Financial Inclusion-Its changing nature in Indian banking sector.

8/15/2019 Financial Inclusion-Its changing nature in Indian banking sector.

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nanc a nc us on an e n anu

Economy -Economy - A study on the changing nature of the nancial A study on the changing nature of the nancial

servicesservices

Mr. Pema LamaMs. Madhumita Dasgupta Assistant Professor

Research Scholar Department of Commerce


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Layout of the PresentationLayout of the Presentation

Introduction

Literature Revie

!hat is nancial inclusion and nancial literacy

Stages of nancial inclusion

Indian Scenario

Challenges

Improvement measures Conclusion


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IntroductionIntroduction

With growth of the nancial sector across the world, thereis an increasing need of more and more households andindividuals becoming a part of the organized nancialworld.

Policy-makers at both the national and global level areembracing nancial inclusion as an importantdevelopment priority.

This is also gaining importance since it forms thefundamental block of sustainable development.

t has the ability to generate positive e!ternalities


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Literature ReviewLiterature Review

Ravichandran "#$$%& on comprehensive study of the villages in

south ndia and states that nancial inclusion would not only benet

the customers but would also be benecial for the nancial

institutions and would help in bringing up the standard of living of

the particular region.

"andoo "#$'$& tries to capture the e(ect of the di(erent reform

measures that were brought up by the government and the e(ortsby the policymakers to bring about an drastic change in the

economic growth through the inclusion of the weaker sections of

the society . t tries to analysis a branchless banking and nancial

inclusion ecosystem for the world as a whole and ndia in specic.

Rama#rishnan "#$''& states that there is a strong correlationbetween the propensity to consume and propensity to save. The

paper emphasizes on the fact that ndia needs a higher nancial

literacy since there is a large section of the population which still

remains out of the formal nancial set-up especially in the rural

areas. The keystone of nancial literacy is a perception that

disciplined saving is important.


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What is nancial inclusion andWhat is nancial inclusion and

nancial literacy?nancial literacy?

)inancial nclusion is the process of ensuring access toappropriate nancial products and services needed by allsections of the society in general and vulnerable groupssuch as weaker sections and low income groups inparticular at an a(ordable cost in a fair and transparentmanner by institutional players.

)inancial literacy is one of the components of nancialskills * it is e!pressed as information about nances,nancial trends and as the ability to understand or thee!pertise of nancial products , risks and their returns

n order to achieve broad based improvement in the livingstandards of all citizens of the nation, the ob+ective ofnancial inclusion is to provide an opportunity of formalnancial services such as credit, deposit, insurance andpension to the large sections of the hitherto nancially

e!cluded ndian population.


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Stages of nancial inclusionStages of nancial inclusion

The above gure clearly shows the di(erent stages ofnancial inclusion through digital awareness.

Stage I - critical mobile coverage and penetration of ruralpoor.

Stage II - use of digital devices by the poorer sections forpersonal transfers and government payments.

Stage III $ use digital media for savings , credit and insuranceservices.


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Indian ScenarioIndian Scenario

ccording to , / of all the households do not have bankaccounts, %0/ do not have any health insurance and 1' /. do nothave life insurance.

ccording to a study , it is seen that the costs of a no-frills savingsaccount is much higher compared to the number of transactions inthat account and to reach break-even, the average balance is higher

than the maintained by retail customers. )rom the demand side, a higher cost of nancial services results in

discouraging of nancial inclusion.

ndia stands #% in a list of countries based on the country2sperformance in banking penetration, availability of the bankingservices, and the usage of the banking system.

The electronic payment system for the poor household is not a perfectsolution for promoting banking activities. The electronic paymentsystem is outstanding proposal if it follows top to bottom approach.

The access to formal banking system among the rich class is higher incomparison to the middle and the poor income groups3 howeverusage of electronic payment system is very low in all the classes at

present in ndia.


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Methods to enhance the penetrationMethods to enhance the penetration

of banking services to the rural areasof banking services to the rural areas

• Automated &eller 'achine (A&')

• De*it card and Credit card

• +lectronic Clearing System (+CS)

• +lectronic ,und &ransfer (+,&)

• -ational +lectronic fund &ransfer (-+,&)

• Real &ime .ross Settlement (R&.S)


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Soe statisticsSoe statistics Through 456s e(orts since #$$, the number of branches of

cheduled 7ommercial 5anks increased from 18,18' in 9arch#$$1 to ',$#,:;: in 9arch #$':, spread across country.

n rural areas, the number of branches increased from :$,0#to :0,%: during 9arch #$$1 to 9arch #$':.

s compared with rural areas, number of branches in semi-urban areas increased more rapidly.

Total number of banking outlets in villages increased from

10,1%; in 9arch #$'$ to #,18,;; in 9arch #$':.

77s issued to farmers remained at ::.0% million

with a total outstanding credit of 4s.#1##.%8 billion

Source/R0I


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Soe statisticsSoe statistics

!contd" !contd"

Source / CRISIL


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Soe statisticsSoe statistics

!contd !contd

Source / CRISIL


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#hallenges for nancial inclusion#hallenges for nancial inclusion

Aow literacy levels

Aack of understanding of banking and nancial productsand services.

bsence of reach and coverage

naccessibility, distance and lack of proper infrastructure.

4egulation frameworks are not always adapted to localconte!ts.

Bon-availability of branches in re?uired areas.

Bon-adapted products and services for low incomepopulations and the informal economy.

Bon- involvement of the state and the localadministration at grass root level.


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Soe iproveent easuresSoe iproveent easures

E7

norms, Feneral 7redit 7rad schemes and the 5usiness

7orrespondents6 and 5usiness )acilitators model.


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#onclusion#onclusion


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&han# you&han# you

Financial Inclusion-Its changing nature in Indian banking sector.

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