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FINANCIAL INCLUSION IN BANKS,

STRATEGY OF BANKS,
BCBF (BUSINESS CORRESPONDENT
AND BUSINESS FACILITATORS)
MODEL, FINANCIAL LITERACY
CENTRES AND STATUS OF BANKS
BY
R.K.GUPTA
B. Com (Hons); CAIIB; AIB (London); LL.B; MBA (Finance)
11/22/2014

Topics to be covered during the sessions


a.
b.
c.
d.
e.
f.
g.
h.

i.
j.
k.

Definition of financial inclusion


What has been left so as to enforce financial inclusion by the GOI
What strategies banks are following to implement FI & How
effective it is?
Difficulties in opening no frill accounts &Problems being
encountered?
BC/BF model effectiveness.
Difficulties in Issuance of KCC and GCC cards/OD facility.
Status of implementation of Electronic Benefit Transfer of
funds (EBTF) in banks. Issues if any.
Status and issues in opening Financial Literacy centers and use
thereof.
Latest guidelines issued by RBI through monetary Policy declared
on 03.05.2013
Plan for financial inclusion for the period from 2013-2016
New guidelines of RBI for appointment of NBFCs as BCs dated
24.06.14

11/22/2014

DEFINITION OF FINANCIAL INCLUSION


a.

Financial Inclusion is defined 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. RBI CIRCULAR 12.08.2011
b. Approach is based on the fundamental principle of 5As of ensuring
i.
Adequacy and
ii. Availability of financial services to all sections of the society
through the formal financial system covering savings, credit,
remittance, insurance, etc. and, at the same time,
iii. increasing Awareness of such services and
iv. ensuring Affordability and
v. Accessibility of the appropriate financial products
through a combination of conventional and alternative delivery channels
and technology enabled services and processes.
11/22/2014

WHAT HAS BEEN LEFT SO AS TO ENFORCE


FINANCIAL INCLUSION BY THE GOI
Types of Financial Exclusion :
(i) Exclusion from payment system: not having access to bank accounts
(ii) Exclusion from formal credit markets leading to approaching
informal/ exploitative markets
Post-Nationalization (1969) :
Expansion of branch network to unbanked areas Increased lending to
agriculture, SSI, business Recent trend : access to basic banking services
Who have been excluded so far:
Marginal farmers landless labour oral lessees self employed
unorganized sector urban slum dwellers migrants ethnic minorities
socially excluded groups senior citizens women NER, Eastern &
Central regions most excluded
FI essential
for inclusive growth which is necessary for sustainable overall economic
growth In developed economies, focus is on small population In
developing economies (India), focus is on majority excluded
11/22/2014

WHY FINANCIAL INCLUSION?


a. Out of total 1065 million population, 514 million are
female.
b. Out of 6,00,000 rural habitations across the country, only
30,000 rural habitations have commercial Bank Branches
c. 60% of the population do not have Bank Accounts and life
insurance cover is less than 10%
d. 51.4% of the farmer households are financially excluded
from both formal and informal sources
e. Out of the total farmer households,
i.
27% access formal sources of credit
ii.
73% of the farmer households access funds from
informal sources like local money lenders

SELECT INDICATORS OF FINANCIAL INCLUSION


CROSS COUNTRY ANALYSIS
Country

Number of
Branches

Number of
ATMs

(per 0.1 million adults)

Bank credit

Bank deposits

(as per cent of GDP)

India

10.91

5.44

43.62*

60.11*

Austria*

11.81

48.16

35.26

32.57

Brazil

13.76

120.62

29.04

47.51

France

43.11

110.07

56.03

39.15

Mxico

15.22

47.28

16.19

20.91

UK*

25.51

64.58

467.97

427.49

United States

35.74

173.75*

46.04

53.14

Korea

18.63

250.29*

84.17

74.51

Afghanistan

2.25

0.50

11.95

21.4

Philippines

7.69

14.88

27.57

53.02

11/22/2014

WHAT STRATEGIES BANKS ARE FOLLOWING TO IMPLEMENT FI?.


i. Ultra Small Branches being set up between the base branch and BC
locations so as to provide support to about 8-10 BC Units at a reasonable
distance of 3-4 kilometres.
ii. Such Ultra Small Branches should have minimum infrastructure such as
a Core Banking Solution (CBS) terminal linked to a pass book printer and a safe
for cash retention for operating large customer transaction and would have to
be managed full time by bank officers/ employees. Such an arrangement
would lead to efficiency in cash management, documentation, redressal of
customer grievances and close supervision of BC operations.
iii. Promotion of SHG/ NGO and appointment of retired bank employees
preferably belonging to these areas besides Micro Finance Institutions (MFIs)
and other Civil Society Organisations (CSOs) as intermediaries in providing
financial and banking services through the use of Business Facilitator and
Correspondent models
iv. Opening the literacy centres for counselling of the borrowers and the
depositors.
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WHAT STRATEGIES BANKS ARE FOLLOWING TO


IMPLEMENT FI?.
v.

Implementing the EBTF directly to the credit of the beneficiary for routing
MGNREGS, wages and social security benefits including proposed cash
transfers in respect of subsidies on Kerosene, LPG and Fertilisers etc.
MONETARY POLICY OF RBI AS ON 03.05.2013
With a view to facilitating Direct Benefit Transfer (DBT) for the delivery of social
welfare benefits by direct credit to the bank accounts of beneficiaries, it is
proposed to advise banks to:
a. Open accounts for all eligible individuals in camp mode with the
support of local government authorities;
b. Seed the existing accounts or the new accounts opened with Aadhaar
numbers; and
c. Put in place an effective mechanism to monitor and review the progress
in the implementation of DBT.
d. Guidelines are being issued separately.
11/22/2014

WHAT STRATEGIES BANKS ARE FOLLOWING TO IMPLEMENT FI?.


vi.

Social security pensions, Mahatma Gandhi National Rural


Employment Guarantee Scheme (MNREGS), National Old Age
Pension (NOAPS) insurance scheme etc. for the benefit of the poor to
avoid leakages.
vii. Implementation of ICT (Information and communication Technology)
including Mobile , internet, kiosk, ATMs for illiterate ( biometric) and
blind persons (Braille language).
viii. At least one third of new ATMs installed should be talking ATMs with
Braille keypads and placed strategically in consultation with other
banks to ensure that at least one talking ATM with Braille keypad is
generally available in each locality for catering to needs of
visually impaired persons.
ix. Simplification of branch authorization - Domestic Scheduled
Commercial Banks have been permitted to freely open branches in
Tier 2 to Tier 6 centres
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10

WHAT STRATEGIES BANKS ARE FOLLOWING TO IMPLEMENT FI?.


x.

Banks have been mandated to open 25 % of all new branches in unbanked rural
centers.
xi. Free bank branching for domestic scheduled commercial banks in every part of
the country. No longer will a well-run scheduled domestic commercial bank have
to approach the RBI for permission to open a branch. RBI CIR: 19.09.13.
xii. Know Your Customer (KYC) requirements for opening bank accounts relaxed for
small accounts
xiii. Electronic Benefit Transfer for routing social security payments and other
entitlements through the banking channel.
xiv. Pricing for banks totally freed. Interest rates on advances totally deregulated
xv. Making available a minimum four banking products through the ICT based BC
model.
xvi. Banks are requested to ensure opening of Aadhaar Enabled Bank Accounts
(AEBA) of all the beneficiaries including those residing in villages with less than
2000 population CIR--- RBI 30.11.11
xvii. In addition to introduction from any person on whom KYC has been done, banks
can also rely on certificates of identification issued by the intermediary being
used as Banking Correspondent, Block Development Officer (BDO), head of
Village Panchayat, Post Master of the post office concerned or any other public
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11
functionary, known to the bank.

WHAT STRATEGIES BANKS ARE FOLLOWING TO IMPLEMENT FI?


xvii. Banks prepared Board approved three Year FIPs- April 2010 to
March 2013 and as per latest guidelines mentioned in Monetary
Policy declared on 03.05.2013 the banks are required a plan of
2013-16
xviii. Self-set targets-FIPs to be integrated with Business plan of the
banks.
xix. Coverage of unbanked villages, > 2000 & < 2000, Rural brick and
mortar branches, Deployment of BCs.
xx. No-frill accounts (NFA) to be opened, including through BC-ICT,
EBT, KCC, GCC.
xxi. Specific products to be designed to cater to the financially excluded
segments.
xxii. FIP achievement- Criteria in the performance evaluation of
officials of banks.
xxiii. Close Monitoring by Reserve Bank of India- Monthly ReportingAnnual Comprehensive review.
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12

WHAT STRATEGIES BANKS ARE


FOLLOWING TO IMPLEMENT FI?.
xxiv. Printed material in trilingual form
In order to ensure that banking facilities percolate to the vast sections of
the population, banks should make available all printed material used by
retail customers including account opening forms, pay-in-slips, passbooks
etc., in trilingual form i.e., English, Hindi and the concerned Regional
Language.
MONETARY POLICY DECLARED ON 03.05.2013
The Reserve Bank has prepared comprehensive financial literacy material
consisting of a Financial Literacy Guide, a Financial Diary and a set of 16
Financial Literacy Posters. Banks are, therefore, advised to:
a. use the model of financial literacy camps as a tool to achieve the
targets set under their FIPs;
b. use the financial literacy material as a standard curriculum in the
literacy camps; and
c. be innovative in devising suitable communication channels so that the
messages reach the target audience effectively.
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13

HOW EFFECTIVE IT IS?


Up to 31.03.2012 the villages having population over 2000 have been
covered by 96.4% for the financial inclusion.
a. EBT is one of the products offered under Financial Inclusion, which
facilitates payments to reach the intended beneficiaries through
bank accounts.
b. This relieves State Government functionaries of cost and time
involved in administering the high volume small value payments.
c. Provision of door step banking services in remote areas entails a
cost on the banks.
d. The payment of commission by the State Governments for EBT
transactions makes the model economically viable and also helps
banks to extend their penetration to remote villages.
e. It also provides banks with a business opportunity of linking
credit products to the payments.

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14

PARTICULARS

MARCH 10

MARCH 13

GROWTH

Banking Outlets in Villages - Branches

33,378

40,837

7459

Banking Outlets in Villages - BCs

34,174

2,21,341

1,87,167

142

6,276

6,134

67,694

2,68,454

2,00,760

447

27,143

26,696

BSBDA Total (in millions)

73.45

182.06

108.61

BSBDA Total (Amt. in ` billions)

55.02

182.92

127.90

OD facility availed in BSBD A/c (No. in millions)

0.18

3.95

3.77

OD facility availed in BSBD A/c (Amt in billions)

0.10

1.55

1.45

24.31

33.79

9.48

1240.07

2,622.98

1,382.91

1.39

3.63

2.24

GCCs - (Amt. in ` billions)

35.11

76.34

41.23

ICT A/Cs-BC- Transaction - No. in millions

26.52

250.46

490.49

6.92

233.88

15
388.97

Banking Outlets in Villages - Other Modes


Banking Outlets in Villages -TOTAL
Urban Locations covered through BCs

KCCs - (No. in millions)


KCCs - (Amt. in ` billions)
GCCs - (No. in millions)

ICT11/22/2014
A/Cs-BC- Transactions - Amt. in ` billions

ISSUES AND CHALLENGES


a. Demographic Spread How to provide banking
services to villages with low population Viability?
b. Appropriate Business Model Yet to evolve - Availability
of Suitable products.
c. Efficient Delivery Mechanism being experimented.
d. Financial Literacy Status of awareness.
e. Lack of ownership by banks in implementation under
Financial Inclusion. Issue has been raised by banks
with RBI in April 13
f. Lack of co-ordination.
g. ICT Based BC Model - Yet to stabilize.

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16

WAY FORWARD FOR EBT IMPLEMENTATION


Keeping in view the need to spread the banking habits to all villages, it is advised
that one district many banks one leader bank model may be adopted
henceforth for EBT implementation.
a.
In this model, all the banks present in the district participate in EBT, though
for administrative convenience the State Government deals only with one
leader bank.
b. State Government shall designate the leader bank, in consultation with the
Regional Office of RBI and the SLBC, who will obtain the funds from the
State Government and in turn will arrange to transfer funds through
interbank transfer to other banks for credit to the accounts of ultimate
beneficiaries account on a commission basis.
c.
The commission paid by the State Government may be from the amount
which will accrue to them due to non-incurring of expenses involved in
manually administering high volumes of small value payments.
d. The revenue sharing model is to be decided mutually amongst participating
banks.
e.
Today, with the availability of various modes of EFT like RTGS, NEFT and
NECS, the leader bank is in a position to transfer funds to other participating
banks speedily and cost effectively.
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WAY FORWARD FOR EBT IMPLEMENTATION


f.

g.
h.

i.

j.

11/22/2014

However, there is no prohibition on adoption of one district one


bank model approach where the model exists and is already
working provided one bank is in a position to provide whole range of
minimum banking services under this dispensation.
However, all the operational glitches will have to be resolved
mutually by the State Government and the concerned bank.
EBT implementing bank, will in such case have to follow regulatory
stipulation that brick and mortar branches are built within 30 km
radius of each of the BC outlets in these villages.
Needless to say, the FIP implementing bank's responsibility will be
secondary in the allotted villages of such districts till they also
obtain the EBT mandate.
However, banks will continue opening banking outlets in the villages
allotted to them under FIP and speed up enrolment of customers.
18

WAY FORWARD FOR EBT IMPLEMENTATION


k. As EBT Scheme is a part of the overall FIP, the EBT accounts is required to provide
whole range of permissible banking services viz. deposit scheme, preferably a
variable recurring deposit will in-built Overdraft (OD), remittance and
entrepreneurial credit products in the form of GCC/KCC.
l. The State Governments should not stipulate any condition that prevents EBT
accounts from being used for other banking transactions.
m.Whenever the State Government plans to implement EBT scheme through banks in
future, the details of the scheme should be first discussed in the SLBC.
n. For example, these accounts cannot be opened as joint accounts of the beneficiary
with a State Government agency.
o. Similarly, in some states, EBT accounts are made dormant when there are no
transactions in the account for 2-3 months. This is not permissible as per regulatory
guidelines.
p. Thus in such cases, neither the account can be made inactive nor can the amount
be returned to State Government.
q. The concerns of State Government can be addressed by providing an exception
report of those accounts where there is no transaction for 2-3 months.
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WAY FORWARD FOR EBT IMPLEMENTATION


t. State Government shall designate a nodal department for administration of each
of the social benefit schemes.
u. The provisions of MOU signed between Government agency and the banks
should be consistent with the extant guidelines and notifications of RBI.
v. The Nodal Department shall provide the list of beneficiaries for the district to be
enrolled along with demographic details to the bank.
w. Banks shall arrange for enrolment and creation of bank account of the
beneficiary.
x. The Nodal Department shall maintain a savings account in its name with the
leader bank.
y. The departments account in the bank will be credited with a consolidated
amount by the Treasury Bank of the State Government.
z. The department will send instructions to the leader bank each month containing
with the updated list of beneficiaries in electronic form.
aa.The bank will then debit the savings bank account of the Nodal Department and
arrange for crediting the accounts of beneficiaries.
bb.The Management Information System as required by the State Governments will
be strengthened automatically as payment information will flow electronically
and seamlessly from end to end so that a data base is created for generating
various types of reports.
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WAY FORWARD FOR EBT IMPLEMENTATION


cc. Achieving full financial inclusion is crucial for implementation of EBT
and direct transfer of subsidies. As some of the beneficiaries could
be residing in a village with population less than 2000 requisite
infrastructure should be planned and put in place to cover all the EBT
beneficiaries.
dd. SLBC should immediately prepare a plan of action to cover all
unbanked villages including having population of less than 1000.
ee. The allocation of these villages may be done on the basis of
geographical proximity. In respect of States/Districts where the EBT
scheme is yet to be implemented, this presents an opportunity for
the banks to put in place the requisite infrastructure to cover all the
unbanked villages irrespective of the population criteria.
ff. This will strengthen the position of the banks to provide services to all
the EBT beneficiaries whenever State Government decides to
implement EBT.
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21

WAY FORWARD FOR EBT IMPLEMENTATION


gg. Once banking services are extended to all villages under the FIP,
convergence between the EBT Scheme and FIP would be
automatically realized.
hh. Once FIP is fully implemented covering all the unbanked villages
and a UID number is issued to all the villagers, a model will
emerge where the customer will have the option to transact with
the bank of their choice in any village by using UID enabled Micro
ATMs.
ii. This will make customers, less vulnerable to local power
structures, and lower the risk of being exploited by BCs.
Customers will be able to transact electronically with each other
as well as with individuals and firms outside the village.
jj. This will reduce their dependence on cash, and lower costs for
transactions.
kk. As banking is a public good, this is essential in the interest of
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public policy.

RECENT INITIATIVES-FINANCIAL INCLUSION


a. Monetary Policy Actions Mandated SLBCs to prepare a roadmap for
covering all unbanked villages of population less than 2,000 and allot
these villages to banks for providing banking services in a time-bound
manner.
b. Advised banks to open intermediate brick and mortar structure
between the base branch and BC locations. These structures having
minimum infrastructure like a CBS terminal, pass book printer, safe for
cash retention, etc. will be at a reasonable distance of 3-4 kilometers
and will provide support to about 8-10 BC units Will lead to efficiency
in cash management, documentation, redressal of customer
grievances.
c. Satellite offices in the form of Ultra Small BC outlets are also
mandated and being encouraged
d. Advised sponsor banks to formulate Financial Inclusion Plans for RRBs.
Progress to be monitored by NABARD and Regional Offices of RBI.
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23

RECENT INITIATIVES-FINANCIAL INCLUSION


e. Disaggregation of FIP from Head Office to
branch level- Banks already advised to put in
place a mechanism to monitor the progress at
the branch level periodically.
f. Lead Bank Scheme - Metropolitan Areas
All districts in metropolitan areas under the fold
of the LBS.

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Recent Initiatives Financial Literacy


f.

Financial Literacy & Financial Inclusion should go


together
g. Financial Stability Development Council has been
mandated to focus on Financial Inclusion and Financial
Literacy.
h. Discussion with NCERT/CBSE and State Boards- Efforts
on to include financial education curriculum in school
education.
i. Financial Literacy Centres to be set up in all 630+ LDM
offices All rural branches of Scheduled Commercial
Banks to undertake FL activities.
j. National strategy on financial education being
prepared.
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RBI-22.01.2009-100 per cent Financial Inclusion Evaluation by external agencies- Broad findings
Studies were conducted in 26 districts in the states of Andhra
Pradesh, Gujarat, Himachal Pradesh, Karnataka, Orissa,
Punjab, Rajasthan and West Bengal.
a. The findings reveal that although the State Level Bankers
Committees (SLBCs) have declared several districts as
100% financially included, actual financial inclusion has
not been to that extent in all the districts.
b. Further, most of the accounts that have been opened as
a part of the financial inclusion drive have remained
inoperative due to various reasons.
c. There is a need for SLBC/DCCs to actively step up the
awareness with regard to 'no frills' accounts as this
continues to be poor in many districts.
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26

RBI-22.01.2009-100 per cent Financial Inclusion Evaluation by external agencies- Broad findings
In order to sustain the momentum for financial inclusion,
banks are advised to
a. Ensure that steps are taken to provide banking
services nearer to the location of the no frills account
holders through a variety of channels including
satellite offices, mobile offices, business
correspondents, etc.;
b. Consider providing General Credit Card (GCC)/small
overdrafts along with no-frills accounts to encourage
the account holders to actively operate the accounts;
c. Conduct awareness drives so that the no-frills account
holders are made aware of the facilities offered;
d. Review the extent of coverage in districts declared as
100% financially included so as to meet the gaps in
banking facilities to those desirous of obtaining such
facilities; and
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BC/BF MODEL EFFECTIVENESS.


a. Financial Literacy & Financial Inclusion should go
together
b. Financial Stability Development Council has been
mandated to focus on Financial Inclusion and Financial
Literacy.
c. A technical group on Financial Inclusion and Financial
Literacy under aegis of FSDC is coordinating the efforts
of all Financial Sector regulators.
d. Discussion with NCERT/CBSE and State Boards- Efforts
on to include financial education curriculum in school
education.
e. Financial Literacy Centres to be set up in all 630+ LDM
offices All rural branches of Scheduled Commercial
Banks to undertake FL activities.
f. National strategy on financial education being prepared.
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DIFFICULTIES IN ISSUANCE OF KCC AND GCC


CARDS/OD FACILITY.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.

Attitude of the Bank Officials


Details of the land holding furnished by the Patwari
Recovery of the amount
Lacklustre approach of tehsil authorities after filing RCs.
End use of funds
Accountability
Pre and post sanction report
Delay in disposal
Lack of knowledge
Lack of confidence
Pressure of local Sahukars
Political intervention for write off and effect on the attitude of the
borrowers.
m. Availability of good seed and fertilizers.
n. Benefit of subsidy
o. Number of accounts /borrowers VS employees in the branch. VS incentive
VS corruption
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OBJECTIVES OF THE FLCC4.02.09


a.

b.

To provide financial counselling services through face-to-face interaction as well as


through other available media like e-mail, fax, mobile, etc. as per convenience of the
interested persons, including education on responsible borrowing , proactive and early
savings, and offering debt counselling to individuals who are indebted to formal and/or
informal financial sectors;
To educate for financial products and services available from the formal financial sector
i.
Credit counselling
ii.
Savings counselling
iii. Interest in local terms i.e. monthly basis and the way of interest calculation in
deposit and advances.
iv. Management of debts for borrowers in distress
v.
give due emphasis to customers' rights under fair practices code, benefits of
nomination facilities, operation of accounts, etc.
vi. The choice of finally accepting or rejecting a debt restructuring proposal
suggested by the FLCCs may be left to the bank/ banks concerned. However, in
case of non-acceptance or rejection of restructuring proposals forwarded by
FLCCs by banks, they may give the reasons in writing to FLCC in the interests of
transparency.
vii. The FLCCs would, however, not involve themselves in recovering and distributing
money. This may be left to the bank concerned, or the bank having the largest
exposure to act on behalf of all the banks.
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OBJECTIVES OF THE FLCCs


Consequent to the revision in the guidelines on June 6, 2012 for
setting up Financial Literacy Centres (FLCs):
a. 718 FLCs have been set up as at the end of March 2013.
b. A total of 2.2 million people have been educated through indoor
education to walk-in persons and through outdoor activities such
as awareness camps/choupals, ghostis, seminars and lectures in
a one-year period, from April 2012 to March 2013.
c. It aims to establish initial contact with 500 million adults and
educate them on key savings, protection and investment-related
products so that they are empowered to take prudent financial
decisions.
Qualification of the in charge of the FLCC.
The Reserve Bank's College of Agriculture Banking, Pune, Bankers' Institute
of Rural Development, Lucknow or the training colleges of banks may
consider conducting training programmes for the counsellors
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MONITORING AND OTHER ASPECT OF FLCCS


Monitoring
a.

b.

The functioning of the FLCCs in each State may be monitored by


a Committee headed by the Regional Director of the Reserve
Bank of India and feedback provided to the banks on a regular
basis.
The Committee may comprise SLBC convenor bank, other banks,
NABARD, IBA, consumer organizations, NGOs working in the
area, etc.

Transparency / Disclosure of Information


a.

b.
11/22/2014

To help the customers make informed decisions, all banks may


display on their websites necessary information regarding fees,
charges, etc. as prescribed vide Reserve Bank circular
DBOD.No.Leg.BC.75/09.07.005/2008-09 dated November 3,
2008.
The details of the services offered by the FLCCs opened by the
banks may also be placed on the websites of banks concerned.
32

MONITORING AND OTHER


ASPECT OF FLCCS
Publicity
a. A great deal of emphasis needs to be given by all
institutions to educate the public of the various
schemes/ facilities.
b. All forms of publicity, viz. press conferences,
workshops, publications, websites, road shows,
mobile units, village fairs, etc. should be actively
explored.
c. A suitable budget needs to be provided by all
banks for the purpose.
d. As part of on going measures for publicity, banks
may ensure that the list of counselling centres is
appropriately publicised.
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PUBLICITY OF THE FLCCs


Reserve Bank of India has prepared comprehensive financial literacy
material that consists of:
a. A Financial Literacy Guide (basic concepts about managing money,
the importance of savings, advantages of saving with banks, facilities
provided by banks and the benefits of borrowing from banks in a
clear manner)

b. A Financial Diary ( It has been prepared to enable the target


audience to keep a record of their income and expenses, leading to
better financial planning and understanding of how they spend)
c. A set of 16 posters ( These are simple, appealing slogans and visuals
for prominent display in camps to communicate messages of money
management, savings, borrowings and basic banking products)
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FI AS DREAM V/S REALITY


a.

Achievements cannot be ignored - Nearly 100 Million no frills


accounts have been opened by banks so far.
i.

ii.
iii.

b.

c.

d.

When banks started, we were all saying people have no bank


accounts,
now with bank accounts being opened we are complaining that there
are no transactions in these accounts.
Banks need to be given time for making these Non functional
accounts (NFAs) active.

Banks must be able to see Financial Inclusion as a business


opportunity. The Technology is critical for this as brick and mortar
branches would not be cost effective and that is why BC- ICT model is
the key.
The market players i.e. banks must be allowed to discover the
business and delivery model. To ensure that banks do not get
complacent they should be actively encouraged to set targets for
themselves and for capturing untapped business in rural areas
covering approximately 2/3rd population of the country.
EBT, Remittances and credit products will play a key role in making
this experiment a commercial success.

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WHY TO BE OPTIMISTIC AND HOW THE DREAM


CAN BE A REALITY
a.
b.
c.

d.

e.

All stakeholders like RBI, Other sectoral regulators like SEBI, IRDA,
PFRDA, etc., NABARD, Banks, Governments, Civil Societies, NGOs,
etc. to work together for a sound and purposeful collaboration.
Adequate infrastructure such as digital and physical connectivity,
uninterrupted power supply, etc. will boost the financial inclusion
initiatives.
If the EBT scheme succeeds and if Banks are allowed to develop
the business and delivery models, operations through BCs would
become viable and the number of transactions in these accounts
will increase.
Demand side initiatives - Create awareness, literacy, national
strategy, Curriculum in schools at national level.
Sensitization - Efforts to be made so as to bring about cultural and
attitudinal changes in the mindset of all stakeholders.

11/22/2014

36

Reasons for Financial Exclusion & Perceptions


REASONS FOR FINANCIAL EXCLUSION:
a. Illiteracy (34.62%) Female Illiteracy (45.72%)
b. Distance from the nearest Bank Branch resulting in longer
commuting time to the branch
c. Rigid Banking rules and procedures to commence Banking
relationship
d. Lack of Awareness of Products and services
e. Psychological and Cultural Barriers
f. Lack of suitable Products tailor made to their needs and
infrastructure
g. Involves small value transactions resulting in high
transaction cost

Reasons for Financial Exclusion & Perceptions


BANKS PERCEPTIONS SHOULD BE:
a. Financial Inclusion is not just a Regulatory Directive or as
Corporate Social Responsibility of Banks
b. Financial Inclusion is now perceived as a commercially
viable business which facilitates outreach of banking and
financial services to excluded
c. It provides the opportunity to Banks to create capacity
building, to support livelihood programs and to add
economic value
d. NREG (National Rural Employment Guarantee) and SSP
(Special Security Payments shall be easy and to the right
person being linked to agriculture now.
e. ICT (INFORMATION & COMMUNICATION TECHNOLOGY)

RBI LATEST GUIDELINES FOR OPENING OF NEW ACCOUNTS PROOF


OF IDENTITY AND ADDRESS
RBI LATEST GUIDELINES DATED 10.12.12
Since introduction is not necessary for opening of accounts under PML Act
and Rules or Reserve Banks extant KYC instructions, banks should not insist
on introduction for opening bank accounts of customers.
AADHAAR LETTER FOR KYC PURPOSES
In modification of instructions quoted above, banks are advised that they
may now accept NREGA Job Card as an officially valid document for opening
of bank accounts without the limitations applicable to Small Accounts.
KYC COMPLINACE IN CASE OF SELF HELP GROUPSRBI CIR DATED
01.04.2013
KYC verification of all the members of SHG need not be done while opening
the savings bank account of the SHG and KYC verification of all the office
bearers would suffice.
As regards KYC verification at the time of credit linking of SHGs, it is clarified
that since KYC would have already been verified while opening the savings
bank account and the account continues to be in operation and is to be used
for credit linkage, no separate KYC verification of the members or office
bearers is necessary.

Guidelines for Engaging Business Facilitator-02.07.12-Under the "Business Facilitator" model, banks may use the
services of intermediaries such as:
a. NGOs/SHGs
b. Farmers Clubs
c. Cooperatives
d. Community based organizations
e. IT enabled rural outlets of corporate entities
f. Post Offices
g. Insurance agents
h. Well functioning Panchayats
i. Village Knowledge Centres
j. Agri Clinics

Guidelines for Engaging Business Facilitator-02.07.12


k. Agri Business Centres
l. Krishi Vigyan Kendras
m. KVIC/KVIB units depending on the comfort level of the bank for
providing facilitation services. Such services may include
i. identification of borrowers and fitment of activities;
ii. collection and preliminary processing of loan applications including
verification of primary information/data;
iii. creating awareness about savings and other products and education
and advice on managing money and debt counselling;
iv. processing and submission of applications to banks; (v) promotion
and nurturing Self Help Groups/Joint Liability Groups;
v. post-sanction monitoring;
vi. monitoring and handholding of Self Help Groups/Joint Liability
Groups/Credit Groups/others; and (
vii. follow-up for recovery.

Guidelines for engaging Business Correspondents(BCs)

02.07.12
The scheduled commercial banks including Regional Rural Banks (RRBs) and
Local Area Banks (LABs) may engage Business Correspondents (BCs), subject
to Due diligence may be carried out on the individuals/entities to be engaged
as BCs prior to their engagement. The due diligence exercise may, inter alia,
cover aspects such as
a. reputation/market standing,
b. financial soundness, (iii) management and corporate governance, (iv)
cash handling ability and (v) ability to implement technology solutions
in rendering financial services
c. Individuals like retired bank employees, retired teachers, retired
government employees and ex-servicemen, individual owners of
kirana/medical /Fair Price shops, individual Public Call Office (PCO)
operators, agents of Small Savings schemes of Government of
India/Insurance Companies, individuals who own Petrol Pumps,
authorized functionaries of well run Self Help Groups (SHGs) which are
linked to banks, any other individual including those operating Common
Service Centres (CSCs);

Guidelines for engaging Business Correspondents(BCs)

02.07.12
d.
e.

NGOs/ MFIs set up under Societies/ Trust Acts and Section 25 Companies ;
Cooperative Societies registered under Mutually Aided Cooperative Societies Acts/
Cooperative Societies Acts of States/Multi State
f.
Cooperative Societies Act; Post Offices; and v) Companies registered under the
Indian Companies Act, 1956 with large and widespread retail outlets, excluding Non
Banking Financial Companies (NBFCs).
g.
Now NBFC (ND) can be appointed as BC and distance of 30km has also been left to
the banks Board policy vide RBI circular dated 24.06.2014
h. While a BC can be a BC for more than one bank, at the point of customer interface,
a retail outlet or a sub-agent of a BC shall represent the bank which has appointed
the BC. However, it has now been decided to permit interoperability at the retail
outlets or sub-agents of BCs (i.e. at the point of customer interface), provided the
technology available with the bank, which has appointed the BC, supports
interoperability, subject to the following conditions:
i.
The transactions and authentications at such retail outlets or subagents of BCs
are carried out on-line;
ii.
The transactions are carried out on Core Banking Solution (CBS) platform; and
iii.
The banks follow the standard operating procedures to be advised by the
Indian Banks' Association (IBA).

Guidelines for Engaging Business CORRESPONDENT-02.07.12


Procedure for engaging BCs
a. The terms and conditions governing the contract between the bank
and the BC should be carefully defined in written agreements and
subjected to a thorough legal vetting. While drawing up agreements,
banks should
b. strictly adhere to instructions contained in the guidelines on
managing risks and code of conduct in outsourcing of financial
services by banks, issued by Reserve Bank of India on November 3,
2006.
c. The banks will be fully responsible for the actions of the BCs and
their retail outlets/sub agents.
D. Scope of activities
The activities to be undertaken by the BCs would be within the normal
course of banking business. The scope of activities of a BC may include
i.
identification of borrowers;
ii. collection and preliminary processing of loan applications including
verification of primary information/data; (iii) creating awareness
about savings and other products and education and advice on
managing money and debt counselling;

SCOPE OF ACTIVITIES OF BUSINESS CORRESPONDENT -02.07.12

iii. processing and submission of applications to banks;


iv. promoting, nurturing and monitoring of Self Help
Groups/ Joint Liability Groups/Credit Groups/others;
v. post-sanction monitoring;
vi. follow-up for recovery,
vii. disbursal of small value credit;
viii. recovery of principal/collection of interest;
ix. collection of small value deposits;
x. sale of micro insurance/ mutual fund products/
pension products/ other third party products and
xi. receipt and delivery of small value remittances/
other payment instruments.

Redressal of Grievances in regard to services


rendered by Business Facilitators/Correspondents
a.

b.

c.

d.

11/22/2014

Banks should constitute Grievance Redressal Machinery


within the bank for redressing complaints about services
rendered by Business Correspondents and Facilitators and
give wide publicity about it through electronic and print
media.
The name and contact number of designated Grievance
Redressal Officer of the bank should be made known and
widely publicised. The designated officer should ensure that
genuine grievances of customers are redressed promptly.
The grievance redressal procedure of the bank and the time
frame fixed for responding to the complaints should be placed
on the bank's website.
If a complainant does not get satisfactory response from the
bank within 60 days from the date of his lodging the
compliant, he will have the option to approach the Office of
the Banking Ombudsman concerned for redressal of his
grievance/s.
46

Guidelines for Engaging Business Facilitator-02.07.12

In the Paragraph 93 of the Union Budget


announcement made by the Honourable Finance
Minister for the year 2008-09 where in it was
stated as under:
"Banks will be encouraged to embrace the concept
of Total Financial Inclusion. Government will
request all scheduled commercial banks to follow
the example set by some public sector banks and
meet the entire credit requirements of SHG
members, namely, (a) income generation activities,
(b) social needs like housing, education, marriage,
etc. and (c) debt swapping"

BUSINESS MODEL CHALLENGES


a. Being perceived more as an obligation than a
business opportunity.
b. Infrastructure issues- Premises, Roads, Power, etc.
c. Less transactions- Non-operational accounts- High
volume small value transactions- High Cost Viability issues.
d. Technology issues- availability of handheld
devices, cards, technology partners, operational
glitches, Digital connectivity, Turnaround time.
e. Engaging BCs- Associated risks - Lack of
professionalism of BCs.
f. BC attrition- inadequate remuneration- Non
payment of commission.
11/22/2014

48

ESSENCE OF WORK LIFE AND WORK ETHICS


What is work?
To nurture each other. It is a form of Yagna, sacrifice. It is
the worship of the Divine

Why to work?
To purify the mind and the heart (Chittashuddhi) and to
become wise; to provide public benefit

How to work?
With the spirit of renunciation, i.e., Tyag and to serve
others without self-interest

Spirit of work
Excellence and perfection in work (GEETA PREACHES)
22-11-2014

49

THANK YOU FOR YOUR KIND ATTENTION


R.K.GUPTA
rkgupta1949@hotmail.com

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