Financial Inclusion

IDBI Banks Initiative

Kumar Neel Lohit

General Manager. Financial Inclusion Department, HO.
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What is Financial Inclusion?

Financial inclusion consists of providing banking services at affordable costs to weaker sections of the society or the unbanked segment, which does not have any access to formal banking system. As defined by Dr. C. Rangarajan, Former Governor, RBI, Financial Inclusion is the process of ensuing access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker section and low income groups at an affordable cost. Financial Inclusion means approaching the group of financially excluded people in the rural & urban areas to bring them within the purview of banking services.

Extent of Financial Exclusion

Extent of Financial Exclusion

1. Coverage of (Estimates based on various studies and Market Surveys): Check in accounts - 40% Life Insurance - 10.0% Non-Life Insurance - 0.6% Credit Card - 2% ATM + Debit Card - 13%

2.

Geographical coverage - 5.2% villages are having a bank branch

3.

Farmers coverage- Out of 119 million farmers, small and marginal farmers are 97.7 million (82.1 %)

Financial Exclusion Who are these People?

Underprivileged section in rural and urban areas like, Farmers, small vendors, etc. Agricultural and Industrial Laborers People engaged in unorganized sectors Unemployed Women Children Old people Physically challenged people

Financial Inclusion Steps Taken

Co-operative Movement Setting up of State Bank of India Nationalization of banks Lead Bank Scheme RRBs Service Area Approach Self Help Groups
--- Still We Failed! --- Why?

Financial Exclusion Why Have We Failed?

Absence of Technology Absence of reach and coverage Delivery Mechanism Not having a Business model Rich have no compassion for poor

Financial Inclusion - Products

Financial Inclusion should include access to financial products and services like: Bank accounts check in account Deposits Withdrawals Account balance Mini-statements Savings products Remittances & Payment services Insurance - Healthcare Financial advisory services etc.

Why Are we Talking of Financial Inclusion Now?

Focus on Inclusive Growth

Banking Technology has arrived

Realization that Poor is bankable

How will financial inclusion take place

Business Correspondent (BC) model was developed by RBI in January 2006 to overcome traditional challenges and increase banking penetration keeping in line with its goal of total financial inclusion.
The UID and NPCI infrastructure, supported by bank and associated business correspondent or retailer networks, can help bridge the bankedunbanked divide by enabling channels like micro-ATMs and mobile banking.

Way to reach the villages

Business Correspondent The business correspondent (BC) is an intermediary between the customer and the bank; it provides all the basic banking facilities (saving accounts, deposits, loans, remittances and insurance) but does not boast of a portfolio offering as expansive as the modern banking channel. The BC model is a type of branchless banking wherein the agents appointed by the BCs themselves reach out to the customers on behalf of the bank. These agents provide Banking at the Doorstep facility to customer using myriad of technologies depending upon the BC involved.

BUSSINESS CORRESPONDENT MODEL

In this model a non banking company acts as an extended arm of the bank to provide banking facilities to the customer outside bank premises from any outlet not doing having banking as a primary business activity.
Following technology is being used for doing financial inclusion

Account opening on the banking platform

Technology Service Provider (TSP), to provide back end data management and connectivity to core banking Business correspondent : BC are responsible for appointment of CSP and CASH management Smart card : personalized have all the customer information Hand-held device : used by CSP to do offline / online transaction by doing biometric authentication

Financial Inclusion - Overview :

Based on RBI/GoIs initiative, IDBI Bank Ltd is implementing FI plan through respective base branch / BC structure. The ICT solution envisages use of biometric enabled Point of Transaction (POT) terminals Smart Cards through Business Correspondents (BCs) / Customer Service Points (CSPs). BCs/CSPs would provide basic banking facilities in the villages /other urban centers as guided by the base branch.
BC Does the KYC of the customer and provides service

Appointment of BCs Base Branch

BC completes the formalities and interacts with branch on behalf of customer

Business Correspondent (BC)

Customer

Customer uses the account through BC (Debit/credit/ account statement/ transfer etc)

Architecture of Financial Inclusion transaction

FRONTEND SYSTEMS CONNECTIVITY BACKEND SYSTEMS

Biometric scanner
ISO 19794 Smart Card Reader GSM/GPRS/PSTN/ LEASED LINE/ INTERNET POS Terminal Backend Banking Server

Smart Card

Financial Switch

Printer ISO 7816-4 / ISO 14443-4 ISO 8583

Process - Transactions
Cash

Cash

Instant Receipt Transaction

stored on card

Agent
Transaction Data Updates for Customer transferred via phone lines

Bank Branch

Transaction Data Bank Systems

Service Providers Systems

Unique Identity Authority of India (UIDAI)

Aadhar, the unique identification scheme is going to aid banks a lot in bringing banking to the rural sections of the country.
Many banks have joined hands with Unique Identification Authority of India (UIDAI) to act as registrars for signing up residents RBI is shortly going to bring in a regulation stating that KYR (Know your Resident) is equal to KYC (know your customer) for opening of bank accounts. All the govt. funds to flow through Aadhar numbers to the beneficiaries.

Transaction Diagram : UIDAI Active - I

Transaction Diagram : UIDAI Active - II

IDBI Banks Mandate

IDBI Bank has been allocated 118 villages in various states : Sr.Nos. 1 2 3 4 5 State Maharashtra West Bengal Chattisgarh Madhya Pradesh Dadra & Nagar Haveli Total No. of Villages 82 4 25 6 1 118

The villages are within a range of 5 30 km from the respective base branch

Implementation of FIP :
Background Information
IDBI Bank has been allocated 119 villages :
Sr. No. 1 2 3 4 5 6 State Maharashtra Chhattisgarh Madhya Pradesh West Bengal Dadar & Nagar Haveli Himachal Pradesh Total Total No of Villages 82 25 6 4 1 1 119 To be Covered during FY 2011 34 10 5 4 1 1 55 Already covered 22 0 0 4 1 1 28 To be covered during FY 2012 48 15 1 0 0 0 64

Year-wise Plan Projections for 119 Villages

: FY 2010 11 : 55 FY 2011 12 : 64

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Allotted villages - Maharashtra

Allotted villages
Chattisgarh & Madhya Pradesh

Allotted villages
W.B, H.P and Dadra & Nagar Haveli

Media Coverage of IDBI Banks FIP Initiative:

Other Initiatives :
Description
Finanacial Literacy

IDBI Bank is setting up the R-SETI in Satara. Prior to launch of FIP in villages, visits to those villages are organised. The visit includes meeting with Block level officials, Gram Panchayat

officials, prominent villagers and youth, and making them aware of the Financial Inclusion initiatives of the Bank.

Brand Awareness

Financial inclusion has been integrated in all the training programmes for BHs and RMs of rural and semi-urban branches provided by the bank.

Training & Capacity Building

Basic training on use of hand-held device is being imparted to BHs/RMs of base branches where 'pilots' have been launched.
Training has been planned for BHs/RMs of all base branches.
Theme based collaterals for Financial Inclusion titled "Kholo Vikas Ka khata have been designed. prepared. Financial literacy-cum-training campaigns using street play as a technique for imparting knowledge on banking services for rural population organized. A dedicated portal on Financial Inclusion has been linked with our Bank's website.

Awareness in villages

Marketing collaterals viz., Posters/banners in Marathi/English/Hindi/Bengali have been

Awareness

Thanks