V.Ramkumar part-1 - Sa-Dhan

Report
Technological readiness - expanding
business working with Banks
Sa-dhan’s
“Transformation Workshop” @ GOA
25th March, 2010
Presentation by V.Ramkumar
(Retd.DGM, SBI, CC)
Advisor, A Little World Pvt. Ltd.
EMERGENCE OF
BRANCHLESS BANKING
 RBI introduced the “Business Correspondent model” in 2006 - a new
model of branchless banking for Indian banks.
 BC model aims to promote banks offering financial products,
especially savings accounts, to previously un-reached population.
 Promoting banking with low capital cost by enabling outsourcing of
rural business to agents on a commission basis.
 RBI laid down criteria for the type of entities/individuals eligible to be
engaged by Banks to outsource transaction processing.
 Distance criteria also was laid down in regard to the location of the
agents engaged by the bank branches.
 RBI also stipulated that the information on all transactions must be
updated in bank’s Core Banking System by end of the day
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FI : RBI GUIDELINES
• Introduction of BC/ BF Model
• Use of Information Technology: Smart cards for opening bank accounts
with biometric identification and mobile banking etc.
• Simpler KYC Norms
• No-Frills accounts
• General purpose Credit Cards (GCC)
• SLBC Project of 100% Financial Inclusion. All house-holds
in villages with more than 2000 inhabitants should have bank
accounts by March 2011.
• F.I. Fund / F.I. Technology Fund
(Budget allocation increased by Rs. Cr)
• Financial Literacy - Credit Counseling Centre
 GoI’s Guidelines
• Opening of atleast 250 household accounts by RUSU branches.
(Rangarajan Committee recommendations).
3
WHAT HAS BEEN DONE SO FAR
The BC/BF channel is still in its nascent stage and is being built-up.
Many Banks launched Pilots and are in the learning curve.
There has been some progress in
 Engagement of BCs/BFs
 'No Frills' Accounts being opened
 Smart Cards being issued
 Unbanked villages being covered
 Financial Literacy Credit Counselling Centres being established.
Technology:
 Disbursement of various Government benefit scheme payments
through smart card technology by various banks.
 Kiosk banking.
 Introduction of few Bio-metric ATMs
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TRANSFORMATION
WHY & FOR WHOM ?(1)
• If one’s ultimate goal is providing access to a range of financial
services to the disadvantaged sections of society , at a low cost, at
the nearest place and at a convenient time,
–
there is no alternative as on date to implementing wholeheartedly the BC
model.
• The mind-set “BC is not viable and it is somebody other than us to
make it viable” to go for those who are to implement the model.
• NGOs to leave the “mission drift” approach and MFIs the “instant
business opportunity” mode to allow transformation of “beneficiaries
into clients” by taking up the BC route for realising their objective of
poverty alleviation.
•
FI implementation literacy to stake holders to precede FIL for poor.
TRANSFORMATION
WHY & FOR WHOM? (2)
• The technology enablers looking at FI from a business perspective
of long term profitability have to “stay some where” for “some time”
- to allow consolidation and move away from “ever changing”, for
the sake of changing” mode.
• Banks to shed “banking to the poor is not poor banking” mind set
and own up FI as their ordained role.
• Govt to go beyond seeing FI as a “primary mechanism for Govt.
Benefit transfer”mode, providing gradually relaxed and evolving
regulatory frameworks and sporadic fund support mostly in very
small pilots.
• NABARD to provide adequate and quick fund support to Banks in
reimbursing the promotional cost incurred
EMERGING SCENERIO(1)
• GOI ‘s UID with “bank account free” plans – No KYC, nominal sum
as incentive to individuals for opening account.
• GOI’s proposed incentive of Rs.1000 per annum for each pension
fund a/c opened by people from the organised sector
• GOI’s plans for full migration to smart-card based EBT system for
NREGS and route more welfare scheme payments through this
channel
• GOI introducing an index to assess financial inclusion on a quarterly
basis from June 2010 onwards to aid RBI / GOI to take timely and
area specific measures to drive financial inclusion better.
• GOI initiating creation of Post Bank of India
EMERGING SCENERIO (2)
• GOI mulling over providing a common technology platform to aid
banks reach out to the poorest at low cost
• 3G Spectrum & BSNL, MTNL broad band brand width on the anvil
• Self-regulatory body MFIN set up by 31 MF-NBFCs
• MFIN &CIBIL tie-up for setting up a Credit Bearu for the MF sector
• Mobile cos trying to get payment gateway licence from RBI to cover
unbanked areas as RBI favour banks doing payment business
• State Govts. providing interest subvention for bank loans to SHGs
• Introduction of “savings cards” of for small amounts
EMERGING SCENERIO (3)
•
Rashtriya Swasthya Bima Yojana enrolled 13 million BPL
households through smart card s collecting registration fee of Rs.30
per card
• Private players entering into micro-pension, micro-insurance ,microinvestments - “savings cards” , remittances ( for migrant labour) etc.
• Sa-Dhan suggesting creation of Micro Finance Credit Guarantee
Fund to provide cover for MFIs. (Can cover be extended for risk of
transformation as BC?)
• National Skills Development Mission linkage with National rural
Livelihood Mission
EMERGING SCENERIO(4)
• RBI is mulling over allowing of more Local Area Banks (LABs) to
provide an impetus to the Financial Inclusion drive, to be opened in
unbanked or under banked areas with a higher Capital Adequacy
Ratio (CAR) than Banks.
• SMS Banking will be the order of the day with tech companies
coming out with secured digital authentication and encryption of
messages.
• Micro Insurance products brought out by banks like SBI’s Grameen
Shakthi are gaining slow acceptance by SHGs . Technology when
used for delivery to end user, scaling up would be faster.
• Micro Investment products ,eg: SBIMF’s Chhota SIP of Rs.100 p.m
etc is providing investment opportunities for the poor.
EMERGING SCENERIO (5)
• After the infrastructure sector, the public-private partnership (PPP)
model will be extended to rural job generation as well.
• National Rural Livelihood Mission (NRLM) currently has 15 private
partners. But the interest among private enterprises and NGOs to
participate in the programme is increasing
• The PPP scheme involves private enterprises to give short duration
vocational training to the rural youth
• The government bears the cost of the training as a subsidy on
condition that the private parties would provide jobs to trained
personnel .
ENABLERS SUM UP
.
 Govt. Providing common infrastructure and technology platform.
 Mainstreaming MFIs into formal banking system.
 Product diversification, by Banks, Insurance and FIs.
 Release of funds to Banks promptly from FIF and FITF funds.
 Govt. Subsidy incentives to FI customers on transactions basis.
 Financial Inclusion Implementation Literacy to all operating level stake
holders.
 Exempting payment of Stamp Duty for small loans.
 Waiver of PAN requirement for Mutual Funds for small amount
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PROF : MOHAMMAD YUNUS’ - QUOTES
 POOR ARE BANKABLE – EVEN BEGGARS
 BANKING FOR THE POOR – NOT POOR BANKING
 ACCESS TO CAPITAL, EVENON A TINY SCALE CAN HAVE A TRANSFORMING
EFFECT ON HUMAN LIVES
 SOCIAL BUSINESS IS CAUSE-DRIVEN BUT NOT LOSS MAKING
I - SOCIAL OBJECTIVESS COVERING COST
II – POOR AS OWNERS DOING BUSINESS FOR PROFIT
 SOCIAL BUSINESS OWNED BY THE POOR
 SOCIAL BUSINESS IS NOT CHARITY – IT IS A BUSINESS IN EVERY SENSE
 POOR PEOPLE OR BONSAI PEOPLE. NOTHING WRONG WITH THEIR
SEEDS.SOCIETY NEVER GAVE A BASE TO GROW ON. ENABLING
ENVIRONMENT IS THE NEED
 PUTTING POVERTY IN MUSEUMS
 SOCIAL STOCK MARKET – SHARES OF SOCIAL BUSINESS WILL BE TRADED
 WE CREATE WHAT WE WANT OR WHAT WE DONOT REFUSE
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