Whither Financial Inclusion - State of the Sector Report

7/28/2019 Whither Financial Inclusion - State of the Sector Report

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Presented by:

Sameer Kochhar Chairman, Skoch Group

FINANCIAL

INCLUSION DAY2013

State of the Sector

Report5th January 2013 | Hotel Shangri-La

Ashoka Road | New Delhi


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Self Help Groups(SHGs)

Declining growth rate of SHG linkages is alarming: 2009-10 : -1.4% 2010-11 : -25% 2011-12 : -4.2%

The actual situaKon may be worse as the 2nd and 3rd tranches of credit

disbursal may be counted as a fresh linkage. CumulaKve numbers are misleading as they do not weed out inacKve SHGs

and assume zero mortality

Nearly 80% SHGs are run by women and therefore gendered exclusion isbecoming more pronounced.

The above is due to an insKtuKonal failure of NABARD leaving an opportunityfor the bureaucracy to step in to set up NGOs etc. System likely to get leakier.


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Priority Sector , Agriculture and Cooperatives

Priority sector lending decelerated to 12.9% during 2011-12 from 13.5% in theprevious year.

Non-food credit growth down to 17% in 2011-12 from 20.6% in 2010-11. CooperaKves dying a slow death (2010-11 data):

Medium term and other loans issued -6.59% Total demand -6.06% Total collecKons -6.08%


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Banking

Number of bank branches went up 46.35% from 2004 to 2012: Rural branches went up by only : 12.15% Semi-urban branches went up by : 69.61% Urban branches went up by : 72.12% Metropolitan branches went up by : 93.63%

While average populaKon served per bank branch fell from 16000 in 2004 to 13000in 2012, situaKon in rural India about the same if not worse.

Out of 408.41 lakh households covered by March 2011 only 179.38 lakh were ruraland 229.03 lakh were urban

Cont.


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Banking

DomesKc credit provided by the banking sector in India stands at an abysmally lowlevel compared to many emerging Asian economies.

Need to develop stronger linkages with real sector In a cross country analysis of Financial Inclusion per 100,000 adults:

India Brazil

Branches 10.64 46.15

ATMs 8.9 119.63


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Banking Correspondents and No FrillAccounts

From 13077 Customer Service Points (CSPs) in 2009, the number went up to1,16,548 in March 2012

Out of these 72000 were added under the nancial inclusion plan of Ministry of Finance

CumulaKve numbers are misleading as many CSPs have closed down Quite a few CSPs are in-operaKonal or only parKally operaKonal Urban CSPs averaging growth rate of nearly 400% compared to rural ones at only

80.63%

There were 138.5 lakh no frills accounts in March 2012 and 57.08 lakh ICT enabledBC accounts - only 11% odd no frills accounts are acKve

Only 2% of these have an Over Dra_ facility totaling to a meagre 108 crore.

Total number of issan credit cards issued in 2011-12 were 30.23 million up 3.12%and General Credit Cards issued were 2.11 million up 0.41% Hardly any of these were linked with no-frills accounts


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Direct Benet Transfer or Doubtful BenefitTransfer?

Infrastructure simply not in place Pilot in 51 districts means at least 51 districts are 100% (or even 80%) nancially

included - this is simply not true

3% transacKon fee being talked about for disbursements in pilot districts - what aboutdeposits?

Shared ATMs for all banks in a state being provided by third party service providers -

whose baby? What stops rent seeking by BC agents on DBTs? Single BCs quoKng as low as 0.15% transacKon fee when they have proven to be

unsustainable below 3% - rent seeking can plug the gap!

DBT is not a one size ts all soluKon. Only some subsidies are amenable to DBT (e.g.pensions, NREGS wages etc.) while others (food, educaKon, health etc.) are not.

DBT can not be a replacement to good governance and systemic reform


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Exclusion by Design

No frills accounts instead of basic savings accounts (the sKgma) Separate Financial Inclusion Infrastructure - inadequate, not to scale, kills

interoperability

Lack of relevant products e.g. micro-savings, insurance, pensions, credit, remi ancesetc.

illing of Business Facilitator model accentuates nancial illiteracy and exclusion Single BC in one zone and shared third party ATMs are a terrible idea We need to buy technology and more technology to solve all problems mindset of

bureaucracy


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Need to re-orient Financial Inclusion

Adequate and Kmely credit supply Support to livelihood Promote entrepreneurship

Create a sense of empowerment Enable poverty alleviaKon Access to nancial services


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Possible Answers

Demand side targets on SHG formaKon, entrepreneurial credit, priority sector, DRIand marginalised secKons lending

Financial literacy is the biggest felt need - create one nancially literate woman pergram panchayat as a Business Facilitator at a realisKc compensaKon

Direct Bank Access through banks on wheels, kiosks, micro-branches AcKve role of Department of Post Liberal distribuKon of bank licences Make available all relevant products Need for all regulators to work on silo-bursKng and creaKng common distribuKon

channels

Cont. .


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Possible Answers

All amenable benets to be converted to DBT and converged with the nancialinclusion plan

Banks to sum up courage to charge realisKc interest rates

All bank accounts in a bank should run from one core banking infrastructure SensiKsaKon of bank manpower Technology driven but technology pla orm neutral Set up a FI mission mode project - high level commi ees don't deliver


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THAN YOU!

Whither Financial Inclusion - State of the Sector Report

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