Financial Inclusion – Background:
Comprehensive Financial Inclusion incorporates ensuring access to financial services and timely & adequate credit to the excluded sections i.e. weaker sections & low income groups.
It is a known fact that in India, while one segment of the population has access to assortment of banking services encompassing regular banking facilities & portfolio counselling, the other segment of underprivileged and lower income group is totally deprived of even basic financial services.
Exclusion of large segments of the society from financial services affects the overall economic growth of a country. It is for this reason that Financial Inclusion is a global concern. In Sweden and France, banks are legally bound to open an account for anybody
who approaches them. In Canada, law requires Banks to provide accounts without minimum balance to all Canadians regardless of employment / credit history. In the United States, the Community Reinvestment Act (1977) is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate,
Current status of financial inclusion in the country:
Census, 2011 estimated that out of 24.67 crore households in the country, 14.48 crore households had access to banking services. Of the 16.78 crore rural households, 9.14 crore were availing banking services. Of the 7.89 crore urban households, 5.34 crore households were availing banking services.
In the year 2011, Banks covered more than 74,000 villages, with population more
Than 2,000 (as per 2001 census), with banking facilities under the “Swabhimaan”
The present banking network of the country (as on 31.03.2014) comprises of a bank Branch network of 115082 and an ATM network of 160055. Of these, 43962 Branches (38.2%) and 23334 ATMs (14.58%) are in rural areas. Moreover, there are More than 1.4 lakh Business Correspondents (BCs) of Public Sector Banks and Regional Rural Banks in the rural areas. BCs are representatives of bank to provide Basic banking services i.e. opening of basic Bank accounts, Cash deposits, Cash Withdrawals, transfer of funds, balance enquiries, mini statements etc.
Public Sector Banks (PSBs) have estimated that by 31.05.2014, out of the 9.17 crore Rural households which were allocated to them, for coverage, about 5.23 crore Households have been covered (3.94 crore uncovered). In addition, the Regional Rural Banks (RRBs) have also covered about 1.99 crore households out of the 3.97 Crore households allocated to them (1.98 crore uncovered).
The task at hand:
Putting the PSBs and RRBs numbers together implies that about 5.92 crore rural Households are yet to be covered. Considering field level data mismatches in some Instances, it is estimated that there are about 6 crore uncovered households which Would need to be covered in the rural areas. Assuming 2 accounts per family, one for the husband and the other for the wife, this Translates into opening of 12 crore accounts in villages. In addition account opening of uncovered households in urban areas would also be Required. These households are estimated at 2.55 crore as per Census, 2011. However, the exact number of households without bank accounts are not available But estimated to be 1.5 crore implying opening of about 3 crore accounts in urban Areas.
Besides, those households which were covered under the earlier campaigns and have only one account per family would need to be provided with two accounts-one for the husband and the other for the wife.
There are three major shifts from the earlier programme on Financial Inclusion. First , the earlier efforts of financial inclusion had village as the unit for coverage while The present plan focuses on coverage of households. Second, only rural areas have Been the focus so far while both rural and urban areas have been included now. Third, the present plan is being implemented as a Mission Mode Project. It Envisages a comprehensive coverage of all excluded households in the country by a Six pillar approach in two phases.
Mission Mode Objectives ( 6 Pillars):
The present proposal of Comprehensive Financial Inclusion under the Mission Mode i.e. PMJDY envisages provision of affordable financial services to all citizens within a reasonable distance. It comprises of the following six pillars:-
1- Universal access to banking facilities:- Mapping of each district into Sub
Service Area(SSA) catering to 1000-1500 households in a manner that every habitation has access to banking services within 5 km by 14th August,2015. Parts of J&K, Himachal Pradesh, Uttarakhand, North East and the 82 Left Wing extremism affected districts which have telecom connectivity and infrastructure constraints would be covered by the end of Phase II of the program (14th August,2018)
2- Financial Literacy Programme:- Extended to the block level from district level at present by March, 2016.
3- Providing Basic Banking Accounts with overdraft facility and RuPay Debit card:- To all households. The effort was to first cover all uncovered households with banking facilities by August 2015 by opening two bank accounts-one for the husband and the other for the wife. This is to be continued on an ongoing basis to cover those households who have only one account per family. Facility of an overdraft of Rs.5000/- through RuPay debit card to every basic banking account holder. This card have an inbuilt accident insurance cover of Rs. One lakh.
4- Creation of Credit Guarantee Fund - Creation of a Credit Guarantee Fund would be to cover the defaults in overdraft accounts.
5- Micro Insurance PMJJBY and PMSBY :- By 14th August,2018 and then on an ongoing basis.
6- Unorganized sector Pension schemes APY :- By 14th August,2018 and then on an ongoing basis.
Under the campaign, the first four pillars were given thrust in the first year .
5. Financial Inclusion Plan :
These activities have been covered under PMJDY launched on 28-08-2014 by PM
1- Universal access to banking facilities: Providing Basic Banking Accounts with overdraft facility of Rs.5000 and RuPay Debit card with inbuilt accident insurance cover of Rs. 1 lakh.
2- Financial Literacy Programme
3- Creation of Credit Guarantee Fund for coverage of defaults in overdraft A/Cs
1-Micro Insurance PMJJBY & PMSBY launched on 09-05-2015 by PM
2-Unorganized sector Pension schemes i.e. APY launched on 09-05-2015 by PM
In addition, in this phase, coverage of households in hilly,tribal and difficult areas Would be carried out. Moreover, this phase would focus on coverage of
Remaining adults in the households and students.
The implementation strategy of the plan is to utilize the existing banking infrastructure
The comprehensive plan was necessary considering the learnings from the past where a large number of accounts opened remained dormant, resulting in costs incurred for banks and no benefits to the beneficiaries.
The plan therefore proposes to channel all Government benefits (from Centre/State/Local body) to the beneficiaries to such accounts and pushing the Direct Benefits Transfer (DBT) scheme of the Union Government including restarting the DBT in LPG scheme.
The target for setting up additional 50,000 BCs is quite challenging given the constraints of telecom connectivity.
In order to achieve this plan, phase wise and State wise targets for Banks have been set up for Banks for the period 15th August,2014 to 14th August,2015.
In order to achieve a “demand” side pull effect, it would be essential that there is
Branding and awareness of Business Correspondent model for providing basic banking services, Banking Products available at BC outlets and RuPay Cards. A media plan for the same is being worked out in consultation with banks.
A Project Management Consultant/Group engaged as PMJDY Mission Office to help the Department implement the plan
The programme was launched simultaneously at National level in Delhi, at every State capital and all district headquarters.
A web-portal created for reporting/monitoring of progress.
Roles of various stakeholders like other Departments of the Central Government, State Governments, RBI, NABARD, NPCI and others have been indicated.
Department of Telecom has been requested to ensure that problems of poor and no connectivity are resolved. They have informed that of the 5.93 lakh inhabited villages in the country (2011 census) only about 50,000 villages are not covered with Telecom connectivity.
Need for PMJDY; Learning from the Past- Older FI Plan
The efforts need to be converged so as to cover the various aspects of Comprehensive Financial Inclusion.
The campaign focussed only on the supply side by providing banking outlets in villages of population greater than 2000 but the entire geography could not be covered.
The target was for coverage of villages and not of the households
It also came out that some technology issues hampered further scalability of the campaign.
The deposit accounts so opened under the campaign had very limited number of, or no transactions and
The task of credit counselling and Financial Literacy did not go hand in hand with
Consequently the desired benefits were not visible. Learning from the past, the present proposal is, therefore, an integrated approach to bring about comprehensive financial inclusion or PMJDY
Roles of major stakeholders:
Role of Department of Financial Services:
Overall ownership of the Mission Mode Project on Financial Inclusion
Overall Monitoring and Implementation of the Mission
Role of other Central Government Departments:
In order to achieve the complete financial inclusion and transfer of social benefits in the accounts of the beneficiaries, the concerned Departments of Central Government would coordinate with the stake holders.
Presently, 26 centrally Social benefits scheme under DBT are sponsored by eight Departments of the Central Government as under:
I. M/o Social Justice & Empowerment
II. M/o Human Resources Development, D/o Higher Education
III. M/o Human Resources Development, D/o School Education & Literacy
IV. M/o Tribal Affairs
V. M/o Minority Affairs
VI. M/o Women and Child Development
VII. M/o Health & Family Welfare
VIII. M/o Labour and Employment
MGNREGS is sponsored by Ministry of Rural Development (MoRD, GoI). Departments like Department of Posts for using the rural post offices, Department of Telecommunications for telecom connectivity, Ministry of Information & Broadcasting and DAVP to assist in media campaign, DEITY in
development of logistic support for monitoring like creation of portal for data updating, development of electronic reporting system, MoRD for convergence with NRLM, HUPA for convergence with NULM etc.
Role of RBI:
To align their directions to the Banks on Financial inclusion with the Mission mode
FIF fund allocation support
Depositor Education and Awareness Fund scheme 2014 support
To guide and support Banks in Financial Literacy Campaign and revamping and expansion of FLCCs upto the Block level
Role of Banks: As defined in the Mission Mode document
Role of IBA:
Coordination in Financial Inclusion Effort with all Banks
Key monitoring role in Financial Literacy campaign
Coordination in publicity and campaign
Coordination in centralised handling of customer’s grievances / issues through Toll free numbers in coordination with Banks
A dedicated Desk to be set up for monitoring of implementation of FI. The desk will have a call centres with Toll free numbers
Role of NABARD:
Coordination in publicity and campaign
Monitoring of Implementation of Financial Inclusion in respect of organisations working under NABARD
Allocation of funds from Financial Inclusion Fund (FIF)
Role of State Governments:
Appointment of Mission Director at State level
Monitoring of financial inclusion campaign in coordination with SLBC & all the stake holders
Direct Benefit Transfer of the State schemes in the bank accounts of the beneficiaries
Role of SLBC:
SLBC Convenor GM to act as Secretary to state implementation committee
Coordination with all the Banks for Financial Inclusion Activity
Monitoring and follow up of different activities of financial inclusion
Role of District Administration:
Key role in implementation of FI in the districts
District Collector (DC) to act as chairman of District level implementation committee
Role of Lead District Manager:
Lead District Manager (LDM) to act as Secretary to the District Implementation Committee
LDM to coordinate with all the Banks in FI implementation in the District
Role of Local Bodies:
Representatives of local bodies (panchayats in rural areas and municipalities in urban areas) to assist in implementation of FI in various ways like in organising camps in opening of accounts, identification of persons for opening of account , in financial literacy campaign etc.
National Payment Corporation of India (NPCI):
Coordination and necessary guidance and supports to banks for in providing and proper operations of RuPay cards
To facilitate Interoperability among BCs
Necessary supports to Banks in making available USSD based mobile banking with low end mobile phones so that customer can avail basic banking services like deposit, withdrawal, fund transfer, balance enquiry etc across the banks. This product may be enabled at BC outlets also.