...M-CRIL Review of Rural Banking in India: Working Paper 1 Micro-Credit Ratings International Limited 602 Pacific Square, 32nd Milestone NH8, Gurgaon 122 001 INDIA Telephone: +91 124 230 9497, 230 9707, 405 0739, 426 8707; Fax: +91 124 230 9520 e-mail: contact@m-cril.com ; website: www.m-cril.com Study Sponsored by Swiss Agency for Development and Cooperation Micro-Credit Ratings International Limited Table of Contents Section Background Executive Summary 1 2 3 4 Introduction The Importance of Rural Banks Recent Performance of the Rural Banking System Reforms and the Rural Banks 4.1 A huge effort to reform the cooperative system 4.2 Sensible proposals for reorienting the Regional Rural Banks but… 5 Will Reforms Enable Inclusion? 5.1 Cooperative reform – is it good money after bad? 5.2 RRB reform – has the inclusion objective been sidelined? 6 Conclusion Page v vii 1 3 7 8 8 12 15 15 17 18 M-CRIL Review of Rural Banking in India Background This study follows from the discussion of issues in the performance of Regional Rural Banks (RRBs) written by Sanjay Sinha, Managing Director, M-CRIL and published in The Economic Times (newspaper) on 17 March 2007. In relation to financial inclusion, many of the issues raised there affect the performance of cooperative banks as well as the RRBs. These issues include • The effect of government ownership of RRBs on their ability to operate efficiently and effectively to fulfil the financial inclusion mandate; the domination of (district)...
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...------------------------------------------------- A Study on Relevance of Financial Inclusion in India and other ------------------------------------------------- Developing Nations Prof. Nilesh PatelAssistant ProfessorSal Institute of ManagementGujarat Technological UniversityEmail id: patelnileshmm@gmail.comContact no: +91-9925937375 | Prof. Saloni SarafAssistant ProfessorSal Institute of ManagementGujarat Technological UniversityEmail id: lohiasaloni31@gmail.comContact no: +91-9510164544 | ABSTRACT: India is one of the largest and fastest growing economies of the world, but what has been the most disturbing fact about its growth has not only been uneven but also discrete. More than 150 million poor people have access to collateral-free loans. However; there are still large sections of the world population that are excluded from financial services market. Financial inclusion is an innovative concept which makes alternative techniques to promote the banking habits of the rural people because, India is considered as largest rural people consist in the world. Financial inclusion is aimed at providing banking and financial services to all people in a fair, transparent and equitable manner at affordable cost. Households with low income often lack access to bank account and have to spend time and money for multiple visits to avail the banking services, be it opening a savings bank account or availing a loan, these families find it more difficult to save and to plan financially...
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...Financial Inclusion-case study Financial Inclusion is a need which has been capturing the attention of the governments and policy makers all over the world. It is a process by which banking services as well as other financial services can be extended to the poorest of the poor in a country. There can be multiple levels of financial inclusion. Banks have at one end the high end customers for whom they are offering wide range of products & services. At the other end there are customers having only the savings bank accounts & withdrawal facilities. Governments have followed different approaches to achieve financial inclusion .The US government expanded the scope of financial inclusion through statutory enactments. e.g. Community Reinvestment Act. In France, it is a statutory right of every individual to have a bank account. Internationally Financial Inclusion has a wider perspective, a mere current & saving account holdings cannot be an accurate indicator for the financial inclusion. A financial inclusion taskforce in UK identified three priority areas namely 1) Access to banking 2) Access to affordable credit 3) Access to advisory services. UK has established a financial inclusion fund for removing financial exclusion. A post office card account has been created for people who are unable to access basic bank account. Community Advance Finance initiative was introduced to promote financial literacy among people. Housing Reimbursement Act in US prohibits...
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...Overview of Financial Inclusion in India C. Paramasivan Assistant Professor, PG & Research Department of Commerce Periyar EVR College, Trichy, Tamil Nadu V. Ganeshkumar Research Scholar, PG & Research Department of Commerce Periyar EVR College, Trichy, Tamil Nadu Abstract Inclusive growth is possible only through proper mechanism which channelizes all the resources from top to bottom. Financial inclusion is an innovative concept which makes alternative techniques to promote the banking habits of the rural people because, India is considered as largest rural people consist in the world. Financial inclusion is aimed at providing banking and financial services to all people in a fair, transparent and equitable manner at affordable cost. Households with low income often lack access to bank account and have to spend time and money for multiple visits to avail the banking services, be it opening a savings bank account or availing a loan, these families find it more difficult to save and to plan financially for the future. This paper is an attempt to discuss the overview of financial inclusion in India. Key Words: Financial Inclusion, Reserve Bank, Inclusive Growth, Financial services. Introduction Financial inclusion is the recent concept which helps achieve the sustainable development of the country, through available financial services to the unreached people with the help of financial institutions. Financial inclusion can be defined as easy access to formal financial services...
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...nations, like India have immensely benefited from the globalizing economy. Wealth has been pouring into the country as investments (both direct and institutional). Indian companies are acquiring companies all over the world, hence benefitting from expansion. This has directly affected the lives of many citizens in our country. For many, there has been a dramatic increase in the disposable income. The savings, consumption and investment patterns have changed in the past few years. This has meant that there has been an increase in demand for many financial services from different financial firms. The market has responded to this soaring demand with making attractive offers and services for the customers at affordable rates. Since the LPG reforms of 1991, there have been progressive reforms in the financial sector allowing for better and easier facilities and options to the consumer. An increasing financially aware middle class have realized the importance of financial services. Banks have streamlined and rationalized themselves to meet with the changing demands of the people. However, not all the reforms in the financial services sector have still been able to bring in the other half of India’s population who are un-banked. There are many reasons that are obvious for this kind of financial exclusion. Most of the un-banked or financially excluded population of India lives in rural areas; nevertheless, there is also a significant amount of the urban population of India who faces...
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... 6 3. Urban Poverty 7 4. Urban Microfinance 9 5. Financial Inclusion in India 11 6. Microfinance as an Anti-Poverty Vaccine 15 7. Transformation of Microfinance in India 19 8. Scaling up Microfinance 22 9. Microfinance in India - A Tool For Poverty Reduction 26 10. SWOT Analysis of Microfinance 29 11. Delivery Models of Microfinance 32 12. Interest Rates in MFIs and prevailing trends 36 13. Scope of further study 42 14. Conclusion 44 15. Bibliography 46 OBJECTIVE OF THIS PROJECT WORK This project work tries to outline the prevailing condition of the Microfinance in India in the light of its emergence till now. Microfinance refers to small savings, credit and insurance services extended to socially and economically disadvantaged segments of society. It is emerging as a powerful tool for poverty alleviation in India. The prospect of Micro-Finance is dominated by SHGs (Self Help Groups) - Banks linkage Program. Its main aim is to provide a cost effective mechanism for providing financial services to the poor. To understand the transformation experiences better, the issues that trigger transformation were identified viz.: size, diversity of services, financial sustainability and focus. It is argued that the transformation experiences in India are not large in number. However, I found that there are three forms of organizations...
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...Autumns Internship Project KPMG Strategic and commercial Intelligence Department Inverting the Pyramid: Inclusion in the Financial Services Industry Final Project Report 19/11/2010 Submitted By: Hufriya Kavarana PGP-09-031 S.P. Jain Institute of Management and Research, Mumbai Inverting the Pyramid: Inclusion in the Financial Services Industry 2 | P a g e Table of Contents Preface .............................................................................................................................................. 3 Acknowledgement ............................................................................................................................ 4 Executive summary.......................................................................................................................... 5 Overview .......................................................................................................................................... 7 Components of financial inclusion—what is being measured? ..................................................... 8 Introduction ...................................................................................................................................... 9 Indian Scenario ............................................................................................................................... 13 Magnitude and Spread of Financial Exclusion ................................................................
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...Now-a-days, banking sector acts as the backbone of modern business. Development of any country mainly depends upon the banking system. Every bank in India has to compulsorily concentrate on Financial Inclusion as it is one of the developing sectors of Indian Economy. It is one of the segments that have a major impact on Indian Economy. The main purpose of this study is to understand the impact of Financial Inclusion on Indian Economy. The study focuses on the financial exclusion and inclusion. It concentrates on the various reasons, causes and consequences of financial exclusion. It also focuses on the initiatives taken by the Government and RBI to expand the coverage of financial inclusion. The various policy been developed with respect to the financial inclusion. The study has majorly focused on 4 objectives: * To understand the reasons for Financial Exclusion in India * To analyze the extent of financial inclusion coverage in India * To list the various measures & initiatives of state / central government with respect to financial inclusion * To understand the link between Industry growth and financial inclusion With the upcoming years there is a strong hope that the vision and mission of financial inclusion will be successful and a large group of customers would enjoy the benefits of banking services. The financial illiteracy of rural masses will no more be a hindrance in the development of strong healthy sustainable economy. Therefore, it is suggestible...
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...Speech Financial Inclusion and Banks: Issues and Perspectives Financial Inclusion and Banks: Issues and Perspectives* K. C. Chakrabarty Ms Naina Lal Kidwai, Vice President, Federation of Indian Chambers of Commerce and Industry (FICCI) and Country Head HSBC India & Director, HSBC Asia Pacific, Ms Meera Sanyal, Chairperson, FICCI’s Financial Inclusion Committee & Country Executive India, The Royal Bank of Scotland N.V., Ms Caitlin Wiesen, Country Director, UNDP, Mr Mathew Titus, Co-chair, FICCI’s Financial Inclusion Committee & Executive Director, Sa-Dhan, Ms Jyoti Vij, Assistant Secretary General, FICCI, members of the print and electronic media, ladies and gentlemen. It is indeed a pleasure to be present here today to address this gathering on the bankers’ role in promoting financial inclusion, their achievements, and the key issues and challenges being faced by them. Role of FICCI and UNDP 2. As you are all aware, financial inclusion is a mammoth task and it cannot be achieved without the active collaboration of all stakeholders. It is in this context that this particular seminar organised by FICCI, which is an apex industry association and brings a large number of stakeholders under its fold, and United Nations Development Programme (UNDP), which is at the centre of the UN’s efforts to reduce global poverty, assumes significance. FICCI has been playing a leading role in policy debates touching social, economic and political issues and I believe that corporates have a great...
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...economy. Strong regulatory mechanism, inherent strength in the economy, and progressive policy framework which supports, nurtures, and helps in growing the financial institutions. Indian financial services industry is dominated by the banking sector that contributes significantly to the level of economic activity. The banking structure in India is broadly classified into public sector banks, private sector banks and foreign banks. The public sector banks continue to dominate the banking industry, in terms of lending and borrowing, and it has widely spread out branches which help greatly in pooling up of resources as well as in revenue generation for credit creation. The role of banks in accelerating economic development of the country has been increasingly recognized since the nationalization This facilitated the rapid expansion of banking in terms of its geographical reach covering rural India, in turn leading to significant growth in deposits and advances. Eventually, however, the government used banking sector to finance its own deficit by frequently increasing cash reserve ratios (CRR) and statutory liquidity ratio (SLR). Deregulation of the Indian financial system in 1991 followed by various financial sector reforms during the period 1990 through 1998 led to a major restructuring of the Indian banking industry. India has entered high growth trajectory with the initiation of economic reforms in the early 1990s with a policy shift towards free market economy. While on the...
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...https://www.nabard.org/english/about_Highlights.aspx Financial Inclusion During the year 2011-12, the disbursements under Financial Inclusion Fund (FIF) and Financial Inclusion Technology Fund (FITF) were 18.49 crore and 128.05 crore reflecting a growth (over previous year) of 100.8% and 137.1% respectively. With this, the cumulative disbursement since inception touched a level of 36.05 crore under FIF and 183.82 crore under FITF. Support was extended for setting up of Financial Literacy and Credit Counseling Centres (FLCCs) to Lead Banks (111 FLCCs), capacity building programmes by commercial banks and (Regional Rural Banks)RRBs and Financial Literacy awareness camps by RRBs, under FIF. Under FITF, support was extended for implementation of Core Banking Solution (CBS) by weak RRBs (26 out of 28) and Information & Communication Technology (ICT) solution by RRBs (52 out of 82). Financial Inclusion During the year 2012-13, the disbursements under Financial Inclusion Fund (FIF) and Financial Inclusion Technology Fund (FITF) were 33.31 crore and 17.14 crore respectively. With this, the cumulative disbursement since inception touched a level of 69.77 crore under FIF and 201.30 crore under FITF. Support was extended for setting up of Financial Literacy and Credit Counseling Centers (FLCCs) to Lead Banks in 256 excluded districts and 10 disturbed districts, capacity building programmes by commercial banks and RRBs and Financial Literacy awareness camps by RRBs, under FIF. Under...
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...SPECIAL ARTICLE Challenges to Financial Inclusion in India The Case of Andhra Pradesh S Ananth, T Sabri Öncü Focusing on the institutional challenges to financial inclusion in Andhra Pradesh, this paper argues that it is the inability of formal financial institutions to meet the specific needs of the poor that has enabled informal service providers to fill the vacuum. Without a paradigm shift, especially on the part of banks, financial inclusion is bound to fall short of expectations. It proposes that the banking sector should look at efforts to expand inclusion not as a capital cost or as a charitable expense, but as a long-term investment in the future. The soundness of such an investment is borne out in the success of individual business correspondents in some districts of the state. 1 Introduction The views expressed in this paper are those of the authors and do not necessarily reflect views of the Centre for Advanced Financial Research and Learning. S Ananth and T Sabri Öncü (Sabrioncu.cafral@rbi.org.in) are with the Centre for Advanced Financial Research and Learning, Mumbai. Economic & Political Weekly EPW inancial inclusion has become central to Indian policymaking over the past few years and various attempts have been made to expand its scope. Despite these attempts, the challenges to financial inclusion remain formidable. These attempts and challenges have to be not only examined in the context of an increasingly globalised economy, of expanding markets...
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...Introduction The Government of India and the Reserve Bank of India have been making concerted efforts to promote financial inclusion as one of the important national objectives of the country. Some of the major efforts made in the last five decades include - nationalization of banks, building up of robust branch network of scheduled commercial banks, co-operatives and regional rural banks, introduction of mandated priority sector lending targets, lead bank scheme, formation of self-help groups, permitting BCs/BFs to be appointed by banks to provide door step delivery of banking services, zero balance BSBD accounts, etc. The fundamental objective of all these initiatives is to reach the large sections of the hitherto financially excluded Indian population. The speech is organized in five sections: Section 1 - Definitions Section 2 - Extent of Financial Exclusion Section 3 – RBI Policy Initiatives and Progress in Financial Inclusion Section 4 – Stakeholder-wise Issues in Financial Inclusion Section 5 – Conclusion and Way forward Section - 1 Definitions 1.1 Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost (The Committee on Financial Inclusion, Chairman: Dr. C. Rangarajan). 1.2 Financial Inclusion, broadly defined, refers to universal access to a wide range of financial services at a reasonable cost...
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...Innovations and Inclusive Growth A Case of Banking Industry in India Kiran Kumar Kakarlapudi Background and Motivation India has entered high growth trajectory with the initiation of economic reforms in the early 1990s with a policy shift towards free market economy.1 While on the growth front, the economy has performed considerably well, on the other hand the issue of distributional effects of growth has gained momentum in the academic and policy environment. Thus, in the eleventh and twelfth five year plans, emphasis has been laid to achieve sustainable economic growth with inclusive development (Singh, 2011). The empirical evidences on India’s growth pattern show that, the fantabulous growth performance, to a large extent, is driven by high growth in the service sector which has grown at 8.1 percent per annum during 1990-91 to 2007-08. Similarly, the share of service sector Gross Domestic Product (GDP) has increased from less than half to 68 percent in 2007-08 (Acharya, 2008). 2 The insights from the studies on service sector growth in India reveal that the spurt in the service growth is driven by the rapid growth of business services (which include Information Technology), communication services, financial services, hotels and restaurants, and trade (distribution) services, which is facilitated by the advent and rapid diffusion of information technology (Gordon and Gupta, 2004; Banga, 2005; Verma, 2006; Eichengreen and Gupta, 2010).3 Further, it has been argued that, rapid...
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...Existing and future challenges The banking industry in India has a huge canvas of history , from traditional banking practices of Britishers to reforms period, nationalization to privatization of banks and now increasing numbers of foreign banks in india. Now expectations and well as level of services are increasing due to emergence of IT and competition in the market. This has created various challenges and opportunities for Indian commercial banks. A few of them are listed below. Rural : The banking in India is fairly mature in terms of supply, product range and reach even though reach still remains a challenge for private sector and foreign banks . Consequently there have been a few instances of inorganic growth like ICICI Bank Ltd merged with Bank of Rajasthan Ltd to increase its market share in rural market and increase the market share significantly. Management of Risks : The growing competition increases the competitiveness among banks. But existing global banking scenario is posing threats for Indian Banking Industry. The three types of risk are Commercial banks foreign exchange risk , credit risk and operating risk To offset these Mergers and Acquisition have increased and risk management capabilities have been improved. Market Discipline and Transparency : Transparency and disclosure norms are accepted as part of corporate governance practices. Expectation is growing to be more responsible and accountable to investors. Movement of NPAs, capital, provisions, shareholding...
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