1. Amir Ullah Khan June 2011 Financial Inclusion and development Focus South Asia

3. Financial inclusion Financial inclusion is the “ 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 .”

5. Farm problems Access to technology has been low. Flow of institutional credit a constraint. Although 18% of priority sector lending is supposed to be for agriculture, agriculture’s share in net bank credit has been more like 12%. The biggest challenge is lowering transaction costs for small loans and deposits, using technology.

6. Liberalisation Liberalisation of FDI limit in banking companies. Interest rate deregulation - Rates on deposits and lending need to be deregulated with banks enjoying greater freedom to determine their rates. Adoption of prudential norms in terms of capital adequacy, asset classification, income recognition, provisioning, exposure limits, investment fluctuation reserve, by banks

8. Government policy The Global crisis has created a doubt among the policy makers in Asia that an opening up of the banking sector is fraught with risks. Therefore the need for strict adequacy measures and tight control over non performing assets The increased threat of laundering and illegal transactions, the need to enforce tight measures for the banks to accept new accounts. Therefore time consuming Know Your Customer norms

9. Economies of scale Small transactions and mandated interest rates: The regulatory environment discourages small transactions, primarily by imposing the same transaction cost on small players as on the big ones. Business facilitators - Business correspondents necessarily have to be non profit organisations

10. Government policy Regulated technology A narrow focus into regulation Value of transaction – The Income Tax Act mandates that payments greater that Rs 20000 be made only through crossed cheques and demand drafts. ATM’s face similar restrictions under the Banking Regulation Act and therefore cash withdrawals of large amounts not permitted.

11. Guidelines Prepaid instruments – The Federal Bank is understandably cautious on these payment mechanisms. Electronic Purse Schemes: The federal bank prohibits companies from providing ‘internet based electronic purse schemes’. Internet Banking: Internet banking governed by central banks, aims at regulation and supervision of the internet banking activities of the banks. Mobile Banking: Operating Guidelines for Mobile Payments in India for regulating mobile banking.