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Financial inclusion can bedefined as the delivery of credit and other financial services at an affordable costto the vast sections of the disadvantaged and low income groupsThe variousfinancial services include savings, credit, insurance and payments andremittance facilities.

If RBI is really interested in promoting financial inclusion, the stategovernments should be forced to bear the cost substantially

It will be wrong to classify all those who are not borrowingfrom the organised financial system as excluded. What is relevant is that whetherthose who need credit and who want credit from the organised system areincluded in the ambit of the financial system or not.

The objective of financial inclusion is to extend the scope of activities of theorganised financial system to include within its ambit people with low incomes.

we need to address issues on the supply as well as the demand side. The formal

banking system, the rural cooperatives, and non -governmental organisations(NGOs) must be strengthened organisationally to extend their outreach. Thefinancially excluded sections require products which are customised to meet theirneeds.Financial exclusion is also caused by demand side factors . Credit is necessary forthis but not sufficient. Credit has to be integrated and made a part of an overallprogramme aimed at improving the productivity and income of small farmers andother poor households.

Every poor fellow has a mobile but when it comes to the card, we say Howcan the poor fellow pay the card cost? The cost of a card is Rs 10 or Rs 50and the customer cannot bear it but, the mobile costs Rs 1,000 -2,000 and heis able to buy it.Karnataka government is giving Rs 25 as subsidy for each card. Andhra isalso giving some commission.Microfinance has been successful because they have identified what is themajor need of the people. The major need is credit, not savings. If any MFIgoes to a village and say we would like to open savings accounts, the publicwill not come. There is a need to identify the package that would be offered infinancial inclusion and selected on a priority basis. Then other products likeinsurance, pension, savings can come one by one. Any product must first make sense from a customer point of view. The reasonwhy MFIs succeeded is that it gave small loans. Small loans for consumption

at reasonable interest will probably become one of the key drivers. Then, the82customer does not have to go to the moneylender or even MFI at 24 per centinterest if they can get a 12-16 per cent loan largely for consumptionpurposes because most of the MFI loans have been by and large forconsumption purposes.

Eligibility of business correspondents

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From 15kms to 30 kms

The reason why NBFCs are not allowed to take savings deposits from peopleor open savings accounts is that they are in lending business. They arerisking their own money in lending to somebody in the hope of getting better

returns because the interest rates are high. But when they are takingdeposits, it is the customer who is risking money with them and that is thefundamental issue. That is why there is a whole category of NBFCs which arenon-deposit taking NBFCs. They are not allowed to play with the customersmoney.

Universal Service ObligationFund

One has realized over a period of time that technology does not sell by itselfunless it is simplified to a point that a common man can understand it, anduse it and make it a daily part of his life. That is what adds value. Telcos haveshown how it can be done. Even in terms of offering, the product is brokendown to such a level that with just Rs 5, one can actually go and buy talktime. They have simplified the product so that it can be consumed by variouspeople in various modes depending on their capab ilities

Suvidha

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One has to be practical on the ground. 90 per cent of the accounts will not beactive as even in the normal banking business 90 per cent of the accountsare not active. It will take some time. For more than sixty years, these peopleare financially excluded and today with a bank account, it cannot be expectedfrom them to operate the account daily starting today. It will take at least 4 -5years for them to develop that habit. They need to be told repeatedly for twoor three years and then only they will start. Now at least 10 -15 per cent hasstarted operating the account

page 136..demand side has been neglected

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DOUBT plr + 5% ( Pg-140 )