Ultra Small Branch Step Towards Financial Inclusion: A Case Study
“The financial inclusion is the only key driver for economic development at national level and economic empowerment at an individual level. It’s a human right of the modern age.”
– David Lewis, Former Lord Mayor, London
India is a federal democratic country with three levels of Government namely Central, State and local. There are various issues considered under union list which is under the purview of Central Government this includes areas which are considered crucial for the country’s development like defence, banking, communication, etc. According to Census 2011, the rural population comprised 68.84% of total population share and 31.16% was the share of the urban population. The rural population too contributes to the GDP of our country predominately through agriculture. We can expect the overall development of our nation only when we are able to provide financial services at a feasible cost to all without any discrimination on the basis of financial status or education. The people residing in the rural areas feel that it’s wastage of time, money and resources, to visit a bank for opening accounts or for loan. According to NSSO report 51.4% of farmers are financially excluded, only 27% of total farmers access formal sources of credit and rest borrow from non-formal sources.
In India we have very strong banking system. Banks such as State Bank of India, Bank of Baroda, Syndicate Bank and Canara Bank are the Public sector banks. Public sector banks are controlled and managed by the Government of India. These banks have been serving the nation for over centuries and are most favoured choice of public because of their affordable and quality services.........
Current Scenario: Financial Inclusion
Indian Prime Minister, Narendra Modi (Modi) announced “Pradhan Mantri Jan Dhan Yojna” (PMJDY) a national financial inclusion mission on August 15th 2014 aiming to provide bank accounts to at least 75 million people by January 26th 2015. According to DNA news article dated January 2014 there are 703 million total savings accounts in India. The number increased by 12.6% only in 2012 and this proves increase in number of people under formal financial system...........
Measures to Achieve Financial Inclusion
No Frills Bank Account
Opening of basic no frill bank accounts for unbanked people is not the only way to achieve the financial inclusion but, also need to focus more on ensuring that these accounts remain operational. This is possible only if all government payments are routed through the banking channel. Secondly, policy makers must have some remuneration schemes for banks for opening such types of accounts with zero balance. These zero balance accounts can be opened under PMJDY by any bank branch or BC (Business Correspondent), but if the account holder wants to have cheque book then he/she needs to fulfil the minimum balance criteria................
Accessibility of Banking Facility
One of the reason of having unbanked population in India is the absence of formal banking facilities. In order to have unified banking facilities throughout the country RBI instructs RRBs to open at least 25 percent of the total number in unbanked or rural area. Private Banks also need to ensure that at least 25 percent of their total branches are in semi-urban and rural areas according to RBI.
India, being a multilingual country has no official language. So in order to access the information about banks, RBI has decided to have the website content in 13 languages so that everybody can access the information...............
Microfinance and Self Help Groups
Microfinance programmes are conceptualised to reach the economically weaker segments of the society as they are not able to access formal financial services. According to S. Porkodi and DR. D. Aravazh (2013) there are immense opportunities for MFIs in micro credit in India as there is huge demand for rural finance, and the inadequacies of formal sources. Microfinance institutions (MFIs) provide small loan to poor people without any collateral. All the microfinance institutions have Self Help Group...............
White Label ATMs
White ATM machines help in conducting banking transactions in rural area where formal financial structure does not exist. RBI gave license in 2013 to open white label ATM by any non-banking entity including NBFCs with a condition of having net worth of more than INR 100 crore. Tata communications opened the first white label ATM named as “Indicash”. Other white label ATMs includes Muthoot Finance, Srei Infra., Vakrangee Software, Prizm Payments, and AGS etc...........
Ultra-Small Branch
One of the reasons of not having banking transaction in rural area is the absence of formal banking structure in remote areas. So to enhance the banking services in these remote areas, The Ministry of Finance, Department Of Financial Services, Government of India, and the Reserve Bank of India (RBI) are introducing Ultra- Small Branches (USBs) in the areas where population is less than 5,000, where brick and mortar branches are not viable. Indian banks have set up over 40,000 USBs across the country to drive financial inclusion in un-banked and under-banked centres, according to the Economic Survey for 2012-2013............
Assignment Questions
I. Why financial inclusion is important? What is the impact of financial inclusion?
II. Do you think that financial inclusion means that banks extends credit to all those who approached them?
III. .............
Exhibits
Exhibit I: Benefits of Financial Inclusion
Exhibit II: India’s Position in Financial Inclusion as Compared to Other Countries
Exhibit III: Financial Inclusion Plan-Summary Progress of All Banks Including RRBs
Exhibit IV: Number of Accounts in Indian Banks
Exhibit V: Growth of Self Help Groups
Exhibit VI: No. of ATMS of Public Sector Banks
Exhibit VII: No. of ATMs of Scheduled Commercial Banks (SCBs)
Exhibit VIII: Comparison of Banks Accounts Opened by Branches and BCs
Exhibit IX: Growth of Business Correspondent Network
Annexures
Annexure I: Total Number of Bank Accounts Opened Under Pradhan Mantri Jan Dhan Yojna
Annexure II: Guinness World Record of Pradhan Mantri Jan Dhan Yojna