Financial Inclusion

1
Financial Inclusion

• Role of Banks
• N.Srinivasan

2
What

• Is it a savings account
• Is it a loan account
• Is it direct client relationship
• Coverage of those who have not so far been made a
  client of a bank person or household having an
  effective financial service requirement to be
  covered

3
Why Financial Indlusion

• Bringing underserved and marginalised in to the
  mainstream economy
• Covering barter and cash economy under the formal
  payments system
• Ensuring effective and safe savings and credit
  facilities to all sections of people
• We should recognise that banking services are a
  public good- those who have a genuine need should
  have unfettered access

4
The size of the effort
Number of adults No of loan a/cs No of deposit a/cs Gap
600 mn 122 mn 466 mn 480 mn or 130 mn?
Multiple accounts of the same borrower not
factored the gap is actually larger
5
(No Transcript)
6
Issues

• Large numbers uncovered
• Sparsely populated areas and remotely located
• Uncovered not economically significant in terms
  of business volumes
• Branch network limited compared to the numbers
• Staff strength low compared to additional effort
  needed post VRS blues continue
• Large inter-state variations in per branch and
  per staff work loads

7
Issues

• KYC norms entail additional time and cost
• Impact on profitability
• Level playing field whether the load will fall
  on Public Sector banks and cooperatives?

8
How the strategies

• Overarching concerns
• Cost effectiveness
• Early completion of the task
• Strategies
• Use of technology
• Outsourcing of services use community based
  organisations for client identification and
  documentation

9
How - strategies

• Devising a credible KYC compliance procedure that
  would satisfy RBI ( such as a bankers committee
  at the block level)
• Camp mode of enrolling clients
• Usage of facilitator model to use SHGs, NGOs,
  Farmers clubs and MFIs
• Financing of MFIs, cooperatives and SHGs in
  larger numbers to achieve indirect inclusion

10
Internal preparedness

• Need to identify staff and train staff in fast
  client acquisition
• Skills of contracting outsourced services
• Investment in software and networking to render
  remote KYC compliance easy
• Active role of SLBC and DLCC for documenting best
  practices and sharing the same
• Cooperatives better placed with extended network
  need to sharpen the skills and focus on new
  client enrolment
• Lobbying with RBI for a relook at KYC norms for
  the inclusion agenda
• Lobbying with GoI and RBI for access to financial
  inclusion fund - based on results achieved and
  investment in technology

11
Conclusion

• It is a challenge but also an opportunity
• Tomorrows clients today with some costs
  hopefully being absorbed by inclusion fund
• Investment in technology would be of long term
  help
• Business volumes would get up built up over the
  next few years on the back of large number of new
  clients
• It is not a cost nor a vain effort it is an
  investment in future of the bank as well the
  underserved people.