A pioneering initiative in Financial Inclusion of the Poorest of the Poor by the State of Andhra Pradesh for Electronic Benefit Transfer for Payment of MGNREGA Wages and Social Security Pensions in the State.
WelcomeElectronic Benefit Transfer A. P. Smartcard Project A .V.V. Pras ad, A ddl. C ommis s ioner Department of Rural Development Govt of Andhra Pradesh
Extent of Financial Exclusion Households• 30,000 bank branches and 1.5 lakh Social Populati % % Group on in Included Excluded post offices for about 6,00,000 rural ‘000 villages. S.C 15592.6 50.23 49.77• 51.36% of rural households are S.T 11924.1 36.32 63.68 financially excluded. OBC 37043 51.42 48.58• 44.9% of total earners have bank Others 24688.4 49.42 50.58 accounts. Total 89248.1 48.64 51.36• Only 28.3% of total earners ( who In million earn less than Rs.50,000 ) have bank Institution / End-March 1993 2002 2007 accounts. Scheduled Commercial Banks 246 246.5 320.9• Only 54 persons per 100 have savings Regional Rural Banks 30.5 36.7 52.7 account. Primary Agricultural Credit Societies 89 102.1 125.8 Urban Co-operative Banks 41.6 42 50• Only 13.0% of total earners ( who Post Offices 47.5 60.2 60.8 earn less than Rs.50,000 ) take credit Total 454.6 487.1 610.3 from banks. Total Accounts per 100 adult 51 46 54 persons Source: Report on Currency and Finance 2006-08 (IIMS Survey, 2007), NABARD report
Financial Inclusion ‡Banking service –Public Good. ‡Delivery of banking services at an Comprehensive financial inclusion affordable cost. ‡Delivery of banking service to the Credit, insurance etc disadvantaged and low income groups. Financial literacy Financial STATE DRIVEN INTERVENTION Opening of a Inclusion VOLUNTARY EFFORT BY BANKS bank account “A small loan, a savings account or an insurance policy can make a great difference to a low-income family. They enable people to invest in better nutrition, housing, health and education for their children. They ease the strain of coping with difficult times caused by crop failures, illness or death. They help people plan for the future.” - Kofi Annan, Secretary General of the United NationsSource:1.Commemorative Lecture by Shri V.Leeladhar, Deputy Governor Reserve bank of India at the Fedbank Hormis Memorial Foundation at Ernakulam on December 2, 2005.2. Building Inclusive Financial Sectors for Development, The Blue Book.3. The NABARD Report, January 2008
A.P.Smartcard Project State Driven Intervention. Establishment of last mile banking - establishing banking outpost at each Gram Panchayat. Banking SSP pensioners Disbursement of Social Security pensions outpost in & MG-NREGS and MG-NREGS wage payments. each Gram wage seekers Chip based smartcard backed by bank a/c Panchayat have bank a/cs as identity card for disbursement. Biometric proof of identity arrangement. Disbursement through a GP level Business correspondent. Branchless Banking model – A major step towards financial inclusion. TOTAL FINANCIAL INCLUSION Bank lays the entire infrastructure i.e. position kit and CSP at each Gram Panchayat. Govt pays 2% as commission to the total amount paid.
Key-Processes d1) 2) Bi Technology Service Providers Bid Allots districts/GPs Bid Bank Bank Business Correspondents Bid Enrollment 3) Issue of 4) •Govt identifies the beneficiaries and give data. •Data is encrypted and card is prepared. •Bank conduct enrollment camps at GP. •Data fulfilling KYC norm is used to open •Govt machinery helps in logistics. bank accounts. •6/10 finger prints, demographic details, •Bank account is updated in the card and photograph and identity proof – captured. issued to the beneficiaries.
Smartcard Business Cycle5) e-Payorder Acquittanc e & FTO e-payorder CASH Acquittanc e BUSINESS CORRESPONDENT Acquittanc e Acquittanc e BANK Unspent Unspent Reconciled Reconciled money money statement statement Unspent money CASH DISBURSEMENT The AP Smart Card Project CSP
Project Implementation Started in 6 mandals in Warangal District OVERALL PROGRESS AT A GLANCE Service area Approach, ALW as TSP No. of districts : 22PILOT with 6 banks Total no of GPs 21805 Enrollment started March,2007in and payments started in April, 2007 No of GPs where 18789 payments are commenced GPs in six districts are allocated to different banks based on the service area Target (No.of 188 lakhsService Beneficiaries) Area From March, 2008 onwards, No. of beneficiaries 142 lakhsApproa enrollment started enrolled ch The GPs are allocated to 12 banks in No. of cards issued 134 lakhs service area approach One single district is completely Amount paid (from May Rs.4180 One allocated to one single bank 2007) CroresDist- From November, 2008 onwards, One enrollment startedBankmodel 7 banks are operating in this model.
Challenges and way forward:• Banks need to create a separate vertical only for EBT/FIP. HO-State-District-Branch level activities• Technology: – Hardware & Software- Standardization of protocols. – Information Flows, Data interfaces and furnishing disbursement data to the govt.• Business Process Reengineering: – Enrollment, Account Creation, Card Issue. – Integrity - w/o zero balance , w/o carded but manual payments. – Payment within 4 days – Reconciliation of accounts in time. – Maintaining accounts in CBS – Mandatory. – Bank to have direct control over BC. – Maintaining the appropriate OD limits for effective implementation of EBT.• Cash Management: – Managing & monitoring cash transfers between Bank, MC, CSP & customers. – Accessing Remote areas: Connectivity, Cost, Security• Capacity building & Coordination among functionaries:• Need for Competition among Banks & choice to customer.
FINANCIAL EXCLUSION 30000 rural branches of banks aresupposed to serve over 8 lakhs villages.Service Area Approach has becomedysfunctional for most of the villages:Denial of service to millions of poor.Poor are starved of credit, forced to payusurious rate of interest.Urban Poor also left out.
FI: The Rights ApproachIf technology permits, Rural Areas should be served on same terms as the urban areas. The poor shall not have to pay usurious interest rates; in fact, they shall not be charged more than the rich. People need services; shall not be denied. In fact, they must have choices.
Towards faster & better FI• Service Area Banks always fall short of people’s expectations as well as needs. It should not be extended to FI.• Multiple players may be permitted:• First come, first serve!• Newer, better services.• Cheaper and faster service.• Let people choose whom they patronize.
Banks Axis Bank Union Bank of IndiaService Providers APGVB ALW State Bank of India FINO Andhra Bank Integra Corp Bank Atyati State Bank of Hyderabad TCS ICICI HCL Indian Bank Coromondal Punjab National Bank APOnline ING Vysya Bank Post Office