PILLARS OF FINANCIAL INCLUSION

NP MOHAPATRA

22 January 2009
 Financial Inclusion - Definition
Financial Inclusion can be described
as the broad based delivery of banking
and other financial services at
affordable costs.
 Formal Bank Network In India
June 2007

Reserve Bank of India Government of India

NABARD

Public Sector RRBs (96) Private Foreign

Banks (28) LABs (4) Banks (24) Banks (29)

TOTAL
Rural 18,197 11,444 / 5 987 0 30,633
Semi-urban 11,736 2,481 / 14 2,077 2 16,310
Urban 10,247 522 / 11 2,102 43 12,925
Metro 9,726 59 / 0 1,901 227 11,913
Total 49,906 14,506 / 30 7,067 272 71,781

13,104 NBFCs registered with RBI.

1853 Urban Co-operative banks with 7217 branches.
1,09,924 Rural cooperatives comprising ST structure
with 31 SCBs, 367 DCCBs, 1,08,779 Primary
Agricultural Credit Societies & LT structure with 20 at
State level and 727 at Primary level.
 Financial Exclusion at a glance
State-wise
Sl. No.
% of Financial Exclusion States

1 > 75%Mizoram, Jharkhand, Uttarakhand, Arunachal Pradesh, Assa

Meghalaya,

Bihar, Orissa,
2 51 – 75 Himachal
Chattisgarh, % Pradesh, Jammu and Kashmir, Uttar Pradesh, Na

25Kerala,
Karnataka,
3 – 50 Madhya
% Pradesh, Maharashtra, Punjab, Tamil Nadu, West B

4 < 25 % Andhra Pradesh, Delhi, Goa and Pondicherry

Financial Exclusion at a glance
Sl. No. Social Group Population (000) % Excluded

1 Scheduled Caste (SC) 15592.6 49.77

2 Scheduled Tribes (ST) 11924.1 63.68

3 OBC 37043.0 48.58

4 Others 24688.4 50.58

5 Total 89248.1 51.36

Medium Farmers - 34.90%

Semi-Medium Farmers - 41.80%
Large Farmers - 33.00%
 Extent of Financial Exclusion
 Despite the presence of over 69,000 outlets of the formal
Banking network, only 57% of indebted farmers were
served by the institutional credit.
 Thus financial exclusion is to the order of 43%.
 Besides, 51% do not have access to Financial Services.
 Poor and weaker sections of society are predominantly
excluded from the formal banking structure.
 FI through SHGs
 SHG-Bank linkages have facilitated 40.45 million
poor households to gain access to the formal
banking system as on 31 March 2008.
 Savings of SHGs with the banks aggregated
Rs.3512.71 crores as on 31 March 2007.
 Bank loans outstanding against SHGs
-Rs.12366.49 crores as on 31 March 2007.
 Funds in NABARD
In the Union Budget Speech for 2007 - 08,
FM announced the constitution of the Financial
Inclusion Fund (FIF) and the Financial Inclusion
Technology Fund (FITF), with an overall corpus
of Rs. 500 crore each, in the ratio of 40:40:20 by
GoI, RBI and NABARD respectively.
 Objectives of FIF
The objectives of the FIF shall be to support
“developmental and promotional activities”
with a view to securing greater financial
inclusion, particularly among weaker sections,
low income groups and in backward regions /
hitherto unbanked areas.
 Business Correspondent model
Eligible entities
 NGOs /MFI set up under
Societies/Trust acts. (Registered,
accounting system with donor
assessment)
 Societies registered under mutually
aided cooperative Societies Acts or the
Cooperatives Societies Acts of States.
 Section 25 companies.
 Post offices.
 Retired Bank/Govt. employees and ex-
servicemen,
Scope of activities
In addition to those under BF model,
 Disbursal of small value credit
 Recovery of principal/ collection of
interest
 Collection of small value deposit.
 Sale of micro insurance/mutual fund
products/pension products/other third
party products
 Receipt and delivery of small value
remittances/other payment
instruments.
BUSINESS FACILITATOR MODEL
Eligible entities Scope of activities
 NGOs  Identification of borrowers and fitment of
activities.
 Farmers club  Collection and preliminary processing of
 Cooperatives loan applications including verification of
 Community based organisation primary information/data.
 IT enabled rural outlets of corporate
 Creating awareness about savings and other
products and education and advice on
entities managing money and debt counselling.
 Post Offices  Processing and submission of application to
 Insurance agents banks.
 Well functioning Panchayats  Promotion and nurturing of self help
groups/Joint Liability groups.
 Village knowledge centers  Post sanction monitoring.
 Krishi Vigyan Kendars
 KVIC/KVIB units
 Challenges
 Strategies to ensure that atleast one member in each family
should have one bank account in next 3 – 5 years.
 Designing and marketing of Innovative Micro Insurance
products in collaboration with Micro Insurance providers.
 Protecting the deposits of clients of micro Finance
Organisations (mFOs) in the absence of adequate deposit
insurance coverage.
 setting up of Rural Credit Information Bureau.
 Ensuring the effectiveness of BFs / BCs in FI.
 Designing and conducting of financial literacy programmes
for financially vulnerable groups.
 Micro remittance
 INNOVATIONS
 PARTICIPATORYWATERSHED
DEVELOPMENT PROJECT
 WADI DEVELOPMENT PROGRAMME
 CLUSTER DEVELOPMENT PROGRAMME
 RURAL ENTREPRENUERSHIP
DEVELOPMENT PROGRAMMES
 RURAL HAAT,GRAIN GOLA
 MICRO INSURANCE-ISSUES
 FARMER LOOKS FOR CROP INSURANCE,NON
LIVE ASSET INSURANCE,LIVESTOCK
INSURANCE,TRACTOR,PUMPSET…….
 RASTRIYA SWASTHYA BEEMA,JANASHREE,AAM
ADMI,JEEVAN MADUR,….
 MODELS AVAILABLE-Partner Agent ,Community
based insurance,Full service insurance,provider model
 INNOVATION-PEOPLES MUTUTAL
 Pillars of Financial Inclusion
Targets for each Branch on
 250 accounts to be ADDED every year
 100 KCCs may be distributed
 100 GCCs may be distributed
 100 micro insurance policies may be targeted.
 Micro remittance facility may be addressed
 Way Forward-Technology
application
Providing financial support to technological solutions aimed at
providing affordable financial services to the disadvantaged
sections of the society;
 Funding support to technologies facilitating the documentation for
processing of loans;
 Providing promotional support to institutions, such as, Resource
Centres, Farmers’ Service Centres and Rural Development and Self
Employment Training Institutes to enable them to provide improved
technical and financial services (including counseling) aimed at
increasing technology adoption, effective management of assets,
nurturing entrepreneurial capacity and increasing financial education
and literacy;
 Way Forward-Promotional
Intervention

2. Capacity building of personnel of banks, Post Offices, State

Government Departments, MFIs, NGOs, VAs and Local Level
Associations, members of SHGs / Joint Liability Groups, etc.;
3. Providing funding support for promotion, nurturing and credit
linking of Self Help Groups (SHGs);
4. Defraying of expenses /Capacity Building of BC/BFs
5. Guidelines for Financial Literacy Programmes
 Inclusive Growth
‘Kato Upanishad’
"Om Sahana Vavatu Sahanau Bhunaktu,
Saha Viryam Karawavahai,
Tejasvinavaditamastu, Ma Vidvishavahai,
Om Shanti hi Shanti hi Shanti hi"

"Together may we be protected, together may

we be nourished, together may we work with
great energy, may our journey together be
brilliant and effective, may there be no bad
feelings between us, Peace, Peace, Peace”