Financial Inclusion Summit 2016 - Background & Current Status - Part - 1
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The document discusses the status and progress of financial inclusion in India, emphasizing its importance for economic growth and social equity. Despite government initiatives, a significant portion of the population remains financially excluded, particularly in rural areas, highlighting the need for systemic improvements and targeted credit support for the MSME sector. The financial inclusion opportunity for banks in India is substantial, estimated at USD 24.4 billion by 2020, which can be realized through innovative technologies and a focus on unbanked segments.
Financial Inclusion Summit 2016 - Background & Current Status - Part - 1
- 1. Financial Inclusion: Status and Progress Financial Inclusion Summit 2016 Part 1
- 2. Background & Current Status Financial Inclusion is a key enabler to economic, social and transaction security of a country, thereby driving inclusive growth. It is for this reason that financial inclusion has been one of the key government priorities over the years, through various initiatives like Nationalization of Banks, Expansion of Banks branch network, Lead Bank Scheme, Business Correspondent Model, Mobile banking, Aadhaar enabled banking accounts, e-KYCs etc. Despite these various measures, poverty and exclusion continue to dominate socio-economic and political discourse in India even after six decades of post economic independence era.
- 3. Background & Current Status Though economy has shown impressive growth during post liberalization era of 1991, impact is yet to percolate to all sections of the society and therefore, India is still home of 1/3rd of world's poor. As per the census of 2011, more than 40 per cent of the Indian population did not have access to banking facilities. The graph below shows that a large population base is financially excluded both in urban and rural areas. Since low financial growth impedes economic growth, it was imperative for the government to initiate financial inclusion schemes that would alleviate poverty and reduce social inequity.
- 4. Efficiency improvement of MSMEs • Timely implementation of Technology Development Centers and proper information dissemination to ensure wider participation • While the existing marketing support to MSMEs are confined to Trade Fairs, Procurement Policy MSEs & Vendor Development Programs –a • Constant education of Corporate Governance through seminars & workshops – involving Govt. agencies, professional firms and non profit organizations involved in corporate governance practices
- 5. Road Ahead Road ahead –focus on practical and implementable solutions with systemic improvements to solve the real problems Immediate priorities • Enable the release of right credit to MSME sector Strengthen the Credit Monitoring Cell under Ministry of MSME to work with the banking ecosystem for timely evaluation and release of credit to MSME under various schemes as well as under general credit
- 6. Financial Inclusion Opportunity for Banks The miniscule numbers across the statistical sources suggest an urgent need to further push the financial inclusion agenda to ensure that people at the bottom of the pyramid join the mainstreamformal financial system.An inward look into the supporting infrastructure highlights the lack of the same. The present banking network of the country (as on 31.03.2014) comprises of a bank branch network of 1,15,082 and an ATM network of 1,60,055. Of these, 43,962 branches (38.2%) and 23,334 1 ATMs (14.58%) are in rural areas. This indicates that banking in India is under-penetrated in comparison to other emerging markets with 70 per cent of the country’s population, predominantly rural, being serviced by 38 per cent of branches and 15 per cent of ATMs.Moreover, there are more than 1.4 lakh Business Correspondents (BCs) of Public Sector Banks and Regional Rural Banks in the rural areas. BCs are representatives of bank to provide basic banking services i.e. opening of basic Bank accounts, cash deposits, cash withdrawals, transfer of funds, balance enquiries, mini statements etc.
- 7. Road Ahead • Develop holistic revival packages for MSMEs in key & promising sectors Develop specialized task force on core manufacturing sectors to develop and implement revival package Leverage MSME Clusters for formulating and implementing appropriate programs Develop clear frameworks and criteria to enable MSMEs with the right intentions benefit from such programs
- 8. Financial Inclusion Opportunity for Banks As per a recent Accenture report, the financial inclusion opportunity for banks in India is estimated at USD 24.4 Bn by 2020. Within the emerging markets, this opportunity is pegged at USD 380 bn. As per the graph below, India lies just below Brazil in terms of the overall size of the opportunity. Banks have the potential to register substantial revenues if they serve the unbanked and underbanked segments in a cost effective manner.
- 9. Road Ahead Focus on systemic improvements by way of structured programs to create sustainable solutions • Corporate Governance Develop standard practices and protocols and include them as part of specific programs and packages • Credit Rating Provide strong incentives to promote practice of credit rating amongst MSMEs. Strengthen SMERA to provide quality & timely services to MSMEs
- 10. Financial Inclusion Opportunity for Banks With the emergence of JAM (Jan DhanYojana, Aadhaar, Mobile numbers) and advent of new and innovative mobile technologies, it will be relatively easier to reach the lowest income and micro segment consumers. In order to capitalize on this opportunity, the banks will be required to enhance their focus on the financially excluded segments.
- 11. THANK YOU Email: jyoti.gadia@resurgentindia.com Call Us: +91 124 4754550 www.resurgentindia.com Read full report on : http://blog.resurgentindia.com/financial-inclusion-summit-2016/