Financial Inclusion Strategies.docx

Unit – III Financial Inclusive strategies in Indian Banking Sector 3.1 Introduction to Financial Inclusion Developing economies all over the world are exploring new ways to eradicate poverty and include everyone in the economic growth of the country and none is deprived of their right to lead a decent life. Though the task looks simple has been daunting with limited resources at their disposal, the mission has become an uphill task for these nations. There have been tremendous growth in the world economy in the last two decades and despite this impressive growth there are many countries that are experiencing inequalities in income levels, dampening the growth prospects and negative social impact. To attain long term sustained growth there should be inclusive growth and spread across all the sectors. The necessity of having an inclusive financial system is recognised by many countries and is included in their policies. The inclusive financial system ensures the allocation of resources and ensures the accessibility to the financial services to improve the daily management of finances and also helps in reducing the informal sources of credit. The inclusive growth helps in reducing the poverty, improving the standard of living, decreases the disparities in income levels, increases the agricultural growth rate, provide new employment opportunities and promote economic growth Deutsche, Eckhard. & Jacquet, Pierre. (2009). Promoting pro-poor growth: Employment and Social Pprotection. Retrieved from http://www.oecd.org.. Thus the financial inclusion had evolved as a global agenda to achieve long term sustained economic growth. Financial inclusion is assumed to be the stepping stone for effective economic growth and sustained economic development of the country by providing various effective and efficient financial services and products to the citizens of the country. Inclusive growth is an approach to economic development facilitated by the government and fuelled by the market driven growth. It is a long term activity focusing on the productive employment rather than income redistribution; it helps in poverty eradication and to attain sustained economic growth. Inclusive growth enables the individuals to reap the benefits of globalization and also enables them to sustain the economic shocks in the future Retrieved from https://en.wikipedia.org/wiki/APEC_United_States_2011. The inclusive growth is both a process and an outcome. It ensures that everyone participates in the decision making of growth and also participates in the growth itself. It ensures that that the benefits of the growth are distributed equitable among the people. It emphasises on the employment generation and providing a suitable environment for the private sector. Inclusive growth highlights on the participation and benefit sharing. It is perceived that participation without sharing will make the growth unjustified and similarly sharing without participation will be like a welfare activity. So there should be proper balance between the participation and sharing for yielding better results. The financial experts assume that bank account is the stepping stone for including the people into the formal financial sector. The financially excluded are not aware of the financial products and couldn’t reap the benefits associated with these instruments on investing in them irrespective of the quantity of amount. Financial inclusion includes the people into the formal financial sector, who are at the lowest strata of the social pyramid. These segments of the society should be provided the basic banking facilities which are free of restrictions. The regulatory authorities had taken several initiatives but are not commensurate in view of the magnitude of the problem. 3.1.1 Definition of Financial Inclusion Financial inclusion is defined differently by different people and organisations. Some of them are cited below: Asian Development Bank - “Financial Inclusion as the provision of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance to poor and low-income households and their micro-enterprises.” Report of the Committee on Financial Inclusion in India (Chairman: C Rangarajan) – “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.” Stephen P Sinclair - “Financial Exclusion means the inability to access necessary financial services in an appropriate form. Exclusion can come about as a result of problems with access, conditions, prices, marketing or self-exclusion in response to negative experiences or perceptions.” The Committee on Financial Sector Reforms (Chairman: Dr. Raghuram G. Rajan) - Financial Inclusion, broadly defined, refers to universal access to a wide range of financial services at a reasonable cost. These include not only banking products but also other financial services such as insurance and equity products. Chakrabarty - "Financial Inclusion is the process of ensuring access to appropriate financial products and services – deposit accounts, payment services, micro-credit and micro-level insurance – to vulnerable groups such as weaker sections and low income groups by the mainstream institutional players." United Nations – “A financial sector that provides ‘access’ to credit for all ‘bankable’ people and firms, to insurance for all insurable people and firms and to savings and payments services for everyone. Inclusive finance does not require that everyone who is eligible use each of the services, but they should be able to choose to use them if desired.” World Bank – “Broad access to financial services implies an absence of price and non price barriers in the use of financial services, it is difficult to define and measure because access has many dimensions.” Banking Association of South Africa - Access and usage of a broad range of affordable, quality financial services and products, in a manner convenient to the financially excluded, unbanked and under-banked; in an appropriate but simple and dignified manner with the requisite consideration to client protection. Accessibility should be accompanied by usage which should be supported through the financial education of clients.” 3.2 Evolution of Financial Inclusion 3.2.1 Financial Exclusion Social exclusion was prevailing in the remote areas of the country where the developmental activities were not taking place and also because of the deep rooted system prevailing in the society over the years. These socially excluded are denied of ownership, access and control over the resources. They are deprived of education, healthcare, public amenities, basic needs etc. These can be viewed as the denial of human dignity along with the constitutional and human rights. These socially excluded segments are also financially excluded due to lack of awareness about the availability of financial services and products. There are other factors which are the cause for financial exclusion Niranjan, Shetty., & Prakash, Pinto (2015). Financial Exclusion: Concept, Causes & Consequences - A Tri-Dimensional Literature Analysis. Pezzottaite Journals, 4(1), 1605-1613.. Some of them are described below: Place of Residence: The commercial banks operate at the locations which are profitable to them and the people residing in rural areas find it difficult to reach there to avail the banking services. Transportation to the branch, population density, mobility of the population have affect on the access to the financial services and products. Absence of Identity: The banks insist on submitting the identity proofs and address of the people for opening of accounts. There are people who are not in receipt of these making these people being excluded from availing the financial services. The access to financial services for the women is a bit more difficult and access to credit is still more difficult as they are not in possession of any property or assets. Financial Illiteracy: This is one of the major hurdles for the individuals for access to financial services and products. They are not aware of the advantages of holding bank account, insurance, pension, loan etc. The financial literacy boosts the use usage of financial products and helps in the overall development of the country. Income Levels: The income levels of the citizens determine the level of access to the financial services. There are perceptions among the rural poor that the banks charge more for availing these services. In view of this the poor are not accessing the services even though these services are designed for them only. Occupation of the People: The access to the financial services is impacted by the nature of the occupation. The entrepreneurs are also differentiated based on the scale of their operations. The financial institutions give least priority for the small borrowers or the unorganised sectors while disbursing the loans. Rules and Regulations: The conditions assigned to the various financial services and products make the people move away from using them. Some financial institutions link the credit disbursement upon the level of deposits made in the bank and similarly some restrictions are there on the minimum balance maintained in the accounts. Self-Exclusion: The state where the people believe that they are deprived of the financial services rendered by the providers and assume that there is no necessity to apply for financial services. The reason may be due to their perceived differences or opinions in dealing with the service providers or due to their experiences. The above are some the factors which influence the access to the financial services despite the efforts being made by the regulatory authorities in improving the accessibility to the financial services and products. 3.2.2 Importance of Financial Inclusion Financial inclusion is the delivery of the financial products and services to the deprived sections of the society at an affordable cost. The primary objective of financial inclusion is to provide the basic banking services to all without any discrimination and at an affordable cost. Financial inclusion is conceived as the process of providing the financial services and products to the deprived sections in particular and to all the population in general. It is formulated keeping in view the banking service providers through whom the regional rural banks, co-operative banks etc are operating. The other objective of financial inclusion is to provide credit to the poor at a lower rate of interest to sustain their livelihood and to improve their financial position and status. Financial inclusion has long term benefits associated with it both for the people and the economy. It is perceived that the financial inclusion helps to eradicate poverty, provides formal identity, provides access to deposits, credits, insurance, and pension along with other financial products and services, payment system etc. Globally it is agreed that financial inclusion can extend the scale of operations of the formal financial sector and include the low income groups. There should be a coordinated effort and approach among the government, regulatory agencies, banking system to facilitate the basic banking services to the financially excluded segments. It is evident from the reports that access to the financial services varies from nation to nation and achieving the task of increasing the access remains a big challenge for all the nations Vipin Kumar, Aggarwal. (2014). Financial Inclusion in India: An Analytical Study. IRACST – International Journal of Commerce, Business and Management, 3(6), 841-849.. Policy should be framed such that there are no gaps in the flow of information and coordination is required among the stakeholders. The banks should play a vital role in the process of supporting, regulating and providing financial services to the poor. Financial inclusion measures the efficiency with which the financial resources are pooled and distributed, the banking habits, the level of financial literacy among the population etc. Affordable access to the financial services and products helps the small scale entrepreneurs to get investment opportunities; generate cash flows and income which enable them to withstand any financial shocks in the process. Thus the financial inclusion accelerates the economic development of the country lead by employment opportunities for the people. In addition to this, there are various financial services and products available for the financially excluded or under covered populations under the formal financial sector. Thus the investment and savings options help in the process of eradication of poverty and also add to the GDP of the country. Easy access to the financial services enables the rural poor to inculcate savings habit, make investments and also avail credit depending on their financial requirements and these help them to sustain them against any emergencies. Financial inclusion safeguards the rural poor from the clutches of money lenders. Financial inclusion enables the government to transfer any social benefit schemes directly into the bank accounts of the beneficiaries preventing any leakages in the program. This process enables the people to make use of the banking services on a continuous basis. There are enormous benefits associated with this process and the acceptance and experience of both the recipients’ and the government is impressive. 3.2.3 Objectives of Financial Inclusion The objective of financial inclusion is to increase the range, quality and availability of financial services and products to the unserved, under-served and financially excluded. To make financial inclusion a successful process there are certain principles attached to it and needs to be delivered properly Anupama, Sharma., & Sumita, Kukreja. (2013). An Analytical Study: Relevance of Financial Inclusion For Developing Nations. International Journal Of Engineering And Science, 2(6), 15-20.. A few of the principles are described below Access – the availability of appropriate and affordable financial services & products and also considering their delivery channels to the target segments are vital for universal access. Affordability– the financial institutions should provide the services and products at an affordable price. The financial institutions should consider the paying capacity of the customers and accordingly plan the cost of the services provided to them. Financial institutions should increase their operational efficiency thereby reducing the cost to the customers such that they are as per the paying capacity of the target customers. Appropriateness– the financial institutions should design the products and services such that they cater to the needs of the customers and also protect their identity and dignity after due consideration of the language barriers, regulatory framework etc Usage– the success of the financial services and products deployed for the customers depends on its usage. Access to the financial services and products will yield no result if there is no usage and inclusive growth can be achieved if access is accompanied by the usage. Quality– explains how the financial services and products are made available to the customers. It refers to the product design, delivery traits which improve the value of services provided to the customers. Quality financial inclusion includes the safety, affordability, convenience, product fit, simplicity etc. Financial Literacy– this is vital to enable the customers to know the complete details of the services and products being rendered to the customers. Financial education is more important to those who are first time users and highlights what needs to be done and what need not be done. Simplicity– the ease of use and understanding of the financial services and products in local language determines the success of the products. Innovation– there is need to innovate new products, delivery channels, technology such that they give satisfaction to the users of these. 3.3 Importance and Role of Commercial Banks in Financial Inclusion Commercial banks play an important role in the economic development of the country. The Indian economy had been growing at a good pace thanks to the role played by the commercial banks in the process. Despite these efforts a large section of the society is deprived of the formal financial services. Most of these people are the deprived sections of the society with low income and sometimes are socially excluded. These financially excluded sections needs to be brought into the formal financial fold through the availability and accessibility of various financial services and products to cater to the needs of the people. Financial inclusion is the process of bringing these excluded segments into the banking fold. This process should not be viewed as social responsibility of the government or banks but should be viewed as a business opportunity which will yield huge benefits to the financial institutions especially the banking sector in the long run. The financial institutions act as an intermediary between the people which surplus income and the people who are in need of money. The products and services of the financial institutions include the basic banking services like savings, credit, insurance, pension, payment system etc. The purpose of these institutions is to provide credit to the deprived sections of the society so as to bring them out of poverty. The Reserve Bank of India in its policy statement in 2005 had identified the need of financial inclusion for the country and noted that the present banking structure is excluding rather than attracting the large sections of the population and asked the banks to reconsider their approach and align themselves in the path of financial inclusion Swapan Kumar, Roy. (2012). Financial Inclusion in India: An Overview. Asian Journal of Multidimensional Research, 1(5), 134-141.. All the commercial banks were asked to open accounts with either 0 balance or with minimum balance called as no-frill accounts. These accounts are almost free of charges. There are certain restrictions associated with these accounts in the volume of transactions, amount involved in the transactions etc. These no-frill accounts in due course of time are called as Basic Savings Bank Deposit Accounts. 3.3.1 Progress of Financial Inclusion in India Coming to the progress of financial inclusion of India, it is not a new concept to India and is prevailing over the years. Nationalization of commercial banks in 1969 and 1980, establishment of Regional Rural Banks in 1975 and the banking sector reforms from 1992 had changed the picture of the Indian banking system. Financial inclusion is vital for the overall growth of the country and when compared with the progress of other countries, our progress is on the lower side. To analyse the status of financial inclusion in the country, Reserve Bank of India had initiated a commission under the chairmanship of Dr Khan in 2004 and subsequently the commission had given its recommendations which were incorporated into the mid-term review policy of 2005-06. Based on the recommendations, the Reserve Bank of India had asked the banks to open the no-frill accounts with relaxation in the KYC norms. Financial Inclusion Policy was formulated in 2005 to include the financially excluded into the banking fold. The policy was aimed at creating employment, increase in the income levels, asset creation which help in the upliftment of the rural poor. To promote financial inclusion Government, Reserve Bank of India, Financial Institutions, NGOs, SHGs and others need to have coordinated effort to financially include the deprived, low income and weaker sections of the society. The first success of financial inclusion was viewed at Mangalam village of Pondicherry Union Territory where all the households were provided with banking facilities through Indian Bank. Financial inclusion provides the avenue in bringing the savings of the poor into the financial system and channelizes them towards investments. From the banks perspective they are able to collect deposits from the poor and minimises their dependence on large deposits which inturn help them to manage their operations risk, liquidity risk and asset-liability mismatches Raihanath, MP., & Pavithran, KB. (2014). Role of Commercial Banks in the Financial Inclusion programme. Journal of Business Management & Social Sciences Research, 3(5), 75-81.. The progress of financial inclusion and the role of commercial banks in India has a long history and this is split into phases depending upon their importance. 1947 – 1991 Nationalization and consolidation of the banking sector 1992 – 2004 Credit disbursement for excluded segments, strengthening of the financial institutions 2005 to till date Emphasis on financial inclusion 3.3.2 Progress of Financial Inclusion between 1947 and 1991: After independence of the country, it was observed that the important sector like agriculture and its allied sectors are neglected by the commercial banks. The credit disbursement for the agriculture sector during the early 1950 was hovering around 1% of the total credit disbursement. All India Rural Credit Survey report in 1954 was the stepping stone for the credit structure of the agriculture and its allied sectors. The report highlighted that the agriculture credit was not of the right quantity, right type and couldn’t reach the right person. Keeping these experiences the government of India had taken the initiation of nationalizing the Imperial Bank of India and later named it as State Bank of India. Subsequently in the year 1969, 14 private banks were nationalised to cater to the needs of the rural population. Again the government had nationalised few more banks in 1980. In addition to these to cater to the needs of the rural poor, the banks were asked to open Regional Rural Banks in the rural areas. Nationalization of banks, starting of RRBs etc was the first steps towards financial inclusion initiatives. The statistical figures over the years had shown progress of the banks in terms of the branches, business of the banks both credit and deposits. By 1991 more than 65% of the bank branches were located in the rural and semi-urban areas which was mainly because of the policy adopted by RBI for opening the branches. For every four branches opened in rural areas one branch can be opened in the urban areas. The deposit accounts and the loan accounts opened in the rural areas are less when compared to that of the urban areas. By 1991, the total deposits of the banks stood at Rs 193871.42 crores and out of this 35% are from the rural and semi-urban branches. Similarly the total credit disbursed by 1991 stood at Rs. 121658 crores and out of this 36% accounts for rural and semi-urban branches. Out of this Rs 121658 crores the credit disbursement for agriculture and its allied segments was Rs 16687 crores which is equivalent to 14% of the total credit disbursed. 3.3.3 Progress of Financial Inclusion between 1992 and 2004 The government viewed that agricultural needs are to be addressed to have an inclusive growth as most of the population resides in the rural areas. The government and RBI had initiated few measures to promote agricultural productivity through specialised credit flow in improving the agricultural infrastructure, rural connectivity etc with the help of Special Agricultural Credit Plan (SACP) introduced in 1994. Due to this the government and RBI had emphasised on the credit disbursement for the agriculture and its allied sectors. There was a compound growth of over 22% through the commercial banks between 1995 and 2004. The commercial banks had higher disbursement of credit when compared to the co-operative banks. The government through NABARD had initiated the Self Help Group concept and the linkage of these to the commercial banks had spiked after the guidelines issued by RBI to the banks to ensure that the SHGs does all their transactions through the banks only. The finances to SHGs had risen to over 10 lakhs by 2004. The banks which didn’t comply with the priority sector credit and agriculture sector credit disbursement were asked to deploy funds to the Rural Infrastructure Development Fund (RIDF) initiated by NABARD in 1995. With the help of these accumulated funds since its inception, NABARD was able to disburse credit to the rural financial institutions at a lower rate of interest. All these initiations are aimed at promoting the rural activities and make them financially included into the formal financial system of the country. 3.3.4 Progress of Financial Inclusion from 2005 to till date This is the period where the government had taken the policy towards financial inclusion and the financial institutions were geared up for the progress of financial inclusion in the country. It was observed that despite the efforts, initiatives of the government and other financial institutions in the country there are large sections of the society who are deprived of the basic banking services and making them dependent on the informal sources of credit. To eradicate this and poverty especially in the rural areas, government had given financial inclusion the top priority in their policy. During this period there was increase in the credit disbursement for the agriculture and its allied sectors. The strategy of the government in doubling the credit had brought over 95 lakh farmers into the formal financial fold. The role of the commercial banks had increased in linking the SHGs and the banks. Several reforms were undertaken by the government and the regulatory authorities to strengthen the role of commercial banks and the reach of them to the rural segments of the country. Bottlenecks in the transactions and procedures were removed, debt restructuring procures were undertaken, one time settlement was implemented; relief measures for farmers in some areas etc were implemented. The government had taken the agenda of financial inclusion which is the integral part of social inclusion. With this objective given the priority, the Reserve Bank of India had taken the lead in creating a conducive environment to spread across the nation through the banking system. To reach out at 400 million plus un (der) banked population at pace with profitability is the single most important challenge faced by the multi stakeholders, particularly banks and delivery channels with the help of technology led models and their efficacy over traditional brick and mortar branches Jatinder, Handoo. (2010). Financial Inclusion in India: Integration of Technology, Policy and market at the bottom of the pyramid. http://dx.doi.org/10.2139/ssrn.1628564. It was observed that even after 60 years of independence, a large section of Indian population are not part of the formal banking system which led to financial instability among the lower income group. The Government of India and Reserve Bank of India have taken the policy of financial inclusion and making continuous efforts to promote it. The major initiations undertaken are the nationalization of the banks, expansion of bank branches across the country, starting the regional rural banks, priority sector lending targets, linkage of self help groups, appointing business correspondents, opening ultra small branches, relaxing the KYC norms etc are all aimed at providing financial services to the financially excluded segments of the society. 3.4 Strategies of Financial Inclusion As part of the financial inclusion strategies the commercial banks are performing various activities to cater to the needs of the rural population or the financially excluded segments of the society. Opening of Basic Savings Bank Deposit Accounts Relaxation of KYC Norms Credit Counselling Programs Financial Literacy Camps Branch Expansions Business Correspondents Business Facilitators Kisan Credit Cards General Credit Cards Rupay Cards Mobile Banking Expansion of ATMs Direct Benefit Transfers Micro finance and Insurance Linkage of Self Help Groups 3.4.1 Basic Savings Bank Deposit Accounts: Reserve Bank of India had directed the banks to open accounts for the rural and urban poor people with either zero balance or minimum balance. These accounts were termed as No-Frill Accounts and in 2012 these accounts were termed as Basic Savings Bank Deposit Accounts to provide the basic banking services to the vast sections of the society Neha, Garg. (2015). Role of Banks in Financial Inclusion. International Journal of Management and Social Sciences Research, 4(6), Pg 60-65.. Several other benefits were linked to these accounts based on the satisfactory operations of the accounts over the period of time. Over draft facility, Health and life Insurance etc were linked to the account and are available to the account holders upon the satisfactory operations of the account. The banking charges associated with the account are nominal when compared to the regular accounts of the bank. 3.4.2 Relaxation of Know Your Customer Norms: There are people who are not having proper identity to open the accounts. To resolve this Reserve Bank of India had taken the initiative of relaxing the norms for opening the accounts with respect to the Basic Savings Bank Deposit Accounts to bring the large sections of the population into the banking fold. The norms were relaxed to include the card issued by Mahatma Gandhi National Rural Employment Guarantee Act, signed by any state government employee and letter issued by UIAI consisting of the name, address and Aadhaar number etc for the opening of small accounts. The transfer of accounts for the accountholders is made convenient when the customer moves from one place to another in search of employment or transfer in the job. The citizens can submit the photographs and self attested address proof and there are restrictions on the transactions and amount deposited in the accounts. The outstanding amount cannot exceed Rs 50000/- in the account and similarly the total transactions in the account should not exceed one lakh in the financial year. In addition to this there were relaxations in the opening of accounts by Self Help Groups and credit linking of the accounts. It is directed that there is no need to verify the authentication of all the members of Self Help Groups. Similarly there is no need for separate KYC verification of the members at the time of linking the account for credit disbursement. 3.4.3 Credit Counselling Programs: Reserve Bank of India had directed the banks to open credit counselling centres and adopt domicile specific strategy for the different categories of borrowers. The centres in the rural and semi-urban are aimed at creating financial awareness, counselling for people involved in the agriculture and its allied sectors. The centres in the urban areas are aimed at the individuals who have over dues in the credit cards, personal loans or other loans. Basically there are two types of credit counselling of which Preventive Counselling is the one which creates awareness about the cost of credit, linking facility, availing the credit based on the customers repaying capacity. The other one is the Curative Counselling which gives awareness to the customers about debt management and suggests the procedures to come out of the unmanaged debt portfolio and also does the consultation work in restricting the loans with the banks based on the income levels and amount of the credit. 3.4.4 Financial Literacy Programs: Financial Literacy is an important procedure of financial inclusion where the information about the importance of various financial services and products is given which is essential for managing personal finance. This enables the people to evaluate the merits and demerits of the various available financial products and choose the product as per their requirements. Financial literacy helps to include the financially excluded sections into the main stream of financial sector. The banks help in spreading the information about the available financial services and the banking services to the various groups like the students, senior citizens, women in rural areas and the poor residing in both the urban and rural areas Laxmi, Mehar. (2014). Financial Inclusion in India. Innovative Journal of Business and Management, 3(4), 42 - 46.. The financial literacy explains the necessity of savings, advantages of the banking services, the various available financial services and the electronic financial services like the ATMs, mobile banking, internet banking, smart cards etc. It helps in understanding the concept of interest and the process of interest calculation on both the deposits, savings, credit availed etc. Financial literacy helps in bringing awareness and advantages to the account holders about the nomination facility, awareness about their rights. Banks are organising various awareness programs, seminars, audio & video modes of campaigning. 3.4.5 Expansion of Branch Network: The bank branch network had spread across the nation after the independence of the country. Reserve Bank of India had stipulated various norms for opening of branches by the banks. Prior approval of Reserve Bank of India is required for opening of branches and scrutinises the activities to be undertaken by the bank in the proposed area. The priority is given to the places which are unbanked and the perspective of the bank towards the disbursement of credit to the priority sector, efforts in promoting financial inclusion, usage of technology in the banking services, introduction of new products and services. Reserve Bank of India had noticed that some districts are having higher population per bank office than the country average in the rural and semi-urban areas and this triggered the process of identification of unbanked villages with above 2000 population and initiated the process of opening banking outlets in these villages to provide the banking services to the people of these identified villages. The need of opening brick and mortar branches in rural areas is identified in addition to the usage of business correspondents, to improve the financial inclusion process Manisha Vikas, Jagtap. (2016). Role of Banking Industry in Financial Inclusion in India. International Journal of Multifaceted and Multilingual Studies, 3(4), 1-7.. In April 2011 Monetary Policy Statement, banks were directed to open atleast 25% of the branches in rural unbanked areas. This witnessed a rise in the expansion of the banking network across all the regions of the country reducing the regional gap in terms of bank penetration. Similarly there is reduction in the population for bank office which is a good sign for the Indian banking system. Banks are now empowered to serve the people through the usage of Information and Communication Technology models, Business correspondent model etc instead of the traditional brick and mortar branch. 3.4.6 Business Correspondents: The challenges to financial inclusion is a combination of structural economic peculiarities, financial illiteracy, limited bank branch network, lack of relevant financial products etc. The commercial banks find it difficult to open branches in all the rural areas keeping in view the profitability of the banks. As a result, in 2006 Reserve Bank of India had permitted the banks to avail the services of retired employees, agents of insurance companies, self help groups, NGOs, MFIs etc to provide financial services to the rural population as intermediaries and these service providers are termed as Business Correspondents (BCs) to increase the bank outreach. A Business Correspondent is an entity that acts as a teller for the bank and carries out a full range of transactions on behalf of the bank. The Business Correspondent model allows non-financial service providers to provide financial services (savings accounts, money transfer etc.) on a small scale (maximum limits imposed). By using Business Correspondents, banks can reach out to areas that lack formal financial services at a much faster rate with lower cost than the conventional mode of building brick-and-mortar branches. The Business Correspondent model also enables banks to offer financial services to new customers beyond their bank networks which have resulted in innovations to provide inexpensive and efficient technological solutions. Today a vast array of technology, including hand-held mobile devices, Internet, mini-ATMs and kiosks are made available Mohana Krishna, Irrinki. (2015). A Study on Financial Inclusion and the role of Business Correspondents with special reference to Maredimilli Mandal in East Godavari district. International Journal of Management, 7(1), 153-163. This model helps the banks to perform the transactions at a location closer to rural population and enable them to generate income and facilitate financial inclusion. The operations of the business correspondents are conducted at a place other than the bank premises and the BC is attached to a bank branch termed as base branch. The business correspondents render the following services Create awareness of the various financial services and products available from the bank. Educate the people about debt and money management. Identification of potential customers and opening of bank accounts. Collecting the preliminary data of the customers for processing the opening of deposits and other products. Following the Know Your Customer norms while opening the accounts. Filling the account opening application forms and submitting them to the branch on behalf of the customer. Authorised to collect the deposits and disbursement of cash as withdrawal from the accounts upto the prescribed limit per transaction. Authorised to issue mini statement of the account to the account holders. Authorised for disbursement of credit as per the prescribed norms. Promoting the Self Help Group and Joint Liability Group activities. Monitoring the process of repayment of the customers in the assigned area locations. Cross-selling other financial products such as insurance products, mutual fund products, pension products or any other third party product on behalf of the Bank, which are duly approved by the appropriate authority. The advantage of business correspondents is that they are aware of the customers at the personal front and this connection enhances the customers’ accountability towards the bank and helps to improve the loan repayment process. 3.4.7 Business Facilitators The Business Facilitators are appointed by the banks, which refer clients and study their loan or business proposals. Business Facilitators don’t perform any transactions on behalf of the bank but will facilitate the bank to perform the transactions. The banks appoint the NGOs, Insurance Agents; Community based organisations, Cooperatives, Village Knowledge centres, agricultural business units, corporate rural entities etc as their Business Facilitators. Banks use these Business Facilitators to provide the facilitation services. Some of the facilitation services Harun, R Khan. (2012). Issues and Challenges in Financial Inclusion: Policies, Partnerships, Processes & Products. Published by the Reserve Bank of India, Mumbai, 32-48 rendered by the Business Facilitators are identification of borrowers, processing of loan applications, submission of loan applications to the banks, financial literacy camps to provide awareness about the various financial services and products, money management, post loan sanction monitoring, follow up the recovery process, promotion of Self Help Groups, Joint Liability Groups etc. 3.4.8 Kisan Credit Cards: NABARD formulated a Model Kisan Credit Card Scheme in 1998 in consultation with major banks. Kisan Credit Card was introduced with the aim to provide adequate, timely and cost effective credit to the farmers for their cultivation as it was observed that many farmers were dependent on the informal sources of credit to meet their requirements. The cards are issued to the farmers based on the land holdings, previous credit history etc. Through the scheme revolving cash credit facility is provided with any number of receipts and payments within the time and sanctioned amount limit. The scheme permits the farmers to procure fertilizers, seeds and other inputs as per their requirements. The scheme enables the farmer with ongoing credit ensuring that there is no need to apply for the loans on a yearly basis. The rate of interest on the credit through this scheme is around 9% and the borrowing limit is upto three lakhs. A concession of 2% in interest is provided to account holders with good track record. The issued card consists of the details such as name, address, photo, land holding, validity of the card etc which can be used for identity purpose also. The credit disbursed under this scheme is insured under the National Crop Insurance scheme which enables protection against crop loss due to natural calamities etc. The farmers are assured of timely availability of credit and also reduce the interest burden and are provided with the facility of repayment after the harvesting season Arvind, Sharma., Sandhya, Choudhary., & Swarnakar, V. (2013). A Study on Impact of Kisan Credit Card Scheme among the Beneficiary Farmers in Sehore District of Madhya Pradesh. International Journal of Science and Research, 2(1), 154-157.. The card holders are covered for accidents. Kisan Credit Cards helps in reducing the redundancy of processing the loan applications for the banks. It helps in reduction of transaction cost and minimises the paper work for the banks. Better cordial relationship can be maintained between the bank and the client. The individual farmers, Joint Cultivators, Share Croppers; Joint Liability Group etc are eligible for acquiring the Kisan Credit Card. 3.4.9 General Credit Cards As per the guidelines of Reserve Bank of India, banks were directed to issue General Credit Cards to the accountholders of rural and semi-urban areas based on their income levels and previous credit history of the household. The prime objective of the General Credit Card is to disburse credit to the individuals for entrepreneurial activities other than the agricultural and its allied sectors. Banks are entitled to fix the limit for credit disbursement under the scheme but not beyond Rs 25000/-. Banks are permitted to have their own schemes to cater to the needs of the poor people and they are flexible in charging the interest on the credit availed. The credit disbursed to the entrepreneurs through this scheme includes both the term loans and working capital. The General Credit Card is issued in the form of a smart card and stores the identity information of the accountholder, borrowing limits, validity period, credit profile, assets etc. This card will serve as an identity card and will record the transactions over the period. 3.4.10 Rupay Card: It is the card payment scheme which permits the scheduled commercial banks and financial institutions of the country to be part of the electronic payment system. This was developed to counter the dependency on international cards for the electronic payment system and simultaneously displays the strengthen of the Indian banking system to evolve an electronic card payment system at an affordable cost for the scheduled commercial banks and financial institutions. This was developed to enable the customers with the flexibility of electronic payment option which works on all the ATMs, POS terminals, online payments etc. There are several benefits associated with the usage of the card for the account holders. 3.4.11 Mobile Banking: It is the service provided to the accountholder by the financial institutions permitting them to perform financial transactions with the help of mobile phone tab etc. This facility is available to the customers at a remote location and round the clock with certain institution specific restrictions on the type of accounts to be accessed and the limit on the amount per transactions. Mobile banking is used to perform banking transactions, balance enquiry, bill payments, fund transfers, to pay the amount at merchant locations for the goods purchased, purchase of goods over internet etc. The statement of accounts can be obtained through mobile banking and some financial institutions permit to download the statement of account, some institutions send the statement of account over mobile on a charge basis. Reserve Bank of India had formulated guidelines for the implementation and usage of mobile banking and the penetration of mobile phones are enabling the banks to reach wider sections of the society. The usage of technology based services and products are improving the reach of the banking services to the deprived sections of the society. The services of the financial institutions are available in the mobile phones in the form of Applications normally called as Apps. There are several advantages for the banks in implementing the mobile phone service to its customers. Mobile banking reduces the necessity of visiting the branch for the non-financial transactions, reduces the transaction cost for the banks Gandhi, M. (2013). Role of Banks in Financial Inclusion in India: Issues, Challenges and Strategies. International Journal of Applied Business and Economic Research, 11(2), 163-183.. Mobile banking service doesn’t handle the cash operations and for which the customer had to visit a branch and now some of the financial institutions are permitting the customers to digitally transmit the cheques with the help of the camera on the phones. To cater to the needs of the public, Reserve Bank of India had directed all the banks to introduce Information and Communication Technology based services to the villages where the population is more than 2000. As a result of this, Mobile Banking Vans were introduced to provide effective and efficient banking services to the deprived and unbanked sections of the country. These Mobile Banking Vans are fully equipped and computerised to perform the banking activities like depositing, withdrawal of money etc. Bank of Baroda and Indian Bank were the first banks to introduce the Mobile Banking Vans to serve the people of unbanked areas and financially excluded. The model was tested by Bank of Baroda in the states of Gujarat and Bihar and the results were fruitful. The mobile banking facility is extended using the Unstructured Supplementary Service Data (USSD). With the help of this facility the basic banking services like fund transfer, balance enquiries, bill payment, e-payments etc are available on the GSM enabled mobile phones and there is no need to have any mobile application installed on the mobile device. The USSD is entirely different from the IMPS mode of mobile banking. 3.4.12 Expansion of ATM Network: Automated Teller Machine is an innovative means of providing the banking services. These services are user friendly and cost effective as they are becoming a replacement to the branch in offering the basic banking services. The availability of ATMs in urban areas is more when compared to the rural areas though there is increase in the rural areas in the recent past. In 2004, IDRBT had conceived the thought of inter linking the ATMs of all banks and as a result the National Financial Switch, was developed as the largest network of shared ATMs in India. The services like cash withdrawal, balance enquiry, mini statement, pin change etc were made available for all the accounts of the banks in the ATMs irrespective of the base bank. The ATM services are available round the clock, the transactions are safe and all are paper less transactions. The transactions done through National Financial Switch are governed by National Payments Corporation of India. Over the period of time there are several value addition services being added to the card holders Kuldeep, Kumar. (2014). Financial Inclusion progress and Strategies towards future growth in India. ELK Asia Pacific Journal of Finance and Risk Management, 5(3), 1-28.. Some of them are card to card transfer where the card holder of one bank can transfer the funds to the card holder of another bank. The transactions are done based on the card details of the receiver mentioned at the time of the transaction. This feature ensures the safety of the transactions and these are inter-operatable and have the instant fund transfer and helps in better management of the funds. There are limits being prescribed for the transactions made through card. The cheque book requisition and statement requisitions are available for the customers of the particular bank and efforts are being made to have the requisitions at the ATM irrespective of the base branch. The ATMs are equipped to accept cash deposit into the own account or accounts within the same bank. 3.4.13 Direct Benefit Transfer: Through the banks the benefits of the various government schemes are credited into the bank accounts of the beneficiaries. The government had asked all the banks to link the bank accounts with the Aadhaar cards to implement the Direct Electronic Benefit Transfer and through which the MGNREGA wages, social security benefits, subsidies on fertilizers, LPG etc are credited. Reserve Bank of India had asked the banks to open accounts and link them to Aadhaar in the remote areas also for the smooth rollout of the Direct Benefit Transfer scheme. State Level Bankers’ Committee (SLBC) convener banks of all the states along with the Lead banks of selected districts were directed to co-ordinate with the state administrator and field level implementing agencies for the smooth rollout of Aadhaar enabled payment systems. In addition to this the banks were asked to prioritise the opening of branches as part of financial inclusion plans given to the banks to accomplish the financial inclusion. 3.4.14 Micro Finance and Insurance: Microfinance is one type of banking service rendered to the low income, unemployed or small business entrepreneurs who otherwise have no access to the financial services and products. The delivery of financial services to these are relationship based banking for individuals and group based model where entrepreneurs form a consortium and avail loan and other services. The objective of microfinance is to provide an opportunity for the low income groups to save money, avail credit and get insured and provide financial literacy to these people. Credit disbursement to the poor through banks have certain limitations regarding the security etc which lead to the evolution of alternative source of finance for the poor in the form of microfinance and to enhance financial inclusion. Microfinance is bundled with several financial services and products to cater to the needs of the poor and improve their standard of living. Microcredit is the process of disbursing small amounts of loans to the poor people and this is part of microfinance Vipin, Kumar., Monu, Chauhan., & Ritesh, Kumar. (2015). An Overview of Microfinance in India. Abhinav National Monthly Refereed Journal of Research in Commerce & Management, 4(10), 19-26.. Microcredit is rendered to the poor people who are unemployed, small entrepreneurs or farmers who are not bankable. There may be several reasons for not coming under the banking sector like lack of collateral, steady employment, income and a verifiable credit history, and due to some of these reasons they are unable to fulfil the minimal qualifications for availing ordinary credit. Serving these people make them equipped with several opportunities and also enable them to have sustained income, asset creation and thereby eradicate poverty. Normally women are the high vulnerable groups to these financial uncertainties and providing microcredit to them generates multiplier effect and thereby improves the activities of the microfinance institutions. Some of the features of micro finance are disbursement of credit without security, credit to the sections who are below poverty line, disbursement to self help groups, limitation to the amounts disbursed under this, the rules and regulations are prescribed by the NGOs. The income levels of the rural poor are uncertain and are dependent on several factors and are prone to risks. To protect the poor from these uncertainties, insurance comes in handy. Micro insurance is one of the key services rendered to the people at the bottom of the pyramid through which the insurance facilities are provided to the poor or the low income groups. The products designed under this are different from the regular insurance policies as they don’t suit these rural poor or the low income groups. To cater to the needs of the rural poor there should be continuous support from the regulatory authorities. To sustain and accelerate the growth momentum, it is very essential to include economically weak segments of population in the process of economic growth. Financial inclusion of hitherto excluded segments of population can be achieved through micro insurance and expected to reach the rural India Vijay, Kelkar. (2010). Financial Inclusion for Inclusive Growth. ASCI Journal of Management, 39(1), 55–68.. 3.4.15 Linkage of Self Help Group Accounts: Several initiatives were taken by the government and the regulatory authorities for promoting financial inclusion and thereby having inclusive growth. One such initiative was the Self Help Group – Bank Linkage Program initiated by NABARD in 1992 to enable the deprived sections of the society, to have access to the formal financial institutions. A Self Help Group is a local financial intermediary committee comprised of 10-12 local village women or men who hail from a homogenous social and economic background. Normally a mixed group is not preferred and a homogenous committee is formed. This committee can be a registered or unregistered entity. All the group members make small regular savings and mutually agree to contribute to a common pool and from there they can meet their financial emergencies on the basis of mutual help. With the help of the pooled amount, the individual members can take loan and start productive activities and make the members of the group self employed. The group members are collectively responsible for the proper end use of the credit and also timely repayment of the loan taken. In this process there is no need of any collateral from the borrower and flat rate of interest is levied on the amount taken. Self Help Groups are instrumental in eradicating poverty, improving the leadership qualities, women empowerment, improving the school enrolments, financial education, improving health and sanitation etc Raja Reddy, K., & Reddy, CS. (2012). Self Help Groups in India - A Study on Quality and Sustainability. ENABLE Publication, Hyderabad.. The Self Help Groups enable the banks to cater to the credit needs of the people without sacrificing their own funds and this helps the rural women to be empowered both socially and economically. Some of the advantages of Self Help Group are Through the groups the rural poor are empowered to be financially strong Reduces the cost of transactions for both the borrowers and issuers. They reduce the dependence on the informal sources of finance. They eliminate the process of producing the collateral for availing loans. They play a vital role in empowerment of women in the rural areas. Credit is disbursed with almost no paper work and any incurrence of expenditure. This scheme had different outcomes from different states and since its inception states like Andhra Pradesh, Tamil Nadu, Kerala and Karnataka are dominant in credit linkage. There are quite a big number of Self Help groups in the country which are well established on their credit and savings operations and intend to diversify their operations which can yield profits to their groups. Though there is tremendous growth there are few bottlenecks to the scheme like inadequate reach, delay in opening the accounts, delay in disbursement of credit, non-approval of repeat loans, unhealthy competition among the groups, multiple memberships of the members etc. Keeping the Self Help Group’s basic function of savings led credit and with the rapid changes in the working environment there is need for amendments in the structure of the Self Help Groups – Bank Linkage Program to make it user friendly and more flexible to cater to the needs of the rural poor. This had led to the evolution of Self Help Groups phase 2 in the year 2012. This introduced the concept of voluntary savings through the bank accounts where the members can save their surpluses. Another aspect of SHG-2 is to provide credit for a longer period of time rather than the fixed tenure of time and enables to reduce the cost of borrowing. It enables the creation of Joint Liability Group within their group to improve their economic activities. The audit of the group activities can be carried out to strengthen the system and also enhance the self monitoring system. Intensifying, expanding and revitalising the SBLP was assiduously taken up for deepening and widening of access to financial services, covering all eligible poor rural households in the country with a focus on resource poor states. Renewed emphasis was placed on livelihood interventions for SHG members and a livelihood development model was introduced for implementation on pilot basis. Efforts in close coordination with National Rural Livelihood Mission (NRLM) was undertaken to give a renewed thrust to the programme by ironing out differing perceptions, synergising the training efforts, supporting the SHGs and understanding each other’s views. Promotion and nurturing of SHGs continued to be suitably incentivised to encourage financial inclusion, credit linkage, hand holding and livelihood promotion NABARD Annual Report 2016. 3.5.1 Statistical Data on Financial Inclusion Table 1: Cross Country Analysis of Financial Inclusion through Select Parameters Country Automated Teller Machines (ATMs) Branches of commercial banks Automated Teller Machines (ATMs) Branches of commercial banks Borrowers at commercial banks Depositors with commercial banks Deposit accounts with commercial banks Loan accounts with commercial banks Per every 100000 Population Per every 1000 Kms Brazil 114 21 22 4 400 581 1113 2255 China 76 28 92 10 343 165 31 1150 France 107 38 106 37 71 85 188 287 Germany 121 14 246 29 85 97 211 149 India 20 14 62 43 194 412 1542 154 Japan 128 34 387 104 585 1985 7210 195 South Africa 69 10 22 3 386 475 1566 417 United Kingdom 132 25 291 55 59 338 581 110 United States 173 33 44 9 442 149 287 726 Russia 173 33 13 2 593 827 1295 928 Source: Financial Access Survey, IMF; 2016 The table gives a picture of the progress of financial inclusion through few parameters in 10 countries. The parameters like the ATMs, Branches available in the country for every one lakh population. Similarly the parameters like the number of ATMs, Bank Branches, Borrowers, Depositors, Deposit Accounts and Loan Accounts with the banks for every 1000 kms of the country. For the parameter of ATMs for every one lakh population, United States and Russia has the highest number of ATMs of 173 each. Among the countries India has the least number of ATMs for every one lakh population. Regarding the commercial banks for every one lakh population, France has the highest number of branches with 38 followed by Japan, United States and Russia. India has 14 commercial bank branches for every one lakh population. The number of ATMs for every 1000kms in the country the highest is for Japan followed by United Kingdom. The number of commercial bank branches for every 1000 kms, the highest is in Japan followed by United Kingdom and India. The number of borrowers from commercial banks for every 1000 kms is the highest in Russia followed by Japan and United States. The depositors of commercial banks for every thousand kilometres are highest in Japan with 1985 followed by Russia and Brazil with 827 and 581 respectively. Similarly the deposit accounts in the commercial banks for every 1000 kms are highest in Japan with 7210 followed by South Africa and India with 1566, 1542 respectively. The borrowers for every 1000 km are the highest in Brazil with 2255 followed by china and Russia. From the table it is evident that the position of India among the select countries in the parameters’ of financial inclusion is not that satisfactory and a lot needs to be done to reach the desired place. Table 2: Cross Country Analysis of Financial Inclusion through Select Parameters Country / Parameter Borrowed any money Borrowed from a Financial Institution Saved any money Saved at a Financial Institution Paid for Health Insurance Purchased Agriculture Insurance Used Cheques to make payment Used Electronic Payments to make payments Brazil 44.53 30.20 42.18 34.95 24.30 No Data 13.36 33.12 India 92.66 20.43 44.83 40.32 24.10 13.21 13.45 3.98 China 72.65 26.36 114.40 76.84 183.96 14.36 3.68 13.80 Russia 60.33 28.34 45.37 41.79 25.31 No Data 10.44 15.32 South Africa 171.16 33.05 87.53 62.93 24.00 No Data 5.73 26.15 United Kingdom 78.17 54.09 148.40 113.42 No Data No Data 100.25 130.51 United States 102.73 66.64 158.63 133.53 No Data No Data 130.99 128.58 Germany 63.51 49.77 171.71 134.54 No Data No Data 14.47 128.41 Japan 46.29 22.00 172.17 126.68 No Data No Data 2.84 89.60 France 56.60 48.87 153.84 123.56 No Data No Data 159.09 130.27 Source: World Bank Report; 2016 Value in Millions The table depicts the status of financial transactions of select country for the year 2016. The money borrowed recorded highest in South Africa followed by United States. Though the total money borrowed in the year is high and but this money bought from financial institutions is less. The country with the highest borrowed from financial institution is United States followed by United Kingdom. It is observed that the percentage of money borrowed from financial institution out of the total money borrowed is highest in France with over 86% followed by Germany and United Kingdom. The least percentage is recorded by South Africa with 19.30% followed by India with 22%. This low percentage indicates that the people are dependent on informal sources of finance rather than on the formal financial sector to cater to their credit requirements. Similarly the money saved is the highest in Japan followed by Germany and United States and the least is recorded in Brazil and India. The money saved through the financial institutions is highest in Germany followed by United States and Japan. The percentage of savings through the financial institutions is highest in Russia followed by India. This shows that in these two countries though the amount saved is less, most of it is saved through financial institutions considering the safety and security of the amount. The next parameter that is considered is the payment of health insurance of which China has the highest conscious about the health of the citizens followed by Russia. Agricultural insurance is prioritised in China and India. The transactions with the help of cheque system are highest in France followed by United States and United Kingdom. The developing countries are having lesser number of transactions through the cheques. The electronic mode of payments recorded the highest in France followed by United Kingdom and United States. From the data it is evident that the developed countries are making effective utilisation of the technology in making the transactions in the financial institutions.  SNo Variable Component Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 Mar 2017 1 Banking Outlets in Villages - Branches 33378 34811 37471 40837 46126 49571 51830 53240 2 Banking Outlets in Villages – Branchless Mode 34316 81397 144282 227617 337678 504142 534477 557609 3 Banking Outlets in Villages – Total 67694 116208 181753 268454 383804 553713 586307 610849 4 Urban Locations covered through BCs 447 3771 5891 27143 60730 96847 102552 108039 5 Basic Savings Bank Deposit Account (BSBDA) through branches (No. in millions) 60 73 81 101 126 210 238 249 6 Basic Savings Bank Deposit Account (BSBDA) through branches (Amt. in Rs. billion) 44 58 110 165 273 365 474 598 7 Basic Savings Bank Deposit Account (BSBDA) through BCs (No. in millions) 13 32 57 81 117 188 231 248 8 Basic Savings Bank Deposit Account (BSBDA) through BCs (Amt. in Rs. billion) 11 18 11 18 39 75 164 182 9 BSBDA Total (in millions) 73 105 139 182 243 398 469 497 10 BSBDA Total (Amt. in Rs. billion) 55 76 120 183 312 440 638 780 11 OD facility availed in Basic Savings Bank Deposit Account (No. in millions) 0.2 1 3 4 6 8 9 10 12 OD facility availed in Basic Savings Bank Deposit Account (Amt. in Rs. billion) 0.1 0.3 1 2 16 20 29 34 13 KCCs-Total (No. in millions) 24 27 30 34 40 43 47 49 14 KCCs-Total (Amt. in Rs. billion) 1240 1600 2068 2623 3684 4382 5131 5545 15 GCC-Total (No. in millions) 1 2 2 4 7 9 11 12 16 GCC-Total (Amt. in Rs. billion) 35 35 42 76 1097 1302 1493 1614 17 ICT A/Cs-BC Total Transactions (No. in millions) 27 84 156 250 329 477 827 1021 18 ICT A/Cs-BC Total Transactions (Amt. in Rs. billion) 7 58 97 234 524 860 1687 2108 : Report on Trend and Progress of Banking in India 2017  Table 3 shows the progress of financial inclusion plans by the commercial banks from March 2010 to March 2017. The detailed analysis of the components of the table are described below 3.5.2 Banking Outlets in the Villages Figure 1: Progress of banking outlets in the villages Figure 1 depicts the progress of banking outlets established by the banks in the villages over the years. In 2010 both the branch mode and branchless mode are almost equal but after that there is steady growth in the branchless mode of banking operations in the villages. In March 2010 the branch mode outlets are 33378 and the branchless mode of outlets are 34316 whose values were increased to 53240 branch modes and 557609 branchless modes of outlets by March 2017. In March 2010 the ratio of branch outlets to branchless mode of outlets are in the ratio of 49.31% and 50.69% respectively and the same in March 2017 are 8.72% to 91.28%. This is an indicator of the rapid progress of the banking outlets in the villages to cater to the needs of the rural poor. The growth percentage of the branch mode over the years is 4.29%, 7.64%, 8.98%, 12.95%, 7.47%, 4.56% and 2.72% respectively from March 2011 to March 2017. Similarly the growth percentage of the branchless mode of banking outlets are 137.2%, 77.26%, 57.76%, 48.35%, 49.3%, 6.02% and 4.33% respectively from March 2011 to March 2017. Considering the total banking outlets in the villages there is continuous growth rate of 71.67%, 56.4%, 47.7%, 42.97%, 44.27%, 5.89% and 4.19% respectively from March 2011 to March 2017. 3.5.3 Progress of BSBD Accounts Figure 2: Progress in opening of Basic Savings Bank Deposit Accounts Figure 2 shows the Basic Savings Bank Deposit (BSBD) Accounts, which were earlier called as no-frill accounts, opened by the branches and Business correspondents. In March 2010 the accounts through branches are 60 million and by BCs are 13 million which spiked to 249 million and 248 million respectively. In the initial years the accounts were opened through banks and from 2012 there is equal number of accounts opened both at the branches and through business correspondents. In March 2010 the BSBD accounts opened through branches are 82.19% and through business correspondents are 17.81% and by March 2017 the ratios are 50.10% and 49.90% respectively. The rapid increase in the number of accounts opened is due to the recruitment of business correspondents by the banks for achieving the targets of financial inclusion plans. By March 2017 more than 497 million accounts were opened in the unbanked villages. The growth percentage of accounts opened through branch over the years is 21.67%, 10.96%, 24.69%, 24.75%, 66.9%, 13.17% and 4.62% respectively from March 2011 to March 2017. Similarly the growth percentage of the BSBD Accounts opened by Business Correspondents from March 2011 to March 2017 are 146.15%, 78.13%, 42.11%, 44.32%, 60.65%, 23% and 7.36% respectively from March 2011 to March 2017. The total BSBD accounts opened over the years are 73, 105, 139, 182, 243, 398, 469 and 497 million from March 2010 to March 2017. There are continuous efforts by the banks to reach the unbanked segments which are reflected through the number of accounts opened. 3.5.4 Progress of Amounts deposited in BSBD Accounts Figure 3: Amount collected through BSBD Accounts Figure 3 depicts the progress of amounts collected in the Basic Savings Bank Deposit Accounts from March 2010 to March 2017. The amount deposited in the BSBD accounts in March 2010 is Rs 55 billion and increased to Rs 780 billion by March 2017. There is a continuous growth in the amounts deposited in the accounts opened which imply that certain transactions are being performed in the accounts rather than keeping them dormant. The ratio of amounts between branches and business correspondents in March 2010 are 80% and 20% respectively and for the year March 2017 it is 76.67% and 23.33% respectively. From this it can be inferred that though the amounts are getting increased the contribution from the business correspondents is not in the same ratio when compared to that of opening the accounts. The contribution of business correspondents is hovering between 20% and 25% in terms of amount collection in the accounts opened. The growth percentage of amounts deposited in the BSBD Accounts are 38.18%, 57.89%, 52.5%, 70.66%, 40.89%, 45% and 22.26% respectively from March 2011 to March 2017. The amounts collected through branches in the BSBD accounts had moved from Rs. 44 billion in March 2010 to Rs 598 billion in March 2017. Similarly the amounts collected through business correspondents in the BSBD accounts were Rs 11 billion in March 2010 which spiked to Rs 182 billion by March 2017. 3.5.5 Overdraft Facility in BSBD Accounts Figure 4: Over Draft facility availed through BSBD Accounts Figure 4 depicts the Over Draft facility availed by the accounts and the amount disbursed through these accounts. Overdraft facility is sanctioned to the accounts which have satisfactory operations for over six months and the amount is restricted to Rs 5000/- per household. Normally the overdraft facility is extended to the women account of the household. There is a steady growth in the number of accounts which are sanctioned overdraft facility and also the amount disbursed through these accounts. The number of accounts which are sanctioned for overdraft facility had moved from 0.2 million in March 2010 to 10 million by March 2017. The growth percentage of accounts sanctioned with overdraft facility are 400%, 200%, 33.33%, 47.5%, 28.81%, 18.42% and 11.11% respectively from March 2011 to March 2017. The overdraft amount disbursed through the sanctioned accounts had increased from 0.1 billion in March 2010 to 24 billion by March 2017. The growth percentage of amounts sanctioned through these accounts are 200%, 233.33%, 100%, 700%, 24.38%, 45.73% and 17.24% respectively from March 2011 to March 2017. 3.5.6 Progress of KCC & GCC Figure 5: Issue of General and Kisan Credit Cards Figure 5 shows the data pertaining to the issue of Kisan and General Credit Cards to the accountholders of the unbanked villages over the years from March 2010 to March 2017. There is a continuous growth in the number of cards issued starting from 1 million of General Credit cards in 2010 to 12 million in March 2017. Similarly Kisan Credit Cards are issued to 24 million in March 2010 which increased to 49 million by March 2017. The Kisan Credit Cards has registered growth rates of 12.5%, 11.11%, 13.33%, 17.35%, 7.77%, 9.3% and 4.26% respectively from March 2011 to March 2017. Similarly the General Credit Cards had registered growth rates of 100%, 0%, 100%, 85%, 24.32%, 19.57% and 9.09% respectively from March 2011 to March 2017. The rise in the issue of credits indicate that the farmers can reduce their dependence on the informal sources of credit and provide adequate, timely and cost effective credit to the farmers for their cultivation. The Kisan credit cards are issued more than the general credit cards in the country. The Kisan credit card helps to get timely credit to cater to the needs of their cultivation. 3.5.7 Credit Disbursement through KCC & GCC Figure 6: Disbursement of Credit through General and Kisan Credit Cards Figure 6 shows the amounts disbursed through Kisan Credit Cards and General Credit Cards over the years. Huge amounts were disbursed through Kisan Credit Cards. Out of the 49 million KCC issued an amount of Rs 5545 billion were disbursed. The disbursement of amounts saw a continuous growth over the years. The amount has risen from Rs 1240 billion in March 2010 to Rs 5545 billion by March 2017. The growth rates are 29.03%, 29.25%, 26.84%, 40.45%, 18.95%, 17.08% and 8.07% respectively from March 2011 to March 2017. The amounts disbursed through Kisan Credit Cards are1240, 1600, 2068, 2623, 3684, 4382, 5131 and 5545 billion rupees from March 2010 to March 2017 respectively. Similarly there is continuous growth in the amounts disbursed under General Credit Cards. Out of the 12 million GCC issued an amount of Rs 1614 billion were disbursed. The disbursement of amounts saw a continuous growth over the years. The amount has risen from Rs. 35 billion in March 2010 to Rs. 1614 billion by March 2017. The growth rates are 20%, 80.95%, 1343.29%, 18.66%, 14.7% and 8.1% respectively from March 2012 to March 2017. High variation was observed March 2014 which was the year where the second phase of Financial Inclusion Plan was initiated and new guidelines were issued for issue of General Credit Cards. The amounts disbursed through the General credit cards are 35, 35, 42, 76, 1097, 1302, 1493 and 1614 billion rupees from March 2010 to March 2017 respectively. 3.5.8 Progress of Transactions in ICT Accounts though Business Correspondents Figure 7: Transactions by BCs using Information and Communication Technology Figure 7 shows the volume and value of transactions done by Business Correspondents using Information and Communication Technology. Both the parameters are showing consistent raise in their values. In March 2010 the number of transactions was 27 million and by March 2017 it is 1021 million. There is a growth rate of 211.11%, 85.71%, 60.26%, 31.44%, 45.16%, 73.38% and 23.46% from March 2011 to March 2017. The volume of transactions performed by the business correspondents using the ICT in the accounts are 27, 84, 156, 250, 329, 477, 827 and 1021 million from March 010 to March 2017. Similarly the value of transactions done by Business Correspondents using Information and Communication Technology was at Rs 7 billion in March 2010 and Rs 2108 billion by March 2017. There is growth rate of 728.57%, 67.24%, 141.24%, 124.1%, 63.96%, 96.21% and 24.96% respectively from March 2011 to March 2017. From the data it can be presumed that the Business Correspondents are performing well and the volumes and values are being improved year upon year. The value of the transactions performed by the business correspondents using the ICT in the accounts are 7, 58, 97, 234, 524, 860, 1687 and 2108 billion rupees from March 2010 to March 2017. 3.5.9 Progress of Self Help Groups Table 4: Self Help Group Analysis Year Savings with Banks Loans Disbursed during the year Loans Outstanding No of SHGs Amount No of SHGs Amount No of SHGs Amount 2007 4160584 3512.71 1105749 6570.39 2894505 12366.49 2008 5009794 3785.39 1227770 8849.26 3625941 16999 2009 6121147 5545.62 1609586 12253.51 4224338 22679.84 2010 6953250 6198.71 1586822 14453.3 4851356 28038.28 2011 7462048 7016.3 1196872 14547.73 4787257 31221.16 2012 7960927 6551.41 1148601 16534.77 4354974 36340 2013 7317551 8217.25 1219821 20585.36 4451434 39375.3 2014 7429500 9897.42 1366421 24017.36 4197338 42927.52 2015 7697469 11059.68 1626238 27582.1 4468180 51545.85 2016 7769018 12983.74 1682487 29482.01 4821179 57078.84 Source: NABARD Annual Reports Amount in Crores From table 4, it is evident that there is continuous growth in the SHG–Bank Linkage Programme (SBLP) which covers more than 7.7 million Self Help Groups and nearly 100 million poor households in India. The rural poor, thought to be unbankable prior to the SBLP epoch, now constitute a staggering 4.8 million SHGs having credit outstanding of more than Rs 57,078 crores with the formal lending institutions. More than 1.6 million SHGs had availed credit support of Rs 29,482 crores from various banks in 2016, at an average of Rs1.75 lakh per SHG. There was net addition of 3.5 lakh SHGs with savings linkage in the year 2016. The credit disbursement increased by 6.8 per cent over previous year, whereas, the total outstanding of institutional credit to SHGs increased by 10.72 per cent and SHGs’ savings balance with banks went up to Rs 12984 crores. Figure 8: Progress of Self Help Groups Figure 8 depicts the progress of Self Help Groups in terms of the savings with the bank, loans disbursed in the year and the outstanding loans. There is continuous growth in the number of Self Help Groups in all the three parameters under the consideration. The number of SHGs which have savings with the various banks had moved from 4160584 in March 2007 to 7769018 by March 2016 registering a growth of 86.73%. The growth percentage of SHG accounts linked with banks are 20.41%, 22.18%, 13.59%, 7.32%, 6.69%, (8.08)%, 1.53%, 3.61% and 0.93% respectively from March 2008 to March 2016. The number of SHGs for which loans were disbursed for the year 2007 is 1105749 which spiked to 1682487 in 2016 registering a growth of 52.16%. The growth percentage of SHG accounts disbursed credit are 11.04%, 31.1%, -1.41%, -24.57%, -4.03%, 6.2%, 12.02%, 19.01% and 3.46% respectively from March 2008 to March 2016. The number of SHGs with outstanding credit facility is 2894505 in March 2007 and stood at 4821179 in March 2016 registering a growth of 66.56%. The growth percentage of SHG with outstanding credit are 25.27%, 16.5%, 14.84%, -1.32%, -9.03%, 2.21%, -5.71%, 6.45% and 7.9% respectively from March 2008 to March 2016. Figure 9: Amount linked with the Self Help Groups Figures in Crores Figure 9 depicts the progress of Self Help Groups in terms of the amounts in the savings with the bank, loans disbursed in the year and the outstanding loans. There is growth in the transactions of amounts of Self Help Groups in all the three parameters under the consideration. The amount saved by the SHGs with the various banks had moved from 3512.71 crores in March 2007 to 12983.74 by March 2016 registering a growth of 269.62%. The growth percentage of amounts saved through SHG accounts linked with banks are 7.76%, 46.5%, 11.78%, 13.19%, -6.63%, 25.43%, 20.45%, 11.74% and 17.4% respectively from March 2008 to March 2016. For the SHGs for which loans were disbursed for the year 2007 was Rs 6570.39 which spiked to Rs 29482.01 in 2016 registering a growth of 348.71%. The growth percentage in the amount of credit disbursed for the SHG are 34.68%, 38.47%, 17.95%, 0.65%, 13.66%, 24.5%, 16.67%, 14.84% and 6.89% respectively from March 2008 to March 2016. The amount of outstanding credit extended to the SHGs stood at Rs 12366.49 in March 2007 and increased to Rs 57078.84 by March 2016 registering a growth of 361.56%. The growth percentage in the outstanding credit extended to the SHG are 37.46%, 33.42%, 23.63%, 11.35%, 16.4%, 8.35%, 9.02%, 20.08% and 10.73% respectively from March 2008 to March 2016. From the above data it is evident that though there is fluctuations in the number SHGs regarding the savings account, Credit disbursement and the outstanding loan accounts, there is continuous growth in the amounts saved in the bank accounts of SHGs, Credit disbursed to the SHGs and the outstanding loan amount of the SHGs 3.5.10 Progress of ATMs Table 5: ATM Data Analysis YEAR / TYPE OF CARD   ATMs   POS CREDIT CARD DEBIT CARD No of Cards No of Transactions Amount of Transactions No of Cards No of Transactions Amount of Transactions 2012 95686 660920 17653818 28946816 89582.44 278282839 501700545 1363701.77 2013 114014 854290 19538329 35842252 112710.3 331196720 527381264 1623278.71 2014 160055 1065984 19181567 46401963 147149.01 394421738 628478994 1881869.01 2015 181398 1126735 21110653 57344220 181331.95 553451553 700310861 2095763.03 2016 199099 1385668 24505219 72832925 229746.15 661824092 844590741 2380453.65 2017 208354 2529141 29842235 108099506 336196.13 854874586 981280948 2616448.72 Source: RBI Annual Reports Amount in Rs Million From the table it is evident that there is continuous increase in the number of ATMs, POS, Credit & Debit Cards, the transactions with these cards and also the amounts transacted through the cards. Taking the Point of Sale (POS), the available devices were 660920 in March 2012 which increased to 2529141 by March 2017 registering a growth of 282.67%. The growth percentages of POS are 29.26%, 24.78%, 5.7%, 22.98% and 82.52% respectively from March 2013 to March 2017. The growth percentage of 82.52% during 2016-17 is mainly due the demonetization of high value currency which led towards the electronic mode of transactions by the accountholders. The number of credit cards was 17653818 in March 2012 and increased to 29842235 by March 2017 registering a growth of 69.04% during the period. The growth percentages of Credit Cards are 8.65%, 1.86%, 8.05%, 16.08% and 21.78% respectively from March 2013 to March 2017. The number of transactions with the credit cards had shown continuous growth over the years starting from March 2012 with 28946816 which moved to 108099506 transactions by March 2017 registering a growth rate of 273.44%. The growth percentages of Credit Card transactions are 23.82%, 29.46%, 23.58%, 27.01% and 48.42% respectively from March 2013 to March 2017. The value of amount through the credit card transactions stood at Rs 89582.44 million in March 2012 and increased to Rs 336196.13 million by March 2017 registering a growth rate of 275.29%. The growth percentages of amount through the Credit Cards transactions are 25.82%, 30.56%, 23.23%, 26.7% and 46.33% respectively from March 2013 to March 2017. The same is the case with the Debit cards as compared to that of the Credit Cards. The number of debit cards was 278282839 in March 2012 which increased to 854874586 by March 2017 registering a growth of 207.2%. The growth percentages of Debit Cards are 19.01%, 19.09, 40.32%, 19.58% and 29.17% respectively from March 2013 to March 2017. The number of transactions with the Debit cards had shown continuous growth over the years starting from March 2012 with 501700545 which moved to 981280948 transactions by March 2017 registering a growth rate of 95.59%. The growth percentages of Debit Card transactions are 5.12%, 19.17%, 11.43%, 20.6% and 16.18% respectively from March 2013 to March 2017. The value of amount through the Debit card transactions stood at Rs 1363701.77 million in March 2012 and increased to Rs 2616448.72 million by March 2017 registering a growth rate of 91.86%. The growth percentages of amount through the Debit Cards transactions are 19.03%, 15.93%, 11.37%, 13.58% and 9.91% respectively from March 2013 to March 2017. The transactions of the cards are encouraged with the availability of the ATMs and the number of these in the country is on a rapid growth path which is shown in the above table. Figure 10: Progress of ATMs ATMs are the easiest mode of providing the basic banking services to customers in a faster and cost effective. Off-site ATMs are particularly more cost effective as they operate without the paraphernalia of a bank branch which constitute around 48% of the total ATMs. Though the number of ATMs is more, the financial institutions’ focus and penetrations are in the urban areas compared to the rural areas. Slowly the number and percentage of ATMs in rural areas has been on a steady rise in recent years. The ATMs across the country had crossed one lakh during the year 2012-13 and subsequently crossed two lakhs during the year 2016-17. There were instances during the years where the number of off-site ATMs was more than the on-site and Reserve Bank of India had intervened and issued guidelines for the banks to establish the onsite ATMs especially the public sector banks. Figure 10 displays the progress of ATMs established by various financial institutions over the period of time. The number of ATMs was 95686 in March 2012 spiked to 208354 by March 2017 registering a growth rate of 117.75%. The growth percentages of ATMs are 19.15%, 40.38%, 13.33%, 9.76% and 4.65% respectively from March 2013 to March 2017. 3.5.11 Progress of Bank Branches Table 7: Branches of Scheduled Commercial Banks over the years DOMICILE 2010 2011 2012 2013 2014 2015 2016 2017 Rural 32624 (38.2) 33683 (37.32) 36356 (36.97) 39195 (37.17) 45177 (38.52) 48498 (38.59) 50086 (38.73) 51266 (38.53) Semi-Urban 20740 (24.29) 22843 (25.31) 25797 (26.24) 28165 (26.71) 31442 (26.81) 33703 (26.82) 34702 (26.84) 35741 (26.86) Urban 17003 (19.91) 17490 (19.37) 18781 (19.1) 19902 (18.88) 21448 (18.29) 22997 (18.3) 23532 (18.2) 24290 (18.25) Metro 15026 (17.6) 16247 (18) 17396 (17.69) 18175 (17.24) 19213 (16.38) 20474 (16.29) 20984 (16.23) 21763 (16.36) TOTAL 85393 (100) 90263 (100) 98330 (100) 105437 (100) 117280 (100) 125672 (100) 129304 (100) 133060 (100) Table 7 illustrates the ratio of branches based on their domicile. In 2010 out of the 85393 branches 38.2% are located in the rural areas and 24.29% in Semi-Urban, 19.91% in Urban and 17.6% in Metropolitan areas. Similarly in 2011 out of 90263 branches 37.32% are located in the rural areas and 25.31% in Semi-Urban, 19.37% in Urban and 18% in Metropolitan areas. In 2012 out of 98330 branches 36.97% are located in the rural areas and 26.24% in Semi-Urban, 19.1% in Urban and 17.69% in Metropolitan areas. In 2013 out of105437 branches 37.17% are located in the rural areas and 26.71% in Semi-Urban, 18.88% in Urban and 17.24% in Metropolitan areas. In 2014 out of 117280 branches 38.52% are located in the rural areas and 26.81% in Semi-Urban, 18.29% in Urban and 16.38% in Metropolitan areas. In 2015 out of 125672 branches 38.59% are located in the rural areas and 26.82% in Semi-Urban, 18.3% in Urban and 16.29% in Metropolitan areas. In 2016 out of 129304 branches 38.73% are located in the rural areas and 26.84% in Semi-Urban, 18.2% in Urban and 16.23% in Metropolitan areas. And finally in 2017 out of 133060 branches 38.53% are located in the rural areas and 26.86% in Semi-Urban, 18.25% in Urban and 16.36% in Metropolitan areas. From the above data it is evident that around 36% of the total branches are located in rural areas followed by semi urban branches with around 26% and the remaining are in the order of Urban and Metropolitan areas. Figure 11: Branches of Scheduled Commercial Banks over the years Figure 11 depicts the domicile of the bank branches over the years. The rural branches had grown from 32624 in March 2010 to 51266 branches by March 2017 registering a growth rate of 57.14%. The growth percentage of branches in rural areas is 3.25%, 7.94%, 7.81%, 15.26%, 7.35%, 3.27% and 2.36% respectively from March 2011 to March 2017. The semi-urban branches had grown from 20740 in March 2010 to 35741 branches by March 2017 registering a growth rate of 72.33%. The growth percentage of branches in semi-urban areas is 10.14%, 12.93%, 9.18%, 11.64%, 7.19%, 2.96% and 2.99% respectively from March 2011 to March 2017. The urban branches had grown from 17003 in March 2010 to 24290 branches by March 2017 registering a growth rate of 42.86%. The growth percentage of branches in urban areas is 2.86%, 7.38%, 5.97%, 7.77%, 7.22%, 2.33% and 3.22% respectively from March 2011 to March 2017. The metropolitan branches had grown from 15026 in March 2010 to 21763 branches by March 2017 registering a growth rate of 44.84%. The growth percentage of branches in metropolitan areas is 8.13%, 7.07%, 4.48%, 5.71%, 6.56%, 2.49% and 3.71% respectively from March 2011 to March 2017. The total branches had moved from 85393 in March 2010 to 133060 by March 2017 registering a growth rate of 55.82%. The growth percentage of total branches in all the areas is 5.7%, 8.94%, 7.23%, 11.23%, 7.16%, 2.89% and 2.9% respectively from March 2011 to March 2017. 3.5.12 Contribution of Business Correspondents Table 6: Business Correspondents Data Analysis SNo Variable Component Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 Mar 2017 1 Banking Outlets in Villages – Branchless Mode 34316 81397 144282 227617 337678 504142 534477 557609 2 Urban Locations covered through BCs 447 3771 5891 27143 60730 96847 102552 108039 3 Basic Savings Bank Deposit Account (BSBDA) through BCs (No. in millions) 13 32 57 81 117 188 231 248 4 Basic Savings Bank Deposit Account (BSBDA) through BCs (Amt. in Rs. billion) 11 18 11 18 39 75 164 182 5 ICT A/Cs-BC Total Transactions (No. in millions) during the year 27 84 156 250 329 477 827 1021 6 ICT A/Cs-BC Total Transactions (Amt. in Rs. billion) during the year 7 58 97 234 524 860 1687 2108 Table 6 shows the statistics about the Business Correspondents. There is increase of banking outlets in the villages from 34316 in March 2010 to 557609 by March 2017 registering a growth of 1525%. Business Correspondents are recruited even in the urban areas to service the financially excluded segment of those areas. The number of business correspondents engaged in the urban areas is 447 in March 2010 and increased to 108039 by March 2017 registering a growth of 24070%. The business correspondents are active in opening the accounts for the people in their allocated villages and the number of accounts opened was 13 million in March 2010 which increased to 248 million by March 2017 registering a growth of 1808%. The amount parked in these basic savings bank deposit accounts is Rs 11 billion in March 2010 which increased to Rs 182 billion by March 2017 registering a growth of 1555%. The business correspondents were active in utilising the information and Communication Technology in their operations which stood at 27 million transactions in March 2010 and increased to 1021 million by March 2017 registering a growth of 3681%. The amount involved in the transactions utilising the ICT stood at Rs 7 billion in March 2010 which increased to Rs 2108 billion by March 2017 registering a growth of 30014% 3.5.13 Financial Inclusion Fund and Financial Inclusion Technology Fund Table 7: FIF, FITF Data Analysis Name of the Fund 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 S D S D S D S D S D S D S D FIF 1.3 0.36 18.36 7.99 19 9.21 75.96 18.9 67.02 33.31 321.16 65.58 203.57 100.67 FITF 4.22 0.09 17.08 1.67 101.11 54.01 221.07 128.39 22.01 17.14 42.96 20.25 101.31 41.47 Total 5.52 0.45 35.44 9.66 120.11 63.22 297.03 147.29 89.03 50.45 364.12 85.83 304.88 142.14 S – Sanctioned D – Disbursed Rs in Crores RBI Reports The government had taken several initiations for the promotion of financial inclusion and as part of constituted a committee under the chairmanship of Dr Rangarajan. The committee had suggested various measures for including the financially excluded segments of the society, into the formal financial institutions. To include the maximum number of households into the banking fold the committee had suggested the formation of two funds through NABARD and the funds are Financial Inclusion Fund (FIF) for meeting the cost of developmental and promotional interventions of financial inclusion and the other fund is Financial Inclusion Technology Fund (FITF) to meet the cost for adopting the technology in the process of financial inclusion. These funds were started with corpus fund of Rs 500 crores each in collaboration of Government of India, Reserve Bank of India and NABARD in the ratio of 40:40:20 respectively. The objective of Financial Inclusion Fund is to support developmental and promotional activities of financial inclusion among the deprived low income groups of the unbanked areas. It is aimed at providing support, nurturing the SHGs, financial assistance for establishing rural credit bureaus for the rural customers. The fund facilitates the credit disbursement among the rural poor and the vulnerable sections of the society. The Financial Inclusion Technology Fund (FITF) is used to enhance the implementation of technology solution and improve the technology based inclusive growth for the betterment of the rural poor. FITF aims at improving the usage of technology in the process of financial inclusion and increase the technology absorption by the users and create an environment for innovation and induce cooperation among all the stakeholders of the process. The developments in the funds had made the government of India to merge the Financial Inclusion Fund and Financial Inclusion Technology Fund into a single entity termed as Financial Inclusion Fund. The Government of India and Reserve Bank of India had formulated new guidelines and scope of activities and the operations of the fund are governed by the Advisory Board constituted by government and NABARD. The objective of the fund is to create the required infrastructure for financial inclusion, investment in ICT solutions, and awareness about the demand side issues of the financial inclusion Reserve Bank of India (2015). Financial Inclusion Fund (FIF)- Revised Guidelines, DCBR.RCBD.BPD.No.4/19.51.010/2015-16 October 15, 2015. 3.6 PRADHAN MANTRI JAN DHAN YOJANA: 3.6.1 Introduction Pradhan Mantri Jan Dhan Yojana (PMJDY) is a National Mission for Financial Inclusion, launched in August 2014, to ensure access to various financial services and products like opening of Basic Savings & Basic Deposit Accounts, Remittance, Credit disbursement, Insurance, Pension and other banking services in an affordable manner and at an affordable cost. The scheme came into force from 28th August 2014 and on the very first day a record number of 1.5 crore accounts were opened Alka, Choudhary. (2016). PMJDY- A Study of Its Role in Financial Inclusion and Inclusive Growth in India. International Journal for Research in Management and Pharmacy, 6(5), 14-17.. PMJDY was initiated to bring in over 7.5 crore families which are unbanked into the formal financial system by opening bank accounts and have an inclusive growth. This scheme is for all the eligible citizens of the country irrespective of their place of residence. Accounts can be opened in any bank branch or through the Business Correspondent (Bank Mitra) outlet. The accounts under PMJDY are opened with Zero balance. However, if the account-holder wishes to avail the cheque book facility, they have to fulfill the minimum balance criteria. The scheme is aimed at providing the basic banking services and insurance coverage to all the deprived sections of the society thereby transforming the traditional banking system of the country. The main objective of PMJDY scheme is to provide financial access to the citizens of the country and provided overdraft facility, credit facility, pension, life and accidental insurance etc. The scheme aims at inclusive growth of the citizens of the country which can be attained by providing the basic banking services through a bank account. The scheme is aimed at providing lucrative benefits to the citizens and thereby improves the economic development of the country. Some of the key features of PMJDY scheme are providing banking facility to all, issue of Rupay card with overdraft facility, mobile banking facility, Micro Finance, Micro Insurance and Credit Guarantee Fund etc. there by enabling the people towards the inclusive growth. The overdraft amount extended to the customers looks nominal but the influence it generates is immense as the scheme is targeted towards the below poverty line population. The government subsidies are credited directly to the bank accounts of the customers reducing the leakages in the distribution process. Thus the accountholders will avail the benefits offered by banks and facilities provided by government and in due course develop the savings habits among them, and it will enhance capital formation, which will in result increase economic development of country Pramahender., & Narender, Singh. (2016). Financial Inclusion: Role of Pradhan Mantri Jan Dhan Yojna and Progress in India. IOSR Journal of Business and Management, 1(1). 1-8.. 3.6.2 Action Plan of PMJDY The PMJDY is aimed at having an inclusive growth of the country where all the sections of the society have an equal opportunity of availability and access to the various financial services and products. The scheme is part of the financial inclusion process and is divided into two phases to have an inclusive growth. Phase I of the scheme is schedule between 15.08.2014 and 14.08.2015 and highlights on the following points. All the households should be provided with atleast one basic banking account either through the bank branch or business correspondents. All the accountholders should be issued with Rupay Debit Card bundled with accident insurance coverage of Rs one lakh. Six months of satisfactory operations of the bank account should entitle the accountholders with the facility of overdraft of upto Rs 5000/-. Continuous financial literacy camps will be conducted at the village level, The subsidies of various government schemes are to be credited directly to the accountholders through the Direct Benefit Transfer facility and thereby increasing the transactions in the accounts. Upgradation of the Kisan Credit Card to Rupay Kisan Card for disbursement of credit to the farmers. Phase II of the scheme is proposed between 15.08.2015 to 14.08.2018 with emphasis on the following points. Opening of bank accounts for all the members of the household. Micro insurance facility to be provided to all the people. Focus on the coverage of tribal, hilly, difficult and remote areas for inclusive growth. Providing pension facility through Swaylamban scheme with the help of the business correspondents. 3.6.3 Benefits bundled with PMJDY The accounts are opened with zero balance. Amounts can be transferred across the country through these accounts. Interest is paid on the deposits. Rupay Debit Card is issued to all the customers to promote electronic mode of transactions. Insurance is covered for the accountholders subject to certain eligibility conditions. Life insurance is covered for an amount of Rs 30000/- payable on death of the beneficiary. Accidental insurance is covered for Rs 1 lakh. The condition for availing this facility is that the Rupay Debit Card should be used atleast once in every 45 days either for financial or non-financial transactions. The subsidies of various government schemes are credited to the bank account of the beneficiaries through Direct Benefit Transfer. Access to various insurance and pension products. Overdraft facility is extended to the accountholders after six months of satisfactory operations in the account. Overdraft of upto Rs 5000/- is extended to one account per household, preferably lady of the household. 3.6.4 Documents Required for Opening accounts under PMJDY Scheme The letter issued by UIAI consisting of the details like name, address, Aadhaar number etc. If Aadhaar Card / Aadhaar Number are available then no other documents are required for opening the accounts under the scheme. If there is any change in the address of the customer then a self declaration of the present address is sufficient for opening the accounts. Non availability of Aadhaar card can be compensated through one of the Officially Valid Documents termed as OVD. Some of the OVD are Voter Id Card, Pan Card, Driving License, Passport, Job card issued by MGNREGA etc. If these documents contain the address then the same can be utilised as proof for both Identity and Address. If any of the “Officially Valid Documents” are not available but categorized as ‘low risk' by the banks, then an account can be opened by submitting any one of the following documents: Photo Identity Card issued by Central/State Government Departments, Public Sector Undertakings, Statutory/Regulatory Authorities and Public Financial Institutions; Letter issued by a gazetted officer, with a duly attested photograph of the person. In the absence of the above documents, a person can open “Small Accounts” with the banks on submission of self attested photograph and either by signing or thumb print in the presence of bank officials. There are certain conditions in the operations of this account. The aggregate credit should not exceed Rupees one lakh in a year, the aggregate withdrawals should not exceed Rupees ten thousand in a month and the balance should not exceed Rupees fifty thousand at any point of time. These accounts are permitted for operations for a period of one year and further extended for a period of one year on submission of the proof that the accountholder had applied for any of the Officially Valid Documents during the first year of opening the small account by the bank. 3.6.5 Basic Pillars of PMJDY The scheme aims at improving the delivery system on the supply side of financial inclusion. The scheme intends to forge all the available facilities under a single roof for the flexibility of the end customer. The governments’ extensive campaign had attracted the attention of deprived sections of the society and marching from unbanked to the banked mode Rifaya, Meera., Kaleeswaran, P., & Gurunandhini, R. (2017). Financial Inclusion through Pradhan Mantri Jan-Dhan Yojana (PMJDY) Scheme. Asian Journal of Managerial Science, 6(1), 10-14.. The major pillars of the scheme are given below: Universal Access to Banking Facility: The major objective of the scheme is to include all the households into banking fold. The banking network needs to be expanded in such a way that it is reachable to the financially excluded. To enable this, each district is divided into Sub Service Areas (SSA) to serve 1000-1500 households such that all have access to the banking services within a distance of 5kms in the first phase. The identified SSA will be allocated to a bank to provide the banking services either through the branch or business correspondents. And in the second phase, Jammu & Kashmir, Uttarakhand, Himachal Pradesh, North East States and naxal affected districts are to be covered. Providing Basic Banking Accounts to all households: In the first stance the objective is to provide basic banking account to all the households either through branch or the business correspondents by August 2015. The banks had started camps at the village level to achieve the target of providing bank accounts to the households. The camps were initiated to coordinate with the departments for opening of accounts of SHGs, JLGs etc. The promotion of the government had resulted in the introduction of new debit card called the Rupay card, the third of its kind in the world, developed by the National Payments Corporation of India. The accounts opened under the scheme are of zero balance accounts and are also provided with Rupay Debit Card and later with overdraft facility based on the satisfactory operations in the account. Kisan Credit Card is also provided to the eligible customers along with the Rupay Debit Card. Financial Literacy and Credit Counselling: Financial literacy is the process of providing familiarity and understanding of financial services and products, especially the benefits and the risks associated with them, to make calculated choices. This is beneficial to the individuals to take effective action as they have limited resources and knowledge to analyse the merits and demerits in financial dealings with the financial intermediaries and also to improve their overall well-being and finally to avoid distress in the financial matters. Financial literacy is vital in promoting financial inclusion and thereby leading to financial stability. Financial literacy is more important in India due to the low levels of literacy levels among the citizens of the country and financial illiteracy is one of the factors for financial exclusion in the context of Financial Inclusion Reserve Bank of India (2008). https://rbi.org.in/scripts/PublicationDraftReports.aspx?ID=526#. Credit counselling explains the options of repaying the debts outside insolvency and signifies the importance of credit, budgeting and financial management to the debtor. Credit Counselling suggests the process to solve the present financial problem, educate about the cost of mishandling a debt and encourages the people to have access to the formal financial system. They help in financial planning and amelioration of debt related distress. The Financial Literacy and Credit Counselling (FLCC) are aimed at providing free financial education and credit counselling. The major objective of FLCC is to educate the rural and urban about the various available financial services and products and the advantages bundled with them. The centres provide individual financial counselling services and also offer debt counselling who are indebted to either the formal or informal financial sectors. They help in restructuring the loans of the individuals and coordinate with the financial institutions for implementing the same. Credit Guarantee Fund: Credit guarantee is the guarantee that is provided for a specific remedy to the creditor in case of any default by the debtor. It is useful in avoiding the fear of any non-payment. The credit guarantee scheme involves three parties namely the lender, borrower and the guarantor. Here the guarantor is a government organisation which facilitates the debt capital by providing lenders the comfort of guarantee for substantial portion of the debt. They aim at social goals like the elimination of social imbalances, empowering the deprived sections, helping in the post-calamity reconstruction and other activities to empower the society and economy of the country. It is used as a tool to drive the development of the unserved and underserved segments of the society. The major benefits of the credit guarantee scheme are for the economy, borrower and lender. From the perspective of the economy it is beneficial for financial inclusion, market friendly tool and significant impact with less capital. From the perspective of the borrower it enhances the risk profile, disbursement of credit at softer conditions and improved access to credit. From the perspective of the lender it provides more capital leverage, credit enhancement, assuaging the risk and less provision for the credit. The credit guarantee fund is formed for covering any defaults in the overdraft facility extended to the accounts holders of PMJDY. This will be part of the National Credit Guarantee Corporation. It was estimated that Rs. 8,500 crore corpus is required and out of which half will be contributed by banks in terms of guarantee fee. Micro Insurance: This is the fifth pillar of the scheme which is aimed at providing micro insurance to all the eligible by14.08.2018 and from there on a continuous basis. Insurance Regulatory and Development Authority had come out with special set of insurance policies to promote awareness and usage of insurance among the economically vulnerable sections of the society. The micro insurance policy is normally a general life insurance policy with an assured sum of Rs 50000/-. Some other policies cover health insurance, accident insurance, belongings like house, live stock, tools, instruments etc. Life micro-insurance is a term insurance with both the options of return or non refundable premium. Government of India had introduced a micro insurance product named Aam Aadmi Bima Yojana aimed at covering over 12 crore beneficiaries. Business correspondents are to be reinforced to offer the specially designed micro-insurance products and also for the extensive coverage of the schemes like Aam Aadmi Bima Yojana. Pension Schemes: This is last pillar of the scheme which is aimed at providing pension to all the eligible in the unorganised sectors 14.08.2018 and from there on a continuous basis. Government of India had come up with a scheme called Swavalamban where the eligible can park part of their savings into the scheme and government will also contribute amount and this will help the customers in their old age. The role of the business correspondents is vital in the success of the pension scheme. 3.6.6 Bottlenecks to the scheme Every scheme has got its own advantages along with some issues in the implementation process. PMJDY is used as a tool for attaining inclusive growth. Some of the issues being encountered during the process are mentioned below. There is every possibility of opening the bank accounts under the PMJDY scheme by an existing bank accountholder as there is no option to check whether they hold any bank account. The scheme emphasis on the issue and usage of Rupay Debit card to the accountholders under the scheme but there are instances of delay in the issue of the card to the customers as these cards are issued from a central location. Some of the benefits of the scheme are linked to the operations of the account through the Rupay Debit card and this will dampen their chances of availing the benefits. There are connectivity problems in the remote areas which will dampen the progress of financial inclusion. The ATM networks are fewer in rural areas when compared to the urban areas and the residents are not well versed in operating the ATM. There is ambiguity among the existing accountholders whether they are eligible for the benefits like accident insurance cover, issue of Rupay Debit card etc. There is no clarity on the cost of overdraft facility rendered and the thereafter the recovery process. And in the case of default there is no clarity on who will be taking the risk. One major challenge to the scheme is that accounts can be opened but the real challenge lies in increasing the number of transactions per account.  Table 8: Progress of PMJDY Parameter / Type of Bank / Year 31.12.2014 31.03.2015 30.09.2015 31.03.2016 30.09.2016 31.03.2017 Public Sector Banks Private Sector Banks Public Sector Banks Private Sector Banks Public Sector Banks Private Sector Banks Public Sector Banks Private Sector Banks Public Sector Banks Private Sector Banks Public Sector Banks Private Sector Banks Rural 60837496 1511376 84246047 3598756 108304769 4280982 126863521 4843513 146573155 5259998 163171450 5492034 Urban 40763436 1370159 56810752 2507924 69976088 2860912 79522784 3045656 92192044 3332700 109359429 3655358 No Of Accounts 101600932 2881535 141056799 6106680 178280857 7141894 206386305 7889169 238765199 8592698 272530879 9147392 No Of Rupay Debit Card 82435138 2195593 125932958 5549767 154308689 6321844 170091163 7438509 182967683 7974477 211478016 8460741 No Of Accounts With Zero Balance 74529276 2021674 81799814 3413520 71765080 3006422 55516275 3182525 56364207 3133344 53158742 2984057 Balance In Accounts (In Lacs) 785434.55 49903.84 1476216.35 90813.06 2383170.35 110752.22 3431728.81 135471.91 4195259.03 158007.55 6087441.03 209801.78 *Public Sector Banks include their Regional Rural Banks.  Table 7 depicts the progress of accounts opened by the public sector and private sector banks in both the rural and urban areas along with the details like the number of RuPay cards issued, the number of zero balance accounts and the balances maintained in these accounts. In March 2015 the total number of accounts opened was 147163479, out of which 95.85% are opened through Public Sector Banks. 59.69% of the accounts under PMJDY are opened in rural areas showing that banks are giving priority in opening the accounts in the rural areas ahead of urban areas. In March 2016 the total number of accounts opened was 214275474, out of which 94.29% are opened through Public Sector Banks. 61.47% of the accounts under PMJDY are opened in rural areas and 38.53% in urban areas. By March 2017 the total number of accounts opened was 281678271, out of which 96.75% are opened through Public Sector Banks and 3.25% were opened by private sector banks. 59.88% of the accounts under PMJDY are opened in rural areas and 40.12% in urban areas. In March 2015, out of the total accounts opened 89.34% of the accounts were issued Rupay Debit cards, 57.90% of the accounts were of zero balance accounts and in the remaining accounts, balance of Rs 1567029.41 lakhs were maintained. In March 2016, out of the total accounts opened 82.85% of the accounts were issued Rupay Debit cards, 27.39% of the accounts were of zero balance accounts and in the remaining accounts, balance of Rs 3567200.72 lakhs were maintained. In this year there is drastic change in the number of zero balance accounts from 85213334 to 58698800 which implies that transactions are carried out by the customers and balances are maintained in the accounts. In March 2017, out of the total accounts opened 78.08% of the accounts were issued Rupay Debit cards, 19.93% of the accounts were of zero balance accounts and in the remaining accounts, balance of Rs 6297242.81 lakhs were maintained. In this year there is a huge jump of accounts opened from 214275474 in March 2016 to 281678271 in March 2017 registering a growth rate of 31.45% the highest over the years. Similarly the balance maintained in the accounts registered a growth rate of 76.53% from the previous year. Out of all the banks State Bank of India has the highest number of accounts opened under PMJDY followed by Punjab National Bank, Bank of Baroda, Central Bank of India, Bank of India and Bank of Baroda. The private sector banks play a very nominal role in the PMJDY scheme as these banks are focussed more on the urban areas rather than the rural areas. The accounts opened under PMJDY are provided with overdraft facility upon the satisfactory operations of the account for over six months. The OD facility extended to the accountholders stands at around 6% of the total accounts. This percentage is on a rise but on a smaller note. Out of the eligible accounts for overdraft, only 25%-30% of the accounts are availing the overdraft facility with the banks. The reasons may be that the customers are not fully aware of the availability of the facility or the branch officials are reluctant for the disposal of the overdraft to the eligible customers may be of their apprehension of repayment.