Faster implementation of Financial Inclusion Programs is seen after 2010-11. Commercial banks opened new rural branches, increased coverage of villages, set up ATMs and digital kiosks, deployed BCs(Business Correspondents), opened no-frills accounts, and provided credit through Kisan Credit Cards (KCC), General Credit Cards (GCC), and other specific products designed to cater to the financially excluded segments. The introduction of core banking technology and proliferation of alternate delivery channels aided the process of inclusion on a larger scale. The statistics on key banking network give a sense of the pace of progress of banking outreach as part of Financial Inclusion.
Recent Developments Global Findex Report 2017 (April, 2018) The World Bank on April 19, 2018 released the Global Findex Report 2017 indicating that 55 percent of new bank accounts opened globally are from India itself. The Global Findex Report analyses data of 144 economies to demonstrate that how people use financial services. The report was produced by the World Bank with funding from the Bill & Melinda Gates Foundation and in collaboration with Gallup Inc.
Financial Inclusion Index The Union Minister of Finance and Corporate Affairs, Arun Jaitley on September 25 launched the Financial Inclusion Index after his Annual Performance Review Meeting with CEOs of the Public Sector Banks in New Delhi. Though the Index will be released soon. Key Points
Amalgamation of RRBs
Objectives
Consolidation of RRBs
About RRB
Darpan Launched for Financial Inclusion
1st NABARD All India Rural Financial Inclusion Survey (NAFIS)
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Financial inclusion broadens the resource base of the financial system by developing a culture of savings among large segment of rural population and plays its own role in the process of economic development. Further, by bringing low income groups within the perimeter of formal banking sector; financial inclusion protects their financial wealth and other resources in exigent circumstances. Financial inclusion also mitigates the exploitation of vulnerable sections by the usurious money lenders by facilitating easy access to formal credit.
Phases of Financial Inclusion
index of Financial Inclusion Degree of Financial Exclusion Status) High (0.5 < IFI < 1) - Kerala, Maharashtra, Karnataka Medium (0.3 < IFI < 0.5) -Tamil Nadu, Punjab, Andhra Pradesh, Sikkim, Himachal Pradesh, Haryana Low (0 < IFI < 0.3) - West Bengal, Uttar Pradesh, Gujarat, Tripura, Bihar, Assam, Nagaland, Manipur, Mizoram, Madhya Pradesh, Arunachal Pradesh, Odisha, Rajasthan |
Nachiket Mor Committee
The Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households headed by Dr. Nachiket Mor, submitted its final report on December 31, 2013.The Reserve Bank of India (RBI), on September 23, 2013, had appointed the Committee to propose measures for achieving financial inclusion and increased access to financial services. The Major Recommendations of the Committee were-
Banking Sector Reform for Financial Inclusion Extension of ‘Swabhimaan’ Scheme: Under the Swabhimaan financial inclusion campaign, over 74,000 habitations with population in excess of 2,000 had been provided banking facilities by March 2012, using various models and technologies including branchless banking through business correspondents (BCs). Setting up of the “Ultra Small Branches”: These are (wall-less) branches for the purpose of which is to reduce the infrastructural costs in setting up branches in rural areas. Under this initiative, the banks will appoint banking correspondent who will deal with all cash transactions and other routine work in that area. Relaxation on Know-Your-Customer (KYC) Norms: KYC requirements for opening bank accounts were relaxed for small accounts in August 2005; thereby simplifying procedures by stipulating that introduction by an account holder who has been subjected to the full KYC drill would suffice for opening such accounts. It has now been further relaxed to include the letters issued by the Unique Identification Authority of India containing details of name, address and Aadhaar number. Engaging Business Correspondents (BCs): In January 2006, RBI permitted banks to engage business facilitators (BFs) and BCs as intermediaries for providing financial and banking services. The BC model allows banks to provide doorstep delivery of services, especially cash in-cash out transactions, thus addressing the last-mile problem. Self Help Group-Bank Linkage Programme: The Self-Help Group (SHG)-Bank Linkage Programme has emerged as the major micro-finance programme in the country.It is being implemented by commercial banks, regional rural banks (RRBs), and cooperative banks Use of technology: Recognizing that technology has the potential to address the issues of outreach and credit delivery in rural and remote areas in a viable manner, banks have been advised to make effective use of information and communications technology (ICT), to provide doorstep banking services through the BC model where the accounts can be operated by even illiterate customers by using biometrics, thus ensuring the security of transactions and enhancing confidence in the banking system. General-purpose Credit Card (GCC): With a view to helping the poor and the disadvantaged with access to easy credit, banks have been asked to consider introduction of a general purpose credit card facility up to Rs 25,000 at their rural and semi-urban branches. The objective of the scheme is to provide hassle-free credit to banks’ customers based on the assessment of cash flow without insistence on security, purpose or end use of the credit. This is in the nature of revolving credit entitling the holder to withdraw up to the limit sanctioned. Kisan Credit Card Scheme: The Kisan Credit Card (KCC) has been an important initiative for universal access of farmers to institutional credit. Simplified branch authorization: To address the issue of uneven spread of bank branches, in December 2009, domestic scheduled commercial banks were permitted to freely open branches in tier III to tier VI urban centers, subject to reporting. Opening of branches in unbanked rural centers: To further step up the opening of branches in rural areas so as to improve banking penetration and financial inclusion rapidly, the need for the opening of more bricks and mortar branches, besides the use of BCs, was felt. The concept of differential banks: The RBI introduced the concept of “Payment Banks” and “small banks” to attract serious players and push financial inclusion. It allowed corporate houses, including telecom players and retail chains, to set up payment banks, and also gave them the option of forming joint ventures with commercial banks. Pradhan Mantri Jan DhanYojna: The Government in 2014 declared the beginning of the end of financial untouchability in India, with the opening of an estimated 1.5 crore bank accounts across the country, in an exercise unprecedented in scale in economic history. |