Credit seminar presentation

1. Neethu Mol Jacob
Admission No. 2017-11-090
Dept. of Agricultural Economics

2. (Klapper et al., 2016)
(Littlefield et al., 2003)

3. Financial Inclusion: Trends, Challenges
and Emerging Issues

4. Introduction
Global scenario
Indian scenario
Kerala scenario
Challenges & Issues
Conclusion
4
Contents

5. Financial inclusion
“Financial inclusion is defined as the process of ensuring
access to financial services by providing timely and
adequate credit to vulnerable groups such as weaker
sections and low income groups at an affordable cost. ”
(GOI, 2008)
5

6. Dimensions
Financial
inclusion
Savings
Insurance
Bank
account
Credits
Financial
advices Payments
6

7. Goals of financial inclusion
Access to financial services
Sound and safe institutions governed by clear regulation
and industry performance standards
Financial and institutional sustainability
Ensure continuity and certainty of investment
Competition to ensure choice and affordability for clients
7
(Kaur et al., 2015)

8. Household access to financial services
8
Access
Contigency planning
Retirement savings
Buffer savings
Insurable contigency
Credit
Business loans
Emergency loans
Housing loans
Consumption loans
Wealth creation Savings & Investment

9. 9
Adequacy &
Availability
Awareness
Affordability &
Accessibility
Principles of financial inclusion
(Lenka, 2017)

10. 10
Delivering financial services
Opening a bank account
Financial literacy
Process of financial inclusion
(Kumar, 2013)

11. Roles of financial inclusion
Access to credit
Economic growth
Risk management
Women empowerment
Improve access to education
Boost nation’s health & well-being
Reduce hunger
Achieving SDGs
Reduce inequality 11

12. Barriers to financial service access
Psychological & cultural barriers
Legal identity
Level of income
Various terms & conditions
Structural procedural formalities
Limited literacy
Place of living
Social security payments
Occupation
Attractiveness of product
(Dangi et al., 2013) 12

13. Effects of financial exclusion
1. Barrier for employment
2. Unavailability of formal credits
3. Savings and borrowing become difficult
4. Possessing or owning assets become difficult
5. Difficult to adjust income to sudden changes in the economy
6. Exclusion or separation from the society
7. Higher charges for cheques to be cashed
8. Payment of bills become difficult
9. Money lenders & government exploit poor people
10. Deprived of payment offers for card holders
13(Shetty et al., 2015)

14. 14
Global scenario

15. Country 2016
Switzerland 0.94
Spain 0.88
US 0.87
Japan 0.87
Canada 0.86
Source: IMF [International Monetary Fund], 2017
15
0.327282553
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
FDI
India 54th
position
FDI = 0.407

16. 16
FDI

17. 17
50.6
62
68.5
50.6
61.2
67.1
0
2.1
4.4
0
10
20
30
40
50
60
70
80
2011 2014 2017
Percentageofadults
Accounts (%)
Total Financial institution Mobile money
64.8
60.5
59.3
66
54
56
58
60
62
64
66
68
Women Adults
belonging
to the
poorest
40%
Adults out
of the
labor force
Adults
living in
rural areas
Percentageofadults
Account, by individual
characteristics-2017 (%)
Source: World Bank, 2018
Globally the share of adults owning an account

18. 18
Savings
Particulars %
Financial institution 26.7
Saved any money 48.4
Saved for old age 20.6
Credit
Particulars %
Financial institution 22.5
Borrowed any money 47.5
Family or friends 25.8
Source: World Bank, 2018
Savings & Credit (World 2017)

19. 19
Percentage of adults made digital payment
Particulars %
Digital payments (made & received) 52.3
Paid utility bills (account) 22.3
Received private sector wages (account) 15.9
Received government payments (account) 16.3
Used the internet to pay bills or to buy something online 29
Used a mobile phone or the internet to access an account 24.9
Used a debit or credit card to make a purchase 32.6
Source: World Bank, 2018
Digital payments (World 2017)

20. 20
55.1
44.8
39.3
32.9 32.4
23.2
69.1
57.8
51.4
0
46.5
34.2
70.6
65.3
54.4
43.5
69.6
42.6
0
10
20
30
40
50
60
70
80
East Asia &
Pacific
Europe &
Central Asia
Latin America &
Caribbean
Middle East &
North Africa
South Asia Sub-Saharan
Africa
Percentage
2011 2014 2017
Total number of accounts (%)
Source: World Bank, 2018

21. 21
55.1
44.8
39.3
32.9 32.4
23.2
68.9
57.8
51.2
0
45.6
28.8
70.3
65.1
53.5
43
68.4
32.8
0
10
20
30
40
50
60
70
80
East Asia &
Pacific
Europe &
Central Asia
Latin America &
Caribbean
Middle East &
North Africa
South Asia Sub-Saharan
Africa
Percentage
2011 2014 2017
Financial institutional account (%)
Source: World Bank, 2018

22. 22
Mobile money account
0.4 0.2
1.7
0
2.6
11.6
1.3
3.2
5.3 5.8
4.2
20.9
0
5
10
15
20
25
East Asia &
Pacific
Europe &
Central Asia
Latin America
& Caribbean
Middle East &
North Africa
South Asia Sub-Saharan
Africa
Percentage
2014 2017
Source: World Bank, 2018

23. 23
Indian scenario

24. 24
First phase
1904-1981
Second phase
1982-2006
Third phase
2007 onwards
• Cooperative
movement
• Bank
nationalisation
• Priority sector
lending
• Lead bank
scheme
• Branch
licensing
norms
• Interest rate
ceilings
• Financial
institutions
• Annual policy
• Khan
committee
• No- frills
accounts
• Easier KYC
norms
• SHG model
• GCC scheme
• KCC scheme
• Financial
literacy
• Rangarajan
Committee
• NRFIP
• Access to
payment
system
• Use of
intermediaries
• District
adoption
• Use of ICT
• Evaluation,
feedback &
improvement
Phases of financial inclusion

25. 25
Initiatives towards financial inclusion
JAM

26. 26
FDI
0.40731
Rank
54
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5 1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Index
Year
Financial development index - India
Source: IMF [International Monetary Fund], 2017

27. 27
CRISIL Inclusix
score
Level of financial
inclusion
>65.0 High
50.1–65.0 Above average
35.0-50.0 Below average
<35.0 Low
Year Score
2009 35.4
2010 37.6
2011 40.1
2012 42.8
2013 50.1
2014 53.2
2015 56.2
2016 58
Branch penetration (BP)
Credit penetration (CP)
Deposit penetration (DP)
Insurance penetration (IP)
CRISIL Inclusix score
Source: CRISIL [Credit Rating Information Services of India Ltd.], 2018

28. 28
45.7
182.7
0
17.2
0
20
40
60
80
100
120
140
160
180
200
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
No.ofaccounts(crores)
Deposit Accounts Loan accounts
Deposit – loan accounts
Source: IMF [International Monetary Fund], 2017

29. 29
10.7
7.9
0
2
4
6
8
10
12
No.ofoutstanding
deposits/loans(Crore)
Deposits Loans
Outstanding deposits & loans (Commercial banks)
Source: IMF [International Monetary Fund], 2017

30. 30
67156
142207
0
20000
40000
60000
80000
100000
120000
140000
160000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
No.ofbanks
Branches of commercial banks
Annual growth rate = 1.06421
Source: IMF [International Monetary Fund], 2017

31. 31
17642
213396
0
50000
100000
150000
200000
250000 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
No.ofATMs
Number of ATMs in India
Source: IMF [International Monetary Fund], 2017

32. 32
0
10
20
30
40
50
60
70
80
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
%ofATMs
ATMs (%)
ATMs per 1,000 km2 ATMs per 100,000 adults
0
10
20
30
40
50
60
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
%ofcommercialbanks
Commercial banks (%)
Per 1,000 km2 Per 100,000 adults
ATMs & commercial banks
Source: IMF [International Monetary Fund], 2017

33. 33
No. of ATM transactions
Source: RBI [Reserve Bank of India], 2018
44
71
75
0
10
20
30
40
50
60
70
80
2011 2012 2013 2014 2015 2016 2017 2018
No.ofATMtransactions(crore)

34. 34
0
10
20
30
40
50
60
70
80
90
No.ofcardsincrores
Debit cards Credit cards
77
7.5
2.4 2.9
Source: IMF [International Monetary Fund], 2017
Cards

35. 35
Point of Sale
0.6
5.3
4.2
0
1
2
3
4
5
6
2011 2012 2013 2014 2015 2016 2017 2018
No.ofPOStransactions
(crore)
No. of POS transactions
6.2
33
0
5
10
15
20
25
30
35
2011 2012 2013 2014 2015 2016 2017 2018
No.ofPOS(lakhs)
No. of POS terminals
Source: RBI [Reserve Bank of India], 2018

36. NABARD All India Rural Financial Inclusion Survey
(2016 - 2017)
36
• Borrowings
• Savings
• Investments
• Insurance
• Pension
• Remittances
29 states
245 districts
40327 households
187518 population

37. 37
Proportion of households with savings in 2016-17 (% HH)
Agricultural
55.2
Non-agricultural 46.3
Quantum of savings
Rs 18007/HH/yr
Women savings
26.3% HH
Institutional savings
48.5% HH
Savings 51% HH
Source: NABARD, 2018

38. 38
Particulars
All Households
(% HH)
Agricultural
(% HH)
Non-Agricultural
(% HH)
Bank 78.4 79.8 77
SHG 29.4 30.4 28.4
Post Office 0.8 0.8 0.8
Home Saving 5.4 5.9 4.8
Chit Fund 0.4 0.4 0.4
Source: NABARD, 2018
Place of savings in Indian households

39. 39
12000
17000
22000
27000
32000
37000
Savings(Rs/yr)
Land holdings (Ha)
Average amount of savings per
agricultural households (Rs/yr)
Average amount of savings
Average amount of savings
(Rs/yr/household)
Particulars Total Institutional
All India 18007 16959
Agricultural 17488 16576
Non-
agricultural
18568 17373
Source: NABARD, 2018

40. 40
51
45
99
21
0
20
40
60
80
100
120
%ofhouseholds
Household savings- India (%)
17th
rank
Source: NABARD, 2018

41. 41
48
44
16
92
0
10
20
30
40
50
60
70
80
90
100
%ofhouseholds
Institutional savings(%)
18th
rank
Source: NABARD, 2018

42. 42
26
60
35
60
3
0
10
20
30
40
50
60
70
%ofhouseholds
Savings by women(%)
6th
rank
Source: NABARD, 2018

43. 43
18007
37609
90103
8411
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
Quantum of savings(Rs/HH/Yr)
3rd
rank
Source: NABARD, 2018

44. Investment
Particulars
Any
investment
Financial
assets
Physical
assets
Both physical
& financial
assets
Total 9.5 2.5 8.1 1
Agricultural 10.4 3.6 8.7 1.9
Non-
agricultural
8.7 1.5 7.5 0.3
44
10.4
8.1 8.4
9.3
12.6
15.5
8
9
10
11
12
13
14
15
16
Total <0.01 0.01-0.4 0.41-1.0 1.01-2.0 >2.0
Agriculturalhouseholds(%)
Land size
Investment by agricultural households
(%/ Yr)
Source: NABARD, 2018

45. 45
9.5
15.1
4.5
20.1
0
5
10
15
20
25
%ofhouseholds
Household investment- India(%)
4th
rank
Source: NABARD, 2018

46. 46
Average amount of investment (Rs/HH/Yr)
Particulars All Households Agricultural
Non-
Agricultural
All assets 60529 62734 58131
Financial
assets
16624 15731 17595
Physical assets 43905 47004 40535
Average investment amount
Source: NABARD, 2018

47. 47
Average Investment(Rs/Yr/HH)
60529
42759
91720
109622
0
20000
40000
60000
80000
100000
120000
Source: NABARD, 2018
2nd
rank

48. 48
Sources of fund for investment (>Rs 10,000)(% HH)
Particulars All Households Agricultural Non-Agricultural
Own 43 40 47
Institutional 37 38 36
Non-institutional 20 22 17
Sources of fund
Source: NABARD, 2018

49. 49
Indebtedness
49
48
52
56
60
53
40
45
50
55
60
65
<0.01 0.01-0.4 0.41-1.0 1.01-2.0 >2.0 Total
Agriculturalhouseholds(%)
Land size(Ha)
Incidence of Indebtedness(IOI) in
agricultural households (%/ Yr)
IOI in Indian households
(%HH)
Total 47.4
Agricultural 52.5
Non-agricultural 42.8
Source: NABARD, 2018

50. 50
47
27 27
56
79
0
10
20
30
40
50
60
70
80
90
%ofhouseholds
Incidence of indebtedness- India(%)
7th
rank
Source: NABARD, 2018

51. 51
Borrowing behaviour of households
% of HH with loans
All Households 40.2
Agricultural 43.5
Non-Agricultural 37.2
46
39
43
46
50
44
35
37
39
41
43
45
47
49
51
<0.01 0.01-0.4 0.41-1.0 1.01-2.0 >2.0 Total
%ofagriculturalhouseholds
Land size
Proportion of agricultural households
with loan (%HH/Yr)
Source: NABARD, 2018

52. 52
40
76
21 21
50
0
10
20
30
40
50
60
70
80
Borrowings in India (%)
7th
rank
Source: NABARD, 2018

53. 53
Sources of loan (%)
Particulars All Households Agricultural Non-Agricultural
Institutional 58.7 60.5 56.7
Non-institutional 31.8 30.3 33.4
Both 9.5 9.2 9.9
Sources & average amount of loan
Average amount of loan (Rs)
Particulars All Households Agricultural Non-Agricultural
Institutional 63645 77473 48970
Non-institutional 28207 29611 26718
Both 91852 107084 75688
Source: NABARD, 2018

54. 54
25
15
2
6
5
26
17
2
5 5
25
13
2
7
6
0
5
10
15
20
25
30
Any
insurance
Life
insurance
Accident
insurance
Health
insurance
Vehicle
insurance
Percentageofhouseholds
Insurance penetration (%)
All
Agricultural
Non-agricultural
Crop and livestock insurance in agricultural households (% AH)
Particulars <0.01 Ha 0.01-0.4 Ha 0.41-1 Ha 1.01-2 Ha >2 Ha All size
Crop 0.1 1.5 5.1 10.8 8 6.9
Livestock 0.7 0.8 1 1.2 5.4 1.7
Source: NABARD, 2018

55. 55
81.1 79.9 82.3
18.9 20.1 17.7
All Agricultural Non-agricultural
Percentageofhouseholds
Pension coverage(%)
With pension Without pension
Pension coverage in Indian households
Source: NABARD, 2018

56. 56
Microfinance experience
Proportion of households associated with microfinance institution (%)
Particulars Any microfinance group SHG JLG Livelihood groups
All 22.7 20.3 1.6 1.2
Agricultural 23.6 21.6 1.3 1.2
Non-agricultural 21.9 19.2 1.9 1.2
Technical support Training
Loans Marketing assistance
Others
Services
Source: NABARD, 2018

57. 57
Financial knowledge, attitude, & behaviour of
people (%)
Particulars Rural (%) Semi-urban (%)
Financial training 9.4 13.2
Financial knowledge 48 52
Financial attitude 42 49
Financial behaviour 57 54
Financial literacy 11 15
Source: NABARD, 2018
Financial knowledge, attitude, & behaviour

58. 58
National mission for financial inclusion
Launched by PM on 28th Aug 2014
32.62 crore accounts(2018)
Balance: 86,163.79 crores (2018)
PMJDY
Main objective of the scheme is to ensure universal access to
banking facilities with at least one basic bank account for every
household
(Kumar, 2015)

59. 59
PMJDY
Savings &
Deposit
accounts
Remittances
Credits
Insurance
Pension
Dimensions

60. 60
• Life insurance scheme
• Age: 18-50
• Coverage: 2lakh/yr
• Premier: Rs 330/yr
• Offered: LIC
PMJJBY
• Accident insurance scheme
• Age:18-70
• Coverage: 1-2 lakh/yr
• Premier: Rs 12/Yr
• Offered: General insurance
company
PMSBY
• Social security pension scheme
• Age: 18 – 39
• Five Plans: 1000, 2000, 3000,
4000 & 500
• Available after 60 yrs
APY
Pradhan Manthri
Suraksha Bima Yojana

61. 61
Number of bank accounts (Crores)
Particulars 2014 2015 2016 2017 2018
Total 10.44 19.83 26.2 30.79 32.62
Rural 6.23 12.1 15.96 18.11 19.62
Urban 4.21 7.73 10.24 12.68 13.36
Source: PMJDY, 2018
8.4630731
23.7452736
0
5
10
15
20
25
2014 2015 2016 2017 2018
No.ofcards(lakhs)
Number of Rupay cards

62. 62
No. of PMJDY beneficiaries in India (2018)
Source: PMJDY, 2018
51,891
3,560
0
10,000
20,000
30,000
40,000
50,000
60,000
UP
BR
WB
MP
RJ
MH
AS
CT
OR
GJ
KA
JH
TN
TG
AP
HR
PB
DL
KL
UK
JK
HP
MN
TR
ML
MZ
AR
NL
CH
GA
PY
DN
SK
AN
DD
LD
No.ofbeneficiaries(1000’s)

63. Kisan Credit Cards (KCC)
Introduced
1998
• Extend need-
based
• Timely credit
support
63
Post-harvest
expenses
Marketing
loan
Consumption
Working
capital
Investment
credit
Cultivation
Credit

64. 64
Agricultural households
who availed KCC(%)
Holding size Percentage
<0.01 1.2
0.01-0.40 5.9
0.41-1.00 10.8
1.01-2.00 14.1
>2.00 23.8
Overall 10.5
Average
amount
sanctioned
Rs 139208
Average
amount drawn
Rs 91202
% limit utilized 65.5%
Growth rate of the number of cards issued
India 13.74% per annum Kerala 3.03% per annum
(Kshama, 2018)
Source: NABARD,2018

65. “SHG and JLG provided access to finances without
any collateral and had empowered the beneficiaries
not only economically, but also socially”
(Sarma & Mehta, 2014)
65
SHG-JLG bank linkage
SHG
Members: 10-20
Loan limits: 3, 5 & 10 lakhs
Repayment: 3-5
JLG
Members: 4-10
Loan limits: 5 lakhs
Repayment: 3-7

66. 66
Mobile banking

67. MGNREGA- Direct Benefit Transfer
67
Number of workers (2018)
India 25.08 Crores
Kerala 53.47 lakhs
“MGNREGA wage payment
through bank and post office
also helps to speed up
financial inclusion and it could
create wonderful impact in the
rural areas”
(Sahoo, 2013)
Source: MGNREGA, 2018

68. 68
650 branches
3250 post offices as access points
1.55 lakh post offices
3 lakh postmen
10,000+ doorstep service providers
“India post is suitably located to deliver
microfinance services due to its close
proximity to the rural population”
(Arun, 2010)
India Post
Source: IPPB, 2018

69. 69
Kerala scenario

70. 70
Banking Group Number of Branches
Rural Semi-urban Urban Total Percentage
State Bank Group 77 967 326 1370 18.74
Nationalised Banks 101 1545 609 2255 30.84
RRB 51 525 39 615 8.41
Private Sector Bank 148 1469 475 2092 28.61
Co-operative Bank 135 26 819 980 13.40
Total 512 4532 2268 7312 100
Source: GOK [Economic review], 2017
Population 3.34 crore
Branches 7312
Deposits 412503
Credits 246314
CD ratio 59.71
Banking profile

71. 71
Public sector
commercial
banks
Regional rural
bank
Private sector
commercial
bank
Small finance
bank
Co-operative
banks
Bank branches
220
388
121
446
448
425
733
999
176
501
378
387
390
725
0
200
400
600
800
1000
1200
No.ofbankbranches
Source: GOK [Economic review], 2017

72. 72
Deposits & Credits CD ratio
81245
66601
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
No. of deposit and credit accounts
Deposits Credits
59.71
115.91
25.24
0
20
40
60
80
100
120
140
CD ratio
Source: GOK [Economic review], 2017

73. 73
Growth of bank deposits in Kerala
410492
258143
152349
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
No. of deposits
TOTAL DOMESTIC NRI
13.52
14.23
12.34
-20
-10
0
10
20
30
40
50
Annual growth %
TOTAL DOMESTIC NRI
Source: GOK [Economic review], 2017

74. 74
No. of beneficiaries(rural/semi-urban) 16 lakh
No. of beneficiaries(urban/metro) 19 lakh
Total no. of beneficiaries 35 lakh
No. of RuPay cards issued to beneficiaries 24 lakh
Balance in beneficiary accounts (in crore)
Rs
1027.11
Source: PMJDY, 2018
PMJDY beneficiaries in Kerala(2018)

75. 75
Savings
Particulars India Kerala
Total (% HH) 51 45
Institutional (% HH) 48 44
Women (% HH) 26 35
Quantum (Rs/HH/Yr) 18007 37609
Investment
Investment(%/HH) 9.5 15.1
Average amount
(Rs/Yr/HH)
60529 91720
Borrowings
Indebtedness (% HH) 47 56
Borrowings (% HH) 40 50
Source: NABARD, 2018
Palakkad
Trivandrum
WayanadIdukki
Kollam
Alappuzha
Savings, investment & borrowings by households

76. 76
Kiosk banking
157centers
Banking
services of
various banks
Digital literacy/
e-literacy
Akshaya Centres

77. 77
Issues and challenges
Demand side
Large population
Vast area
Limited access to credit
Low skill
Low productivity
Vulnerability to risk
Rural landless
Urban poor
Lack of financial literacy
Lack of technology literacy
Supply side
Reluctance of financial
institutions
High cost
Lack of robust technology
Lack of infrastructure
Restrictive nature of BC
Absence of incentives for BC
Ignorance to bank account,
insurance, cheques
(Varghese and Viswanathan, 2018)

78. Conclusions
• Prerequisite for poverty reduction, social cohesion and
inclusive growth
• Bring about a mindset and cultural shift among newly
connected beneficiaries to derive benefits from the formal
financial system by borrowing from banks and repaying
loans in time
• Educate people, disseminate financial and digital
awareness in the society, and making FI beneficiaries
aware about the scope of expanding rural enterprises
using their rights to borrow and duty to repay bank loans
78

79. • Campaign of financial literacy requires a multipronged,
bottom-up approach
• RBI and banks should coordinate with educational
institutions to include FI as a mandatory subject at
different educational levels right from school to higher
levels of education
• NGOs, corporate sector, banks, NBFCs (Non-Banking
Financial Companies), and government departments
currently engaged in FI should be persuaded to increase
thrust
• Prompt beneficiaries to use their access to financial
services for improving their economic and social well-
being
79

80. Thank you