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Financial Inclusion

Financial Inclusion . Role of Banks N.Srinivasan. What. Is it a savings account Is it a loan account Is it direct client relationship Coverage of those who have not so far been made a client of a bank – person or household having an effective financial service requirement to be covered.

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Financial Inclusion

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  1. Financial Inclusion Role of Banks N.Srinivasan

  2. What • Is it a savings account • Is it a loan account • Is it direct client relationship Coverage of those who have not so far been made a client of a bank – person or household having an effective financial service requirement to be covered

  3. Why Financial Indlusion • Bringing underserved and marginalised in to the mainstream economy • Covering barter and cash economy under the formal payments system • Ensuring effective and safe savings and credit facilities to all sections of people We should recognise that banking services are a public good- those who have a genuine need should have unfettered access

  4. The size of the effort Multiple accounts of the same borrower not factored – the gap is actually larger

  5. Issues • Large numbers uncovered • Sparsely populated areas and remotely located • Uncovered not economically significant in terms of business volumes • Branch network limited compared to the numbers • Staff strength low compared to additional effort needed – post VRS blues continue • Large inter-state variations in per branch and per staff work loads

  6. Issues • KYC norms entail additional time and cost • Impact on profitability • Level playing field – whether the load will fall on Public Sector banks and cooperatives?

  7. How – the strategies Overarching concerns • Cost effectiveness • Early completion of the task Strategies • Use of technology • Outsourcing of services – use community based organisations for client identification and documentation

  8. How - strategies • Devising a credible KYC compliance procedure that would satisfy RBI ( such as a bankers committee at the block level) • Camp mode of enrolling clients • Usage of facilitator model to use SHGs, NGOs, Farmers clubs and MFIs • Financing of MFIs, cooperatives and SHGs in larger numbers to achieve indirect inclusion

  9. Internal preparedness • Need to identify staff and train staff in fast client acquisition • Skills of contracting outsourced services • Investment in software and networking to render remote KYC compliance easy • Active role of SLBC and DLCC for documenting best practices and sharing the same • Cooperatives better placed with extended network – need to sharpen the skills and focus on new client enrolment • Lobbying with RBI for a relook at KYC norms for the inclusion agenda • Lobbying with GoI and RBI for access to financial inclusion fund - based on results achieved and investment in technology

  10. Conclusion • It is a challenge – but also an opportunity • Tomorrow’s clients today – with some costs hopefully being absorbed by inclusion fund • Investment in technology would be of long term help • Business volumes would get up built up over the next few years on the back of large number of new clients • It is not a cost; nor a vain effort – it is an investment in future of the bank as well the underserved people.

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