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Financial inclusion is vital for bringing marginalized groups into the mainstream economy. This involves providing effective financial services such as savings and loan accounts to individuals and households who currently lack access. Banks must recognize their role as public goods and ensure unfettered access to banking services for all. Challenges include uncovering underserved populations, limited branch networks, and the need for effective KYC procedures. Implementing technology and outsourcing strategies can enhance outreach and foster inclusion. This effort is an investment in the future of both banks and the communities they serve.
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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
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
The size of the effort Multiple accounts of the same borrower not factored – the gap is actually larger
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
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?
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
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
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
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.
