Financial inclusion

financial inclusion simply means

• Give every poor man a bank account. And help him get a loan from banks.

Financial inclusion involves

1. Give formal banking services to poor people in urban & rural areas.
2. Promote habit of money-savings, insurance, pension-investment among poor-people.
3. Help them get loans at reasonable rates from normal banks. So they don’t become victims in the hands of local moneylender cum thugs.

Three important initiatives taken by RBI for financial inclusion:

1969	Lead banking scheme (LBS). RBI asked every bank to choose a particular district. That Bank will be responsible for promoting banking services and financial literacy, in that district.(=financial inclusion).
2005	No frills account. Poor people can open bank accounts with very low balance e.g. Rs.5 only. We’ve already discussed that in earlier articles:CLICK HERE on 10th august 2012 no frills replaced by basic saving bank account CLICK HERE
2006	Business Correspondents (BC) system. Discussed in this article

Now so far only 55% indians have banking relationship in any form.
if financial inclusion is all about opening bank accounts in rural areas then whats the problem, just open the damn branches in every area......  but that is not possible... why?????

• Administrative costs will be high= Building rent, telephone, electricity, staff salary, security guards.
• On the other hand volume of business is very “low” in village areas=amount of money deposited, loans taken.
• Means there is No profit. Actually it’ll lead to heavy losses.

on the other hand villagers cant afford to travel  20 kms to deposit Rs. 500 in his account by wasting his full day as the branches are in semi urban areas......

therefore to counter these problem BUSINESS CORRESPONDENT were introduced...

BUSINESS CORRESPONDENT

• Business correspondents are bank representatives. they personally goes to the area allotted to them and carry out banking.
• They help villagers to open bank accounts.
• They help villagers in banking transactions. (deposit money, take money out of savings account, loans etc.)
• The Business Correspondent carries a mobile device.
• The villager gives his thumb impression or electronic signature, and get the money.
• Business Correspondents get commission from bank for every new account opened, every transection made via them, every loan-application processed etc.

Functions of BC-----

1. Create awareness about savings.
2. Give advice to villagers, about how to save/invest money and how to arrange/manage loans.
3. Collect loan applications, forward them to bank.
4. Preliminary processing of loan applications for example: verification of person’s identity, home-address etc.
5. Help the Self Help Groups (SHG), to get loans.
6. Help the bank to collect EMIs and recover loan money.

 SWABHIMAN

• Initiative by the Finance Ministry + Indian Banks’ Association
• launched in 2011
• To bridge economic gap between rural and urban India.

Objectives

• Make banking facilities available to every habitat with a population >2000 (by March 2012.)

• Banks will provide basic services like deposits, withdrawal, Kisan Credit Card (KCCs) etc via Business Correspondents (BCs) also known as Bank Saathi.
• Banks will also working together with the Unique Identification Authority of India (UIDAI) for opening new bank accounts.
• Government will send subsidies and social security benefits (pension etc.) directly to beneficiary’s account.
• Beneficiary can withdraw the money from the Business Correspondents (BCs) in their village itself.
• Government has provided 500 million rupees to banks for taking these initiatives.(e.g. paying Commissions to Bank Saathi, their training cost, doing paperwork with UID.) 

  

KISAN CREDIT CARD

 KCC is a credit facility given to the farmers based on the total yield capacity of their agriculture land.
the money withdrawn is to be paid back in 1 year attracting 7% interest rate. but if the individual pays the credit in time then 3% of interest is paid back to his amount. but this facility is available only for those KCC which has a annual limit of less than or upto 3 lakh.


 general purpose credit card is given to marginal farmers and poor with a limit of Rs. 15000.


for article archive click here

NABARD

National bank for agriculture and rural development.
it is an apex development bank with a mandate for providing credit flow for promotion and development of agriculture, small scale industries and all other allied economic activities in rural area.

inn simple words- NABARD is the mother and father of all agriculture and development activities in the rural area.....

main function is to provide refinance to lending institutions in rural area.
now what this REFINANCE means?

it means NABARD does not provide loans directly to the individual and business. loans needed by individual and business for agriculture and rural development projects is provided by commercial banks, rrb, co operative banks, nbfc working in rural area.
NABARD in turns sanction some percentage of the total loan ( 50% to 95%).

Criteria for refinance
1.	Technical feasibility of the project and adequate response from prospective beneficiaries
2.	Financial viability and adequate incremental income to ultimate borrower to repay the loan within a reasonable period
3.	Organisational capability to ensure close supervision.

other function of nabard

	Prepares, on annual basis, rural credit plans for all the districts in the country. These plans form the base for annual credit plans of all rural financial institutions
•	Undertakes monitoring and evaluation of projects refinanced by it
•	Promotes research in the fields of rural banking, agriculture and rural development
•	Functions as a regulatory authority, supervising, monitoring and guiding cooperative banks and regional rural banks for article archives click here

WHAT IS BANK?

bank is a lawful organisation whose basic function is to accept deposit and lends money to individual and business that need it.

TYPES OF BANK
1. scheduled bank -  are those which are registered in SCHEDULE 2(E) of RBI act 1934 with minimum paid up capital of Rs.200 crore.
2. non schedule- bank =s which are not listed in rbi schedule.


1. Central bank ( RBI ). CLICK ON LINK TO LEARN ABOUT RBI

2. commercial bank - banking institutions which accepts deposit and grant loans and advances to customer.
                                  it may be public sector bank, private sector or foreign bank.

3. development bank- business require medium and long term capital for purchase of machinery and equipment, for latest technology or for expansion, which in turn provided by the development banks like INDUSTRIAL FINANCE CORPORATION OF INDIA.

4. COOPERATIVE BANKS
5. SPECIALISED BANK- for providing support and over all requirements for setting up business in specific area or activity. eg. EXIM, SIDBI AND NABARD

for article archives click here