"DRAFT ACTION PLAN FOR FINANCIAL INCLUSION BY NABARD"
NABARD’s Initiative for Financial Inclusion NABARD 25 August 2009 1 Financial Services - An holistic approach Small Savings Affordable Credit Remittance/ funds transfer Micro Insurance/ Micro Pension Financial Literacy Counselling 2 Extent of Exclusion as per Dr Rangarajan Committee Report - Focus Areas S. Social Households % No Group (000) Excluded 1 SC 15592.6 49.77 2 ST 11924.1 63.68 3 OBC 37043.0 48.58 4 Others 24688.4 50.58 5 Total 89248.1 51.36 Category - % Exclusion Marginal farmers - 55.00% Small Farmers - 49.00% Medium Farmers - 39.64% Large Farmers - 33.00% 3 Major Initiatives so far…… Banks permitted by RBI to open ‘no – frills’ accounts 100 districts identified for Total Financial Inclusion, as decided by SLBCs Enabling policy to encourage Banks to undertake Branchless banking through BC/ BF model FIF/ FITF established - 2008 4 Major Initiatives so far……(cont) NREGP/ SSP encouraged through BC/ BF model Parallel efforts for Technology upgradation of Cooperatives (Vaidyanathan Committee) RRBs (Computerisation of all branches; CBS) Promotion of Financial Literacy Establishment of Financial literacy Counseling Centres by Banks Guidelines for undertaking projects issued (by NABARD) Committee for Mobile Fund Transfers 5 Model Projects Minor Irrigation Drip irrigation Dugwells Pumpsets Sprinkler Tubewells • Medicinal & Aromatic Small lift Plants • Aloevera • Agricultural • Ashwagandha Engineering • Patchouli • Fisheries • Medicinal plant • Animal Husbandry • Annota • Biotechnology • Organic Farming • Land Developmen 6 Model Projects- NABARD Website (http://www.nabard.org/modelbankprojects/modelbankprojects.asp) 7 Model Projects – eg. – Drip Irrigation Requirements of Model Schemes for Formulation by Banks Scheme Requirements Technical Aspects Design Parameters Model Scheme for Drip Systems Financial Viability 8 Our experience •The Country’s first complete e-village is at Saiden(Mizoram). (NABARD &ICAR Collaboration) •ICT is being used for •minimal rainfall prediction, •rapid soil health test, •detecting and arresting citrus crop decline 9 Technology shows the way In Gujarat, provision of a soil health card has increased the productivity of agriculture CDAC has launched portal India Development Gateway for rural areas which offers 1600 topical information. IFFCO offers Kisan sanchar Sevice on planting, harvesting seasons. ICRISAT ,Wikipedia, MIT and IFPRI have launched pilot on Agriculture Innovation Project 10 Digital Initiatives of GOI/NIC AGMARKNET-connects 2800 agricultural produces wholesale markets SEEDNET-Connects to seed information's FISHNET-connects to information on Fish HORTNET-Connects to Horticulture portal COO[PNET,FERTNET,AGRISNET,DACN ET,VISTARNET,APHNET,ARISNET 11 Impact so far ….. RBI Study – January 2009 Financial Services required beyond a mere Bank A/c. SLBCs declared many districts as 100% financially included Actual financial inclusion not to desired extent Most of the ‘no frills’ accounts are inoperative. Need for awareness about 'no frills' accounts Need to leverage on to technology 12 FIF and FITF - Funding Status Particulars Contribution Initial Corpus (%) Received ( Rs crore) FIF FITF FIF FITF GoI 40 40 10 10 RBI 40 40 * * NABARD 20 20 5 5 Total 100 100 15 15 *Matching contribution of 40% to be received after disbursements. For the year 2009 – 10 we have requested GoI to contribute Rs. 67 crore for FITF and Rs. 35 crore for FIF. 13 Projects supported/ under consideration from FIF/ FITF North East Region NER Financial Inclusion in the North East Region though Bio metric Smart cards – SBI Tripura Pilot project for capacity building of the Farmers’ Clubs for providing services as BFs to generate new accounts & business for RRB. Pilot for installing ATMs at RRB Nagaland Micro Credit Programme with Village Development Board as intermediaries Sikkim Technological Upgradation of Sikkim SCB for providing Financial Services in the remote/ hilly region 14 Projects supported/ under consideration(cont) West Bengal Training of Trainers on financial literacy Kerala Pilot project to establish Farmers’ service centres / village knowledge centres, mobile credit counselling centres, promotion of financial literacy and farmer education through mass media Uttarakhand Using Post office as Business Correspondent of RRB (Deposit,credit &recovery thro post offices) 15 Projects supported/ under consideration (cont.) Tamil Nadu Smart card based pilot project for registration, loaning process and micro financing to SHGs. Impact study of 100% achievement under Financial Inclusion in Kanyakumari District Andhra Pradesh Smart cards through BC Model to facilitate payments to the beneficiaries of NREGS & Social Security Pensioners and opening of ‘No Frill A/Cs’ Establishing Financial Inclusion Hubs in PACS through e- Branch facility. 16 Projects supported/ under consideration(cont.) R & D Project for ICT solution in RRBs with support from World Bank/ Source Trace Systems. -15 select districts covering 14 States Assam, Tripura, WB, Bihar, Jharkhand, Orissa, UP, MP, Rajasthan, Gujarat, Maharashtra, Haryana, TN, Kerala - 1st Project – Pilani, Rajasthan 17 FI - Road map for Institutions MFIs/ NGOs Banks/ Co-ops/ RRBs BC/ Financial BF Micro Credit/ Counselling/ Loan/ Credit A/c Saving Literacy BC/ Saving A/c BF Financial Payment & Inclusion Remittances Stand Alone Remittances Postal Savings Insurance 18 Insurance Cos Post Offices Support Architecture for Tech. Application- Components Application Hardware Network Security Configura- Implementa- tion tion Application Upgrade Training Support 19 Technology Architecture of Smart Card Banks TBA/ H Intermediate CBS O Customer Server Server S T 1 Smart Card PoS FI Server H O S Business T Banks Correspondent 2 TBA/ CBS Server 20 Financial Inclusion - Process Enrollment Enrollment Station Enrollment Software for BC & Branch Transaction Provide hand held devices Server Infrastructure Provide network connectivity & Interface to Bank’s backend Provide SMS/ GPRS Interface at Intermediate server Customer Card personalisation Card Software Card Management Manpower Training BC: tie up and Front Ending for BC Rollout and Post Implementation Support 21 Cost Components of Smart Card Customer Enrollment/ Survey cost of the customer Personalisation and card cost Maintenance cost of the card Business Correspondents/ Facilitator Selection of BC/BF Cost of POS Capacity Building of BC and BF Publicity material to BC and BF Compensation Banks / Institution Server and switch Other cost (cabling/ wiring/ telephone etc.) Software Space for housing the server/switch Cost of funds Cost of Management 22 Challenges/ Issues in Smart Card Model Enrolment of large numbers Wide Geographic Spread High Maintenance cost Less transactions Illiteracy and use of vernacular Product and Service Pricing Trust and Acceptance Lack of electricity Poor telecommunications 23 Major Issues Card standardisation and Cost thereof- Smart card v/s plastic card Other Costs Revenue generation/ Sustainability of BC Obsolescence Capacity building of BC 24 Other Major Issues Sec 25 Co. as BC vs. Individual BC Security/ Confidentiality issues Common Tender Process for all district level Banks Reduction in cost of components Financial viability for RRBs and Cooperatives Interoperability/ Open Standard 25 Other Major Issues (cont) Inter operability Integration with existing technologies deployed in Bank with new technologies with in technologies of various other Banks in district/ state “Open Standards” 26 Future Models – 1. Mobile Phone RBI guidelines International Payment Experiments successful – PayPal, M-Pesa, G-Cash, ITZ Cash Facilitates low cost delivery India has large tele-density – 30% Current rural subscriptions – 90 million Target of achieving 200 million by 2012 27 Future Models 2 - Integrated Model of BC/ BF- Entitlements - Old Age Pension/ NREGA etc. One Bank One District Service Area of Bank (Bank A) GOVT. (Bank B) Supported by Govt. for Smart Card* Bank's own initiative for NREGS, Pension, etc. Normal Card Financial Services POS 2 % incentive by State Possible support from Govt./ Rs. 50 by RBI FI FITF as per our policy 28 Future Strategies Increase in Delivery Channel SHGs/ PACs as BC Enhanced role of Farmers Club/ local bodies as BF particularly in NER/ ER. Involve Post Offices in Hilly/ NER/ High exclusion areas (250 backward districts) Risk Fund creation Amendment of Postal regulation Act – to enable Post Offices to carry out limited credit Financial Services, functions as BC Rural Credit Bureau – district wise CSCs 29 Future Strategies Focus on Demand Side as well through Financial Literacy drive Certification Program for BC/ BF On the Spot loan appraisal/ sanction/ rating evaluation through Mobile van system Audio/ Visual display Partnership with reputed and experienced NGOs Sensitisation programme through training establishment Inclusion of Financial Literacy in school curriculum 30 Future Strategies Integrated approach of Financial Inclusion Projects involving micro insurance One schemes – life, asset, accident, health etc Product for part saving of Govt. Citizen payments- NREGP/ Social Security/ Pension One Involvement of MFI sector for FI (Micro finance Bill needs to be prioritised) Card. Last but not the least Integrate with proposed Unique Identification Card of GoI. 31 Global Experience - Bolivia Regulatory set up for MFIs Competition among MFIs Acceptance of deposits by MFIs MFI also provides : Micro insurance (life and health), Cell Messaging (information services), Cash & Wire Transfers, Tax payments, Forex purchase / sale. 32 Global Experience - Philippines The Rural Banks Association (RBA) -Microenterprise Access to Banking / technical assistance/ training in microfinance Mobile Phone Banking (MPB) – Deposit - Withdrawal / Payment/ Advise and Pay Exploring establishment of Loan Collection and Deposit Points Microfinance is a credit+ programme without subsidies Providing Policy Support, Regulatory Framework and setting Performance Standards Segregation of Microfinance clients Microfinance loans for creation of productive assets. 33 Global Experience - Thailand Mobile ATM with facility for online Registration, sanction, Deposit, cash transfer School Banks CSR approach to Microfinance Economy of scale – large scale technology adoption Separate Savings Bank in addition to Commercial Banks 34 Global Experience - Kenya M-Pesa A mobile based transaction service introduced in 2007 - 6 million customers are service registered. Individual electronic money account backed by deposits in a regulated Bank Variety of financial transaction inbuilt in mobile phone. Bill payment Transfer of money Deposit and withdrawal at M-PESA agent and PESA point ATMs Top up of air time for mobile Balance check 35 Financial Inclusion thro’ SHG Model- NB’s Prog Agency wise Status Agency Bank Loans outstanding against SHGs as Per SHG O/s. on 31 March 2008 Loan (Rs.) No.of % Share Amt. % SHGs (crore) Share (Growth) (Growth) Commercial 23,78,847 65.6 1,14,75.47 67.5 48,240 Banks (25.7%) (31%) Regional 875,716 24.2 44,21.04 26.0 50,485 Rural Banks (20.1%) (57.8%) Cooperative 371,378 10.2 1,103.39 6.5 29,711 Banks (36.4%) (37.2%) TOTAL / 36,25,941 100.0 16,999.90 100.0 46,884 Avg. (25.3%) (37.5%) 36 India – The Banking System - 1969 Commercial Banks Public Private Total No. of Banks 8 81* 89 Total Branches 6596 1666 8262 Rural Branches 1504 329 1833 (%Total Branches) (23) (20) (22) % share of 2.2 negligible 2.2 agriculture in total credit + a large number of small sized cooperative bank 37 Banking Network In India June 2008 Reserve Bank of India Government of India NABARD Public Sector RRBs (88) Private Foreign Banks (28) LABs (4) Banks (22) Banks (30) TOTAL Rural 18,557 11,498 1,052 0 31,127 Semi-urban 12,776 2,612 2,468 2 17,858 Urban 11,336 607 2,504 50 14,497 Metro 10,501 63 2,245 227 13,306 Total 53,190 14,780 8,269 279 76,518 + the cooperative banks and almost 100,000 cooperatives linked to cooperative banks and now even commercial banks 38 Vision - 2012 Financial Inclusion of all Rural House holds (11.15 cr). Last mile client should be able to use POS/ Smart Card/ Mobile Financial Services at doorstep of Rural Households. KCC/ GCC/ SCC to all farmers/ artisans/ landless labourers Cash less transaction through cards for all Banking/ Payment transactions 39 Vision - 2012 Every person wishing to open a savings account with the banking system will have an option to do so in his or her own neighbourhood Every no-frills account will have an overdraft facility thru a General Credit Card Business Correspondents will support all transactions for deposits and withdrawals, loan disbursements and repayments and money transfers 40 THANK YOU. 41