Rural poor getting left out ‘Financial inclusion far from inclusive’
Dear Fellow Traveller,
The total number of no-frill accounts as of 31st March 2011 stands at 74.3 million, but the number of active accounts reported by various banks varies between a miniscule 3% and 20% as per the preliminary findings of the “State of the Sector Report” for wholesome financial inclusion. Some of the preliminary findings of the study are as follows:
Out of a total of 5,165 new branches opened in 2011, only 21.86% are rural branches. Rural outreach seems to be entirely dependent on Business Correspondents. And that too seems a bit defocused due to viability concerns.
A growth rate of more than 700% in Urban Customer Service Points (CSPs) over the last year point towards the latest trend of urbanization among Business Correspondents (BCs). Although there is not much difference between growth rates, the number of urban households covered by no-frill accounts is almost double than rural households.
The availability of credit is key enabling factor for poverty alleviation. All indicators provide cause for concern: Declining growth rate of Self Help Groups, negative growth in total loans issued by co-operatives and deceleration in growth in agriculture credit to 10.6 per cent during 2010-11 from 22.9 per cent in the previous year.
Only 0.18% of the total No Frill Accounts have an overdraft which totals a mere Rs 198 crore, out of which 81% belongs to the Bank of India. No-Frill Accounts will remain unused unless there is an Overdraft incentive at the outset. This meager amount of overdraft has to be seen in context of Rs 100 crore advertising plan of Indian Banks’ Association to promote financial inclusion. This amount is sufficient to give a Rs 500 overdraft to 2 million poor households.
The two years since the first study “Speeding Financial Inclusion” was released by Skoch Development Foundation in 2009 has seen a lot of progress on the ground with Ministry of Finance and Reserve Bank of India taking a proactive role in facilitating financial inclusion and incorporating many of its recommendations.
But given the size of the un-banked population in the country, the ongoing drive can at best be considered a "significant beginning". Only a little more than a third of India's population have access to banking services at present. In other words, only 3,500 villages have brick and mortar branches and even if another 73,000 habitations are brought under the net through the Financial Inclusion project, there would still be about 5 lakh habitations left uncovered.