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Financial Inclusion: The need for out-of-box thinking.

What is Financial Inclusion:

Financial Inclusion is the delivery of banking services at


affordable costs to vast sections of disadvantaged and low
income groups.

-
Dr. K.C.Chakrabarty, Deputy Governor, Reserve Bank of
India, at the Seminar 20th SKOCH Summit 2009, Mumbai
on July 17, 2009, has defined Financial Inclusion as

“The process of ensuring access to appropriate financial


products and services needed by vulnerable groups such as
weaker sections and low income groups at an affordable cost in a
fair and transparent manner by mainstream Institutional
players.”

Towards achieving FI, RBI has taken up numerous steps.


No-frills account, is seen as a major contributor by RBI, in its
goal of FI.
The concept of ‘NO-FRILLS’ ACCOUNT, was first mooted by RBI
in its Mid-term Review of Annual Policy Statement for the year
2005-06.

The first letter on this subject by RBI, is Lr.No. RBI/2005-


06/204
DBOD.No.Leg.BC. 44/09.07.005/2005-06, November 11,
2005, addressed to All Scheduled Commercial Banks(Excluding
RRBs).

Subsequently a similar letter was addressed to RRB’s and UCB’s


also.

In RBI’s view, ‘NO-FRILLS’ ACCOUNT is

QUOTE

basic banking 'no-frills' account either with 'nil' or very low


minimum balances as well as charges that would make such
accounts accessible to vast sections of population. The nature and
number of transactions in such accounts could be restricted, but
made known to the customer in advance in a transparent
manner. All banks are advised to give wide publicity to the
facility of such a 'no-frills' account including on their web
sites indicating the facilities and charges in a transparent
manner.

UNQUOTE.

Wisely RBI has left it to the banks, to decide the minimum


balances/fees/facilites to such ‘NO-FRILLS’ ACCOUNT .

However, it has advised Banks to report quarterly, the opening of


such ‘NO-FRILLS’ ACCOUNT ’s

Common Points regarding ‘NO-FRILLS’ ACCOUNT ’s

However, while opening such accounts the customer should be


made aware that if at any point of time, the balance in all his/her
accounts with the bank (taken together) exceeds Rs.50,000/- or
total credits in the accounts exceed Rs.1.00 lakh in a year, no
further transaction will be permitted in the account until full KYC
procedure in regard to verification of identity and address of the
customer through the documents as specified are complied with.

IT Software is available to
 Throw Alerts when the Balance in all the accounts of the
customer in the Bank exceed Rs.40000/-. The Software is
customizable.
 Rejects any Credits(Transfer/Clearing/RTGS/NEFT), when
the credits exceed Rs1lakh in a year.

The issue is of the cost of the Software.

Universal Observations about ‘NO-FRILLS’ ACCOUNT


1) The ‘NO-FRILLS’ ACCOUNT numbers are not impressive.
2) Also, in the ‘NO-FRILLS’ ACCOUNT opened so far, only a
few accounts are active.
3) A decent Average Balance in the ‘NO-FRILLS’ ACCOUNT is
due to balances in 20% of the ‘NO-FRILLS’ ACCOUNT. YES,
the 80/20 funda, works here also.

Banks have been reluctant to encourage ‘NO-FRILLS’ ACCOUNT,


due to the costs involved in Sourcing/Monitoring.

May be it is time, to offer Incentives to Banks to encourage them


to open ‘NO-FRILLS’ ACCOUNT.
What could be the incentives and who has to offer them?
Well, the incentives have to be offered by Reserve Bank of India.
What could be the incentives?
1 BRANCH LICENCE SANCTION ANYWHERE IN INDIA, FOR
EVERY 1 LAC ‘NO-FRILLS’ ACCOUNT, OPENED EVERY
FINANCIAL YEAR.

What are the safeguards, to ensure only quality ‘NO-FRILLS’


ACCOUNT are opened.
 A minimum of 5 transactions in a 6 month cycle i.e Half
year ending 31st March and 30th September
 Accounts closed within 1 year of opening, to be less than
10%.

Few Links to various Bank’s ‘NO-FRILLS’ ACCOUNT ’s offerings.


Please note that I am not canvassing for any bank, I am only interested in ePayments

http://www.icicibank.com/Pfsuser/icicibank/depositproducts/nofrillsaccount/nf_faq.htm

http://www.standardchartered.co.in/personal/accounts/en/no-frills-acc.html

http://www.hdfcbank.com/personal/accounts/savings_accounts/no_frills_account/nofrills
_acc.html

http://www.iob.in/No_Frills_Account.aspx

http://www.axisbank.com/personal/accounts/azaadinofrills/Azaadi-No-Frills.asp

http://www.federalbank.co.in/content/DisplayContentDetails.aspx?id=645

http://www.barclays.in/consumer_banking/no_frills_ac.htm

http://www.chinatrustindia.com/frill.html

http://www.yesbank.in/savings_nofrillsaccount.htm

http://www.ucobank.com/deposit.htm

http://www.indorebank.org/nofrills.htm
http://www.online.citibank.co.in/portal/newgen/seo/banking/citigold/no_frills_account.ht
m

http://www.kotak.com/Kotak_BankSite/personal/deposits/sa_easy.htm

http://www.saraswatbank.com/view_section.jsp?lang=0&id=0,4,6,104

http://www.kvb.co.in/scripts/Common.asp?Page=nofrillcontent.asp

http://www.tmb.in/d_janatha.htm

http://www.lvbank.com/nofrills.aspx

http://www.csb.co.in/asp/0100text.asp?pageId=135&headId=135

http://www.allahabadbank.com/5-banking.asp

http://www.jkbank.net/customerSaveDepositSchemes.php

http://www.bankofindia.com/nofrill.aspx

http://www.abnamro.co.in/India/May-I-Help/Service-Ch/No-Frills/SOB-NOFRILLS.pdf

http://www.corpbank.com/asp/0100text.asp?presentID=392&headID=0

http://www.unitedbankofindia.com/deposit-schemes.asp#UnitedBasicSBAccount

http://www.bankofrajasthan.com/bor/wcms/en/home/personal-
banking/deposits/accounts/small.html

http://www.statebankofmysore.co.in/downloads/depacs-bcsbi.pdf

https://www.obcindia.co.in/obcnew/site/inner.aspx?status=2&menu_id=28

http://www.canarabank.com/english/Scripts/DepositAccounts.aspx

http://www.bankofmaharashtra.in/whats_new.asp
‘NO-FRILLS’ Account’s, can improve the ePayments turnover of the Bank, as a Bank
Account is mandatory to receive ePayments.