Financial Inclusion

Warm Welcome to all

Shri Zonal Manager Bank Of India.

2/20/09

group. Financial inclusion also means extending the banking habit among the less privileged Financial Inclusion is delivery of banking in urban and rural India and weaning them services at an affordable cost to the vast away from unorganised money markets section of disadvantaged and low income and moneylenders. group.

Financial inclusion also means extending the banking habit among the less privileged in urban and rural India and weaning them away from unorganised money markets and moneylenders.
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services, insurance and pension at an affordable cost to the under privileged and unserved population. Financial Inclusion aims to extend hassle free savings, loan facilities, other banking services, insurance and pension at an affordable cost to the under privileged and unserved population.

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No Frills Account; Affordable Credit and Free Face to Face money delivery; Advice to disadvantaged and low income Financial Inclusion covers : group. Access to Banking Services;

No Frills Account; Affordable Credit and Free Face to Face money delivery;

Advice to disadvantaged and low income group. 2/20/09

Who are the excluded

The financially excluded sections largely comprise marginal farmers, landless labourers, unorganized sector enterprises, urban slum dwellers, migrants, socially excluded groups, senior citizen and women. While there are pockets of large population in all parts of the country, the North East, Eastern and Central regions come under financially excluded population.

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According to the National Sample Survey Organization s estimates, 45.9 million farmer households in the country out of the total of 89.3 million households, do not have access to credit at all.

According to the National Sample Survey Organization s estimates, 45.9 million farmer households in the country out of the total of 89.3 million households, do not have access to credit at all.

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Despite the vast network of Bank branches, only 27% of the total farm households are indebted to formal sources, of which 1/3rd also borrow from informal sources. Farm households not accessing credit from formal sources as a proportion to total farm households, is at 95.91% in north-eastern regions.

Despite the vast network of Bank branches, only 27% of the total farm households are indebted to formal sources, of which 1/3rd also borrow from informal sources. Farm households not accessing credit from formal sources as a proportion to total farm households, is at 95.91% in north-eastern regions.

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Financial Exclusion in India

Excluded sections
   

Marginal farmers, landless laborers Self employed & unorganized sector enterprises Urban slum dwellers, migrants Ethnic minorities and socially excluded groups senior citizens & women Mostly in North East, Eastern and Central regions

Reasons for exclusion

 

Remote, hilly and sparsely populated areas with poor infrastructure physical access Lack of awareness, low incomes/assets, social exclusion, illiteracy demand side Distance from branch, branch timings, cumbersome documentation and procedures, unsuitable products supply side

Source : Reserve Bank of India 2/20/09

Financial Exclusion in India

41% of the population in India is unbanked

  

40% is unbanked in urban areas 61% is unbanked in rural areas Higher in North Eastern(63%) and Eastern regions (59%)

Only 14% of adult population has loan accounts

  

9.5% in rural areas 14% in urban areas North Eastern(7%) and Eastern regions (8%)

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Financial Exclusion in India

203 million households in India



147 million households in rural areas

89 million are farmer households 51.4% of farm households have no access to formal or informal sources of credit 73% of farm households have no access to formal sources of credit

Share of moneylenders in debt of



Rural households has increased from 17.5%(1991) to 29.6 % (2002) Urban households has decreased from 40%(1981) to 25 % (2002)

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Initiatives by Government of India :

The Government of India has approved setting up of a Financial Inclusion Fund (FIF) and a Financial Inclusion Technology Fund (FITF) with a total outlay of Rs.4 billion for the next 5 years. FIF aims at economic betterment of the poor while FITF will invest in information technology aimed at promoting financial inclusion. 2/20/09

RBI s Policy on Financial Inclusion :

In November 2005, Banks were advised to make available a basic banking `No Frills Accounts with low or nil minimum stipulated balances as well as charges to expand the outreach of such accounts to vast sections of the population.

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opening the Bank accounts owing to procedural hassles, the `Know Your Customer (KYC) procedure for opening accounts has been simplified. In order to ensure that persons belonging to low income group in rural and urban areas do not encounter difficulties in opening the Bank accounts owing to procedural hassles, the `Know Your Customer (KYC) procedure for opening accounts has been simplified.
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General Credit Card Schemes were simplified to enable customers access credit on simple terms and conditions without insistence on security. To extend hassle free credit to the Bank s customers in rural areas, the guidelines on General Credit Card Schemes were simplified to enable customers access credit on simple terms and conditions without insistence on security.

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with nil or very minimum balance as well as charges. The nature and number of transactions in such accounts would be restrictedAccounts : known to the No Frills and made customer in advance. RBI requested the banks to make available a basic banking No Frills Account either with nil or very minimum balance as well as charges. The nature and number of transactions in such accounts would be restricted and made known to the customer in advance.
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to low income group both in urban and rural areas do not face difficulty in opening the bank account due to procedural hurdles. The KYC procedure for opening Simplification of KYC norms : account for these persons have been simplified. In order to ensure that persons belonging to low income group both in urban and rural areas do not face difficulty in opening the bank account due to procedural hurdles. The KYC procedure for opening account for these persons have been simplified.
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Bank s Initiatives

No Frills Account: General Purpose Credit Card : Star Bhumiheen Kisan Credit Card: Rural Mobile ATM : E-grama Micro Credit Programme IT Initiatives for Financial Inclusion in rural/semi-urban branches with biometric

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All branches to open No Frills Saving Bank Accounts as a first steps towards achieving financial inclusion. Financial Inclusion Indicators:
Banks Position as on 31.12.08
16.34 lakh Rs.4871.44 lakh

Rs. 319.32 lakh

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IT Initiatives :

We have decided to introduce Business Facilitators Model and accordingly approved 63 business facilitators on the panel for assisting Rural/Semi-urban branches in opening SB No-Frill A/cs.

We have initiated the Business Correspondent Model while implementing the I.Tech enabled Financial Inclusion Solution pilot project by issuing of biometric smart cards to the 2/20/09 villagers enrolled with 6 fingers print

transactions 1) 2) 3)


have GADAB BUDNI PUTTUR

started successfully. Branch (Raigad Zone), Branch (Bhopal Zone), Branch (Hyderabad Zone).

With the has envisagedensuring financial inclusion and achieving greater outreach as per the RBI/ Bank objective of that IT-FIS project with biometric smart cards using Ministry of Finance guidelines in the matter, our extended across the nation Voice prompt enabled HDD terminals/BCs be Bank has implemented a pilot project through the usage of an approved IT enabled soon. solution on end to end basis using Voice prompt enabled HDD/Biometric smart cards & utilizing the services of Business-Correspondents in providing all Banking services 5000 villagers in Alibag Block already enrolled forunder the brand name Star As of Oct 08, at the doorsteps of rural/semi-urban villagers, smart Abhilasha . cards. Fresh 3500 villagers in Raigad Dist. & 4700 villagers at Budni Br. (Bhopal) to be enrolled/issued smart cards by Dec. 08. Pilot project of IT-FI Solution launched at the following sites & live transactions have started Field BCs selected at Lucknow, Hyderabad, Ranchi & Bhopal Zones. successfully. 1) GADAB Branch (Raigad Zone), 2) BUDNI Branch (Bhopal Zone), 3) PUTTUR Branch (Hyderabad Zone). Bank has envisaged that IT-FIS project with biometric smart cards using Voice prompt enabled HDD terminals/BCs be extended across the nation soon. As of Oct 08, 5000 villagers in Alibag Block already enrolled for smart cards. Fresh 3500 villagers in Raigad Dist. & 4700 villagers at Budni Br. (Bhopal) to be enrolled/issued smart cards by Dec. 08. Field BCs selected at Lucknow, Hyderabad, Ranchi & Bhopal Zones.

 

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2020

Rural Banking Requirements

A portable compact electronic device Secure identification and authentication system Local language voice guided systems Issue a printed slip as proof of transaction Should work in harsh and diverse rural environments Easy integration into existing banking systems Save on Branch establishment cost Should facilitate operation by ordinary villagers Ability to extend other services - banking and non-banking

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Secure identification and authentication system

Different Biometrics

Finger print

Face

Iris

Facial Thermogram

Palmprint 2/20/09

Voice

Signature

Secure identification and authentication system

Fingerprint


It is a pattern of ridges and furrows on the tip of the each finger. Patterns are created by the inked impression on the paper or through digital images captured from the compact sensor. Matching is a process of comparing the minutiae patterns.

Click to edit the outline text format



Second Outline Level



Third Outline Level



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Fourth Outline Level  Fifth Outline Level

Secure identification and authentication system

Only once during the existence of our solar system will two human beings be born with two similar finger makings Harper s Headline 1910.

Two like fingerprints would be found only once every 1048 years Scientific American 1911.
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Secure identification and authentication system

Fingerprint

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Secure identification and authentication system

Enrollment / Registration
Alice

Alic e Template t
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Secure identification and authentication system

Enrollment / Registration

Alice

A li c e

Server

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Secure identification and authentication system

Authentication

Server

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Secure identification and authentication system

Authentication

Alice
Server

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Secure identification and authentication system

Server verifies against template

?
Ali ce

Alice 2/20/09

Different Hand held devices

Portable terminal solution to carry out banking operations in rural areas and for illiterate customers Deployment in a quick and cost effective manner with minimal changes to existing banking systems

USB Peripheral

Enrollment device

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3131

Hand held devices (terminals) used in Bank of India.

A portable compact electronic device Secure identification and authentication system Local language voice guided systems Issue a printed slip as proof of transaction Should work in harsh and diverse rural environments Easy integration into existing banking systems

Enrollment device

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Financial Inclusion Life Cycle

1. Enrolment Process Data Collection System Demographic Details Biometric Details etc. 4. Transaction data loading to Integrated Back-end system & then to CBS 2. Issuance of Biometric Enabled Multi-Function Card Diverse points of usage Hand-held devices 3. Financial Transactions through Field 3333 Devices Single Device

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Card Preparation and Management

CUSTOMER FINGERPRINT

CUSTOMER CUSTOMER INFO PHOTO

CENTRAL SERVER

CORE BANKING SERVER

BRANCH PC

BRANCH MANAGER

FIELD

CENTRAL OFFICE

BRANCH OFFICE

PRINT CARD

PERSONALIZE CARD

VERIFY AND ISSUE CARD

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Backend System

Holds all the account holder and transaction details in a database Provides an interface to communicate with the Core Banking Server Communicates with the Terminal to allow the transactions Hosts an application to perform the following functions.

System Administrator
3535

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Users authorized to perform Back end

Accounting System of Financial Inclusion System (FIS) y A new GL Head will be created under Overdraft for FIS (FIS-BC). y The nature of the a/c of Business Correspondent (BC) is Overdraft for FIS. y The GL head pertaining to Savings under GL sub-head SB-FIS like SB-NRE,SB-STAFF, etc will be created. y 15 Digit A/c number for Branch-BC will be as < Branch Code> <Scheme Code277><00000001> in CBS <Branch Code> <FISBC> <00000001>. (This No. is exclusively reserved for Branch BC only). y 15 Digit A/c number for Field BC will be as < Branch Code> <Scheme Code-277><Running No starting with 2> in CBS <Branch Code> <FISBC> <Running No starting with 2>. y 15 Digit A/c number of Customer will be < Branch Code> <Scheme Code><777> <Running No > in FIS Server. y End of Day (EOD) at back-end server (FIS Server) will be done on daily basis. y At Begin of Day (BOD) in CIBEX/CBS, file received from FIS Server will be uploaded. y All BCs should do EOD in HHD on daily basis.
Accounting Entries for Field Business Correspondent 1. Deposit in Savings A/c FIS Server EOD DR Field BC A/c CR Customer A/c CR 2. Withdrawal in Savings A/c FIS Server EOD DR Customer A/c CR Field BC A/c

CIBEX/CBS At BOD of Next Day DR Field BC A/c GL A/c SB-FIS CIBEX/CBS At BOD of Next Day GL A/c SB-FIS CR Field BC A/c

DR

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Accounting Entries for Branch Business Correspondent

3.

Deposit in Savings A/c CIBEX/CBS Manual Entry (Voucher) DR Cash CR Branch BC At BOD of Next Day CR DR Branch BC A/c GL A/c SB-FIS

FIS Server

The transactions will be captured through Hand Held Device (HHD) EOD DR CR Branch BC A/c Customer A/c

4.

Withdrawal in Savings A/c CIBEX/CBS Manual Entry (Voucher) DR Branch BC CR Cash At BOD of Next Day DR GL A/c SB-FIS CR Branch BC A/c

FIS Server

The transactions will be captured through Hand Held Device (HHD) EOD DR CR Customer A/c Branch BC A/c

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Accounting Transactions for Deposit/Withdrawal by Field BC with Branch BC at Branch



Deposit by Field BC
CIBEX/CBS Manual Entry (Voucher) Dr. Cr. Cash Field BC

FIS Server

The transactions will be captured thru Hand Held Device (HHD) EOD DR Branch BC A/c No transactions will be posted CR Field BC A/c in BOD Note : For deposit by field BC with Branch BC at branch, cash should be accepted first before capturing the transactions thru HHD.

6. Withdrawal by Field BC
FIS Server CIBEX/CBS

The transactions will be captured thru Hand Held Device (HHD) Manual Entry (Voucher) Dr. Cr. EOD DR CR Field BC A/c Branch BC A/c No transactions will be posted in BOD Field BC Cash

Note : In case of withdrawal by field BC from Branch BC, the transactions will be captured first thru HHD before payment. 2/20/09

How it is useful to the Banks

y y

Extend reach to unbanked people Increase deposit base through SHGs/villagers Earnings from loan disbursements Help rural India by providing Microcredit Enables Micro Insurance Earnings through money transfers 3939

y y

y 2/20/09

Branchless Banking Segmentation

y

Rural Banking => Non-branch banking



Bank wants to do banking without a brick & mortar branch

Segmentation of the Non-branch banking

 

Areas where internet kiosks exist Areas where there are motorable roads, good connectivity exist Areas where there are motorable roads, no connectivity exist Areas where there are no motorable roads, hilly terrain( or inaccessible), no connectivity exist

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Solution Architecture

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Solution Overview

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Gateway Solution
y y

Transactions

y y y y y y y y y

Customer creation No frills Saving Bank Account creation (optional) Cash deposit Cash withdrawal Loan repayment Loan disbursement Balance enquiry Funds transfer Addition of new accounts to the card Mini statement Statement of Account

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Solution Overview Smart Device

GPRS/GSM/PSTN
Transactions

Cash deposit
i i t

Loan disbursement Loan repayment Funds transfer* Balance enquiry Mini Statement
CUSTOMER

FI Gateway

Addition of new accounts to the card*

* Not supported in Offline mode

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Cash withdrawal

Gateway Solution Features

y

y y y y

y y y y

Centralized Financial Parameters( or limits) maintenance Centralized non-Financial Parameters maintenance Business Correspondent /Agent maintenance Biometric authentication for agent and customer Voice acknowledgement for the customer ( provided Delivery Channel can play it) Audit trail of all administrative activities Log of all transactions SSL mode of communication POS terminal authentication

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Gateway Solution Features (Contd.)

Role based access - Service level restriction for agents Account level access restrictions Photo and signature (if captured) of the customer is displayed Report of all transactions processed during the day (filtered by Business Correspondent, date)
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Other Components

Customer Acquisition System

 

Laptop based system Web camera, Fingerprint capture

Card Management System

 

Personalization of cards Issue of duplicate cards lost/damaged cards

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Solution Constraints Smart Card Solution: Customer must present his/her smart card for conducting any transaction Smart Card Solution : There will be timedelay of minimum 5 days for the smart card to reach the rural customer, after the account opening application has been submitted Smart Card Solution : No joint account is possible
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Solution Risks
y Reputation risk y Temporary stoppage of all transactions for all rural customers covered by that Agent

Agent is unable to synchronize data due to lack of connectivity

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Solution Success Factors

Low Cost Operation Stakeholder Collaboration & Governance Compliance to Regulatory Requiremen ts
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Selection of Agents Standardizat ion of technology Training for Bank officials & Agents

Success Factors

Integration with Core Banking Solution

Future Directions
Cash-less transactions can also be conducted this solution, by using similar Smart devices at the merchant locations Payment of insurance premiums can be explored with this solution Other investment products like mutual funds can be rolled out thru this solution Utility payments can also conducted thru this solution
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Thank You

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