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.

1. Welcome
Electronic 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

2. 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

3. 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 Nations
Source:
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

4. 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.

5. Key-Processes
d
1) 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.

6. Smartcard Business Cycle
5)
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

7. CSP Disbursement cycle
6)
Download- Biometric Cash Upload
data authentication disbursement -data

8. Project Implementation
Started in 6 mandals in Warangal
District OVERALL PROGRESS AT A GLANCE
Service area Approach, ALW as TSP No. of districts : 22
PILOT 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 lakhs
Service Beneficiaries)
Area From March, 2008 onwards,
No. of beneficiaries 142 lakhs
Approa 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) Crores
Dist-
From November, 2008 onwards,
One enrollment started
Bank
model 7 banks are operating in this model.

9. 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.

10. FINANCIAL EXCLUSION
 30000 rural branches of banks are
supposed to serve over 8 lakhs villages.
Service Area Approach has become
dysfunctional for most of the villages:
Denial of service to millions of poor.
Poor are starved of credit, forced to pay
usurious rate of interest.
Urban Poor also left out.

11. FI: The Rights Approach
If 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.

12. 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.

15. Banks
Axis Bank
Union Bank of India
Service 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