctioned. Based on assessment of household cash flows, the limits are sanctioned without insistence on security or purpose. Interest rate on the facility is completely deregulated .
A simplified mechanism for one-time settlement of overdue loans up to Rs.25,000/- has been suggested for adoption. Banks have been specifically advised that borrowers with loans settled under the one time settlement scheme will be eligible to re-access the formal financial system for fresh credit.
In January 2006, banks were permitted to utilise the services of non-governmental organisations (NGOs/SHGs), micro-finance institutions and other civil society organisations as intermediaries in providing financial and banking services through the use of business facilitator and business correspondent (BC) models. The BC model allows banks to do “cash in – cash out” transactions at the location of the BC and allows branchless banking .
Other measures include setting up pilots for credit counselling and financial education. A multilingual website in 13 Indian languages on all matters concerning banking and the common person has been launched by the Reserve Bank on 18 June 2007.
, the new branch authorization policy of Reserve Bank encourages banks to open branches in these under banked states and the under banked areas in other states.
The banks used different approaches to communicate the advantages of having a bank account. Bank staff or their agents who are usually local NGOs or village volunteers would contact the people at their households.
Recognizing the need for providing social security to vulnerable groups, in some cases in association with insurance companies, banks have provided innovative insurance policies at affordable cost covering life, disability and health cover.
The following are the main objectives of the Trust.
• Advising on gaining access to structured financial system including banking
• Creating awareness among the public about financial management
• Counseling people who are struggling to meet the repayment obligations and
helping debt resolution
• Helping in rehabilitation of borrowers in distress
