“India has stolen a march in financial inclusion with the initiation of the Prime Minister” Jan Dhan Scheme (PMJDY) accounts since 2014, judiciously use the Banking Correspondent (BC) model to advance financial inclusion,” the report said.
It also said that the BC model has enabled providing a defined range of banking services at low cost and has been instrumental in improving financial inclusion.
What in Financial Inclusion?
The World Bank defines financial inclusion as a state where businesses and individuals have access to useful and affordable financial products and services.
Easy access to a bank account through which a person can transact is the first step towards comprehensive financial inclusion.
progress so far
India has also made remarkable progress in terms of increasing the number of deposit accounts and the use of digital payments.
Solid financial inclusion policies have a manifold impact on economic growth, reducing poverty and income inequality, as well as conducive to financial stability.
With mobile and internet banking transactions increasing from 13,615 per 1,000 adults in 2020 to 183 in 2015 and the number of bank branches growing from 13.6 in 2015 to 14.7 per 1 lakh adults in 2020, India now surpasses Germany, China and South Africa . in financial inclusion metrics.
The number of bank deposit accounts have increased due to the PMJDY push of the Centre.
During the last 7 years of the financial inclusion drive, the number of no-frills bank accounts opened has reached 43.7 crores with deposits of Rs 1.46 lakh crores as on October 20, 2021. Of these, about two-thirds are operational in rural and rural areas. semi-urban areas and more than 78 per cent of these accounts are with state-owned banks, 18.2 per cent are with regional rural banks, and three per cent are opened by private sector banks.
The number of bank branches in rural areas has also increased from 33,378 in March 2010 to 55,073 in December 2020. The number of banking outlets in villages/Banking Correspondents (BCs) has increased from 34,174 in March 2010 to 12.4 lakh in December 2020.
Public sector banks have opened 34 crore out of total 44 crore no-frills accounts and private sector banks have opened only 1.3 crore of them.
Benefits of Financial Inclusion
SBI economists studied the impact of Jan Dhan accounts on crimes.
It added that states with higher financial inclusion and more bank accounts have seen a significant decline in alcohol and tobacco consumption as well as a decline in crime.
“Crimes against women and children have increased by 7.3 per cent in 2018 and 4.5 per cent in 2019, though there has been a decline of 8.3 per cent in 2020,” the report said.
It was also observed that in the states where more PMJDY accounts were opened, there was a significant decline in the consumption of narcotics like alcohol and tobacco products.
“It may be because of Jan Dhan-Aadhaar-Mobile (JAM) Trinity which has helped better organize government subsidies and curb unproductive spending such as alcohol and tobacco in rural areas.
BC model and its challenges
Banks are making efforts by expanding their brick and mortar branches to reach out to the unbanked population in remote and unbanked villages.
The major credit for the financial inclusion drive should go to the RBI which in January 2016 allowed the business correspondent model of branchless banking.
It not only made financial services accessible to non/underbanked people through branchless banking
Facilitated but also supported the national agenda for job creation.
Calling for a fix by making the non-branch banking correspondent model uniform across all banks since the new branch authorization policy of 2017 came into force, BCs need to be made interoperable.
The new norms recognize BCs that provide banking services for at least four hours per day and at least five days a week, as banking outlets have progressively eliminated the need to set up brick-and-mortar branches. .
As per RBI guidelines, a BC can operate for more than one bank, at the point of customer interface, a retail outlet or a sub-agent of the BC shall represent and provide banking services of only one bank.
However, the model comes with its own challenges.
Sometimes it is observed that there is no uniformity among the BCs in the banks regarding adherence to the guidelines.
PSBs mostly follow ‘Branch LED BC model’, while other banks follow ‘Branchless/Corporate BC model’.
The BCs of PSBs are extending all basic banking services including opening of accounts from a fixed location under the supervision of the specific bank branch.
The report said that an estimated capital expenditure of Rs 1.0-1.5 lakh is required to set up a kiosk under the bank-led BC model.
Whereas, the BC model of other banks in ‘Micro ATM/Kiosk Application on Mobile’ has a capex of around Rs 30,000 or less, the report said.
.