Nupur Jha amp Subit Saurav 01 April 2013 1 Overview Current Statistics Reasons for Financial Exclusion Regulatory Mandate KGFS viz a viz Traditional BC Existing Partnership Arrangement ID: 469141
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Slide1
Business Correspondent
Nupur Jha & Subit Saurav
01 April 2013
1Slide2
Overview
Current Statistics
Reasons for Financial ExclusionRegulatory Mandate
KGFS
viz
-a-viz Traditional BCExisting Partnership ArrangementWin-win scenario
2Slide3
Current Statistics- Banking Scenario
Excluded
from the ambit of banking services -
a
pproximately
145 millionOnly 55 per cent of people have bank accountsOnly
9 per cent have borrowings from the banks
with
only one bank branch servicing per 14,000 peopleMore than 80 per cent of the population do not have access to credit or life insurance cover95 per cent have no general insurance98 per cent of population does not participate in the capital marketOn an average, there is one bank branch for every 19 villages
3
http
://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/FIC060911DG.pdf
http://
dqindia.ciol.com/content/top_stories/2012/112011804.aspSlide4
Reasons for Financial Exclusion
Poor infrastructural
set upHigh cost of operations
Lower
transaction volumes
Lack of viable innovative operating modelsUnfamiliar marketInability to correctly assess risks
4Slide5
Regulatory Mandate
5
Service Area
BC’s can service clients only within a 30 km radius from the Bank's branch and in case of urban areas the radius should not be more than 10 km
Transaction Records
All transactions undertaken through BC’s must be recorded in the books of the Bank by the end of working dayKYC Norms
Know Your Customer (KYC) norms must be observed by the promoting Banks for all BC
clients
Key Components of
the Regulatory Framework under BC
Financial Inclusion
Priority Sector Lending
Domestic Banks – 40%
Foreign Banks – increased to 40%Slide6
KGFS viz
-a-viz a Traditional BC
6
Multiple Product Offering
-
including asset productsBrick and mortar
b
ranch
structure – physical branchRobust enrolment process – building customer databaseSeamless technology integration – enables real time transactionKnowledge management and in depth training procedureKnow Your Customer( KYC ) processWealth Management Approach - customer centric
Credit Appraisal ProcessPortfolio performance monitoring expertise
Risk
sharing in between the BC and the
BankSlide7
Existing Partnership Arrangement
Under the Direct Origination Model IRCS shall set up branches under the KGFS model that would serve as BC to the partner Bank
The BC branches can deliver all the products of the Bank, including savings, deposits, payment services and loans to the remote rural customer household
7
KGFS
Branch Location Criteria
No private sector Bank branch in a 5 km radius
No more than one state owned Bank branch in the service area
A population of 10,000 within a 3km radius of the location, with each village in the service area not exceeding a population of 4,000
A minimum distance of 5km from the block headquarters
The Bank
(
Tier 5|6 Location)
BC Branch 1
BC Branch 2
BC Branch 3
BC Branch 4
BC Branch 5
BC Branch 6
BC Branch (Tier 6 locations
*
)
Village 1
Village 2
Village 3
Village 4
Village 5Slide8
Win-win scenario
Banks100% PSL portfolio
Tier 5/6 market penetration – Greater reach
Better loan performance
Quick expansion –
to bottom of pyramidFinancial Institutions (BC)Regular fund inflowNo exposure to interest rate risk
Low capital requirement
KGFS
Full suite of financial products including Savings Account, RD and FD8Slide9
9Slide10
Business Correspondent Model
A major enabler of financial inclusion
10
Source: Financial Inclusion – Issues in Measurement and Analysis - Keynote Address by
Dr.
K. C.
Chakrabarty
, Deputy Governor, Reserve Bank of India at the BIS-BNM Workshop on Financial Inclusion Indicators at Kuala Lumpur on November 5, 2012.