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Extension of Banking Services for Financial Inclusion*

CASELET, FINANCIAL MANAGEMENT
ET Cases - GSMC, 6 Pages
AUTHOR(S) : Dr. Sukhbir Kaur, Asst. Professor, CIBMRD, Nagpur and Dr. Yogita Sure, Asst. Professor, CIBMRD, Nagpur

Case Preview

Extension of Banking Services for Financial Inclusion

 

On September 4th 2014, this news made the headlines “Gujarat milkmen get their own bank accounts, ATM cards. A man, from Prime Minister Narendra Modi’s native district, Mehsana, has been ahead of him in launching a financial payment method similar to the former’s ambitious ‘Jan Dhan’ scheme. Joseph Verghese, 42, has given 60,000 milk producers their own bank accounts with an ATM card to boot!”

India, the biggest democracy is known for highest percentage of financial exclusion. A country having the major percentage of global population also has a vast number of people outside the formal financial system as per Global Findex Report of 2012. The formal financial system in India has a huge capacity to provide financial services to the excluded population. The banking system in India has implemented different approaches to make the dream of Universal financial inclusion a reality but remained unsuccessful. Initially regional rural banks were formed in 1969 to promote banking in rural sector; later NABARD was launched for enabling microfinance to name a  few. A shimmering ray hope has rekindled with the Pradhanmantri Jan-Dhan Yojana (PMJDY) and under this scheme about 1.5 crore accounts were opened on the first  day, August 28th 2014, through thousands of camps across the country..........................

Financial Inclusion

Financial inclusion ensures the availability of basic financial services at an affordable cost to the disadvantaged and underprivileged group both in rural and urban area. This group of people are also known as financially excluded group as they do not have access to formal financial services as simple as banking facility. Every deprived person should have a bank account and the ability to enjoy loan from banks. The Financial Inclusion involves...............

Brief History

The Indian Government has an extended history of working to expand financial inclusion. After independence the 430 commercial banks existed and still unable to help Government of India achieve its social objective. Thus, in 1969, 14 major commercial banks were nationalized, a big step towards financial inclusion. In the same year National Credit Committee (NCC) come with the concept of lead bank scheme..........

Problems Faced during Implementation of Financial Inclusion Plan

Major challenges were faced during implementation of financial inclusion. According to bankers, financial literacy was a major stumbling block. Lack of awareness among financially excluded group about importance of holding an account in bank was a major problem. To further add to the problem concept of saving for a rainy day is still not a habit. Thirdly, the bank KYC norms...........

MNREGA Payments

In the traditional system a villager earned cash under MNREGA scheme, the Government made payment by cash to bank and then the bank disbursed it to the business correspondent and the business correspondent deposited cash into MNREGA worker’s account..........

Warehousing

The Indian farmers are not able to sell their produce at the right time as they neither had the required storage capacity nor were they financially strong. This warehousing facility provided by........

Benefits of Jan Dhan Yojana

• Open an account for zero balance saving mode

• Account holder receives a kit containing cheque book, financial literacy and pass book. However this would vary from bank to bank and account usage

• Every account holder will get RuPay Debit card (which is India’s domestic debit card) included in the welcome kit. RuPay card can also be used for e Commerce transactions

•..........

What Lies in the Future...

India, the world’s largest democracy, has about 72.2% of its population living in 6,38,596 villages. With the objective of ensuring greater financial inclusion and increasing the outreach of the banking sector, there have been several initiatives to provide basic financial services to remote rural citizens. RBI set up the Khan Commission in 2004............

Exhibits

Exhibit I: Business Model for Financial Inclusion

Exhibit II: Pradhanmantri Jan Dhan Yojana

Teaching Note Preview

Extension of Banking Services for Financial Inclusion

 

The case study deals with financial inclusion. It highlights the need for financial inclusion and methods adopted by banking services to achieve the financial inclusion.  The case study also deals with the new innovative trends in technology which has changed the traditional ways of banking to smart and alternative banking model like milk ATM, mobile-van Business facility, etc. The objective of this case study is to highlight on the issues/challenges in implementation of financial inclusion and  understand the new innovative techniques, models, resulting in extension of banking services initiated by many banks for financial inclusion.

Pedagogical Objectives

  • • To create an awareness about financial inclusion, its need, and various ways adopted by banks
  • • What are the issues or problems in implementing the plans for financial inclusion?
  • • To find out the solutions to overcome the issues or challenges in financial inclusion
  • • To know how banks have adopted technology for transformation of banks from core banking services to the technologically driven services
  • • To teach concepts like Financial Inclusion, transformation of banking services, application of IT in business

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Product code: FIN-2-0011, FIN-2-0011A

Abstract

Under the financial inclusion plan the Reserve Bank of India (RBI) decided to provide financial facility at an affordable cost to people who are unable to utilize the benefits of the plan. For successful implementation of this plan, RBI instructed banks to make financial services available in the rural areas also. New innovative trends in  technology has changed the traditional ways of banking with smart and alternative banking models like – Milk ATM, Mobile-van Business Facility, etc. The objective of this case study is to understand the new innovative techniques, models, resulting in extension of banking services initiated by many banks for Financial Inclusion.

The approach for this case study is data collected from various banks (both primary and secondary sources) and the methods used to address the issue on Financial Inclusion. Among various innovations Electronic Benefit Transfer system facilitates smooth financial transaction and decreases money leakage. Similarly, extension of banking services not only will register an increase in bank accounts but will also facilitate the long term goal, of RBI and the Government, of economic growth and prosperity.



Pedagogical Objectives

  • To create an awareness about financial inclusion, its need, and various ways adopted by banks
  • To comprehend the issues or problems in implementing the plans for financial inclusion?
  • To find out the solutions to overcome the issues or challenges in financial inclusion
  • To know how banks have adopted technology for transformation of banks from core banking services to the technologically driven services
  • To understand the concepts like Financial Inclusion, transformation of banking services, application of IT in business

Case Positioning and Setting

  • Financial Inclusion, ICT, Business Innovations
  • * GSMC 2014, IIM Raipur

    This Case Pack Includes:
    - Abstract
    - Caselet
    - Teaching Note (**ONLY for Academicians)
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