Financial Inclusion
Reaching the Un-banked
need of financial support. Without financial inclusion, banks cannot reach the un-banked. Only 30000 rural branches of banks are supposed to serve over 8 lakhs villages. Technology and financial inclusion are the popular coinage in banking parlance in the country. Several banks and technology solution providers have ventured to provide information and communication based solutions for financial inclusion.
Without financial inclusion, banks cannot reach the un-banked By AVV Prasad, Additional Commissioner, Department of Rural Development, Andhra Pradesh
Smart Card Project
‘A
In the smart card, data is encrypted and card is prepared. Once the KYC norm is fulfilled and bank account opened. The smart Card is personalised and issued to each beneficiary. It is state driven intervention. This is an establishsmall loan, a Service Area Approach has become dysfunctional for most of the villages. Denial of service to millions of ment of last mile banking - banking outpost savings account poor is in fact a disservice. Poor are starved of credit, forced to pay usurious rate of interest. Urban Poor at each Gram Panchayat. Disbursement of or an insurance also left out. Service Area Approach is not appropriate model for financial inclusion. Social Security pensions and MGNREGS wage policy can make payments is done in this project. Chip based a great difference If technology permits‐rural Areas should be served on same terms as the urban areas. The poor shall not smartcard is backed by bank a/c as identity to a low-income family. They enable people have to pay usurious interest rates; in fact, they shall not be charged more than the rich. Service area card for disbursement. Disbursement is done to invest in better nutrition, housing, health banks always fall short of people’s expectations as well as needs. It should not be extended to FI. through business correspondent. Bank lays the and education for their children. They ease the Multiple players may be permitted: First come, first serve; newer, better services; cheaper and faster entire infrastructure. The Government pays strain of coping with difficult times caused by service. Let people choose whom they patronize. 2 percent as commission on the total amount crop failures, illness or death. They help people plan for the future.’ paid. The approach is to create branchless banking infrastructure by establishing a network of Kofi Annan, Secretary General of the Quote of Deepak Kumar business correspondents in each village. United Nations The CSC is a strategic cornerstone of the National e‐Governance Plan which provides access to Banks and Government work together to Financial Inclusion is delivery of banking information, backed with relevant infrastructure and end‐to‐end services that would allow rural open accounts and issue smartcards to the poor. services at an affordable cost. This is banking population, the opportunities to enhance their quality of life. To begin with, certain Government benefits for the disadvantaged and low income groups. like social security pensions and NREGS wage When an individual opens a bank account, interest earned thereon is a saving and having Page 2 as Box payments are delivered through this network. he becomes a part of the growth process. The an account would help when the person is in The endeavour is to establish a banking outpost in each village to include the unbanked poor.
Extent of Financial Exclusion
Challenges
Households
•
• • •
• •
70,000 bank branches and 1.5 lakh post offices for about 6,00,000 villages. 51.36% of rural households are financially excluded. 44.9% of total earners have bank accounts. Only 28.3% of total earners ( who earn less than Rs.50,000 ) have bank accounts. Only 54 persons per 100 have savings account. Only 13.0% of total earners ( who earn less than Rs.50,000 ) take credit from banks.
Social Group
Populati on in ‘000
% Included
% Excluded
S.C
15592.6
50.23
49.77
S.T
11924.1
36.32
63.68 48.58
OBC
37043
51.42
Others
24688.4
49.42
50.58
Total
89248.1
48.64
51.36 In million
Institution / End-March
1993
2002
2007
Scheduled Commercial Banks
246
246.5
320.9
Regional Rural Banks
30.5
36.7
52.7
Primary Agricultural Credit Societies
89
102.1
125.8
Urban Co-operative Banks
41.6
42
50
Post Offices
47.5
60.2
60.8
Total
454.6
487.1
610.3
Total Accounts per 100 adult persons
51
46
54
Source: Report on Currency and Finance 2006-08 (IIMS Survey, 2007), NABARD report
There are various challenges. Banks need to create a separate vertical for financial inclusion-Capacity building and Venture Project mode. Service Area Approach has become dysfunctional for most of the villages. Denial of service to millions of poor is in fact a disservice. Poor are starved of credit, forced to pay usurious rate of interest. Urban Poor also left out. Service Area Approach is not appropriate model for financial inclusion. If technology permits, rural areas should be served on same terms as the urban areas. The poor shall not have to pay usurious interest rates. In fact, they shall not be charged more than the rich. Service Area banks always fall short of people’s expectations as well as needs. It should not be extended to financial inclusion. September 2011 / www.egovonline.net / egov
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