Tag: Financial inclusion

How Financial Inclusion is playing a vital role in the Banking Sector

Banking & Finance

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55% of Jan Dhan account holders are women, and 67% are in rural and semi-urban areas. (File image)

by Manoranjan ‘Mao’ Mohpatra

Recently, we celebrated the 7th anniversary of Pradhan Mantri Jan Dhan Yojana (PMJDY). Ever since its launch in 2014, Jan Dhan has been the biggest driver of financial inclusion and one of the largest financial inclusion schemes globally.

Well, that’s true. It’s because more than 430 million bank accounts have been opened under this scheme since inception, amounting to INR 1.46 trillion. Out of which, 370 million that is 86%, are currently operative. In the last seven years, Jan Dhan has financially included the segments like women and the rural population into the formal banking system, thereby empowering them financially to hold a bank account. In fact, today, 55% of Jan Dhan account holders are women, and 67% are in rural and semi-urban areas. Moreover, a total of 312.3 million RuPay cards have been issued to PMJDY account holders.

Hence, the figures mentioned above clearly attest that a significant shift towards financial inclusion is in progress in India.

However, before delving deep into the initiatives leading to financial inclusion in the country, it’s essential to understand what it means.

Financial inclusion is about delivering banking services to all sections of society. Primarily, it’s enabling to reduce the economic gap between the rich and the poor with an aim to lead economic progression in the country.

Initiatives towards financial inclusion

Among several initiatives driving financial inclusion, JAM trinity (linking Jan Dhan accounts with Aadhaar and mobile numbers) is one of them as it’s creating a holistic financial inclusion ecosystem. JAM trinity is serving as an important medium in strengthening financial delivery mechanisms and social welfare schemes and also enhancing the efficacy of several Direct Benefit Transfer (DBT) Programmes.

For instance, to avail schemes like PM-KISAN or life and death insurance, the first step requires people to have a bank account – and that’s what PMJDY provides.

In addition, Aadhaar helps identify and register beneficiaries, and mobile numbers allow communication with them via SMS.

At the same time, during the pandemic-induced lockdown, JAM played a game-changing role as it helped reach out to the citizens staying in the farthest corners of the country. It is because of JAM a total of INR 309.45 billion were credited to women PMJDY account holders during Covid-19 lockdown.

Clearly, Jan Dhan, as the first step towards financial inclusion, followed by banking services like debit cards, insurance, pension scheme, etc., is bringing the financially excluded segment into the formal banking system. Today, the number of individuals visiting banks and ATMs has considerably increased in rural and urban areas.

In addition, Aadhaar Enabled Payment System (AePS) is another service to facilitate financial inclusion in India. It helps in withdrawing money (financial aid received) at micro-ATMs using Aadhaar number and fingerprint. Providing authentication of customers, availability of services, accessibility through AePS channel, and affordability as it’s free of cost, AePS is undoubtedly playing a crucial role in the journey of financial inclusion. In fact, the National Payments Corporation of India (NPCI) highlights that the value of transactions through AePS has nearly doubled to approx. INR 219.78 billion in January 2021 from INR 112.87 billion in January last year.

Role of digital payments in financial inclusion

For several SMEs, digital payment services like Paytm, PhonePe, and Google Pay are becoming the first formal banking service. Even a small roadside kiosk now accepts payment digitally using a QR Code. According to a recent survey done by a merchant payment solutions company, India is estimated to experience the fastest growth in the transactions of mobile payments in terms of value, with a CAGR of over 20% between 2019 and 2023.

Alongside, PM SVANidhi scheme is providing an incentive or cashback facility to street vendors for adopting digital transactions. The network of lending institutions and the digital payment aggregators such as Paytm, NPCI (for BHIM), Google Pay, Amazon Pay etc., will help to onboard the vendors for digital transactions. The onboarded vendors will receive incentives in the form of a monthly cashback in the range of Rs.50 to Rs.100.

Conclusion

Even banks are driving the initiative of financial inclusion by shifting towards digital banking. Those living in remote areas and women are now better equipped with banking facilities via an online system. The traditional financial institutions are leaving no stone unturned in moving their operations online, thereby thus allowing financial inclusion to widen its scope.

All in all, the vision is to bring more and more people – especially those who are underserved customers – into the formal financial ecosystem.


(The author is chief executive officer at Comviva. Views expressed are personal and not necessarily that of Financial Express Online.)

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Jan Dhan 3.0 to focus on digital, doorstep banking, BFSI News, ET BFSI

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The government is working out a roadmap for the third round of financial inclusion, Jan Dhan 3.0, which will focus on doorstep banking, digital financial products and convergence with its flagship pension and insurance schemes.

The government also aims to ensure availability of a banking touch point from any habitat within 5 km. “We are working with banks to develop a broad structure that will improve access, simplify digital loan applications, and ensure quicker response for retail, MSME and agricultural loans,” said a government official aware of the plan.

The government wants banks to also find linkages and converge Jan Dhan accounts with schemes such as the Atal Pension Yojana, PM SVANidhi, Stand Up India scheme and the Sukanya Samriddhi Yojana. “Based on Jan Dhan accounts, Aadhaar and mobile (JAM) framework, banks can look to offer customers new analytics-based offers and expand their coverage,” the official said, adding that banks are further expected to leverage their business correspondent channels for distribution of small credit and other financial products.

Last week, Prime Minister Narendra Modi, in his address at the ‘Creating Synergies for Seamless Credit Flow and Economic Growth’ conference, said banks need to adopt a partnership model and shed the culture of being an approver and the customer being an applicant.

“Banks at branch level can decide to approach at least 10 new youths or local micro, small and medium enterprises in their vicinity to help promote their enterprises,” he said, urging every bank branch have at least 100 clients with 100% digital transactions before August 15, 2022.



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BFSI CEOs look to unlock business value as pandemic ebbs, BFSI News, ET BFSI

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After almost two harrowing years of the pandemic, bank chief executives are looking ahead for a period of stability and growth with predictions of an uptick in credit demand.

Sanjay Singh, Deputy CEO, BNP Paribas India

Sanjay Singh, Deputy CEO, BNP Paribas India

“All the factors are favouring the capex revival. Low interest rates, lower leverage, efficient ecosystem, and demand uptake. All are indicating that capex will resume in next six months,” Sanjay Singh, Deputy CEO, BNP Paribas India, said at the CEO Panel discussion BFSI Leaders: Unlocking Business Value at ETBFSI Summit.

Singh said his bank’s focus is to embrace the best of traditional banking and a mix of new-age technologies.

Rajeev Yadav, MD & CEO, Fincare Small Finance Bank
Rajeev Yadav, MD & CEO, Fincare Small Finance Bank

Rajeev Yadav, MD & CEO, Fincare Small Finance Bank

Focus on risks

Along with growth and revival, bankers are also focused on risks.

Risk taking in the post pandemic world is a very important factor for all. Retail lending is a safer bet than corporate, said Rajeev Yadav, MD & CEO, Fincare Small Finance Bank. “Being a retail bank, we are taking retail risk. Retail lending is stabilised and fear of incremental lending is no more there,” he said.

Sunil Prabhune, Chief Executive-Rural & Housing Finance and Group Head-Digital, IT & Analytics, L&T Financial Services
Sunil Prabhune, Chief Executive-Rural & Housing Finance and Group Head-Digital, IT & Analytics, L&T Financial Services

Sunil Prabhune, Chief Executive-Rural & Housing Finance and Group Head-Digital, IT & Analytics, L&T Financial Services

Sunil Prabhune, Chief Executive-Rural & Housing Finance and Group Head-Digital, IT & Analytics, L&T Financial Services said that the business metrics have changed and the vaccination of employees is now an integral factor.

“Liquidity is not a problem anymore. We are extra conscious about risks and are focusing on how to retain customer franchise by maintaining the relation without meeting the customer. The strategy is to use data intelligence rather than conventional wisdom or rule of thumb for decision making,” he said.

During the pandemic it’s okay to miss top-line success because survival is the major objective, Yadav of Fincare said. “Shouldn’t worry about any loss of GDP or growth. As compared to 2019 data we are doing better,” he said.

On growth

Bank CEOs see a lot of pent-up demand.

“On an average credit demand is muted but there are pockets where demand is thriving. Use of behavioral analytics, machine learning, tailoring asset strategy etc. has helped us to recover faster, said Prabhune of L&T Financial Services, adding that his company’s disbursement this quarter was 3-3.5 times of the last quarter.

Nitesh Ranjan, ED, Union Bank of India
Nitesh Ranjan, ED, Union Bank of India

Nitesh Ranjan, ED, Union Bank of India

Nitesh Ranjan, ED, Union Bank of India said credit demand is subdued right now but definitely recovering from what is seen in the last six months across the spectrum. “Push from the government will help. The demand is high in Agri, renewable energy, Infra and warehousing,” he said.

“In the new normal world, we look at data and decide business operations. We are a rural bank and our rural business is shaping up better than pre-Covid,” Yadav of Fincare said,

Covid didn’t have any impact on businesses that are part of essential services, i.e. agri, dairy, he said, adding that credit demand is reasonably strong.

Future trends

The focus is on the next 3-5 years, how to better leverage digital and data, how to build capacity to manage people and continuously invest in the right risk architecture, said Ranjan of Union Bank of India.

Can banks build their own super app since they have a large customer base, asked Anand Dalmia, Co-founder, Fisdom. “With a super app, banks can offer more service to customers,” he said.

Prabhune of L&T Financial Services said “Monitoring is not something when it’s going wrong. Our focus is to detect what is something like to happen rather than what has happened. Can we predict if a customer is going to delay his payment for a day?”

Yadav of Fincare wants to focus on basic banking objective which the bank missed due to the pandemic. “We would like to have in-house talent rather than depending on the others,” he said.

Learnings from Covid

Ranjan said the PSU bank merger was a major challenge along with Covid. “Overnight we doubled the size. But we are seeing a much better period than what we have seen. With vaccination, we will be in a better place and business continuity is also improving.”

All of us had plans for 3-5 years. Covid taught us to accelerate the plans to one year.

Dalmia of Fisdom said during the pandemic FinTechs gained a lot due to digital adoptions by banks. We focused on getting more partners onboard. “We have collaborated with 10 banks. Banks have many retail customers, which is beneficial for FinTechs.”



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RBI, BFSI News, ET BFSI

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MUMBAI: The Reserve Bank of India (RBI) has said that there was a 24% improvement in financial inclusion (FI) as measured by RBI’s FI-Index between March 2017 and March 2021.

The FI-Index incorporates details of banking, investments, insurance, postal as well as the pension sector in consultation with government and respective sectoral regulators. In April this year, the RBI had announced that it would launch the FI-Index to capture the extent of financial inclusion.

On Tuesday, the RBI announced the first numbers of the FI-Index, and will henceforth publish the data once a year in July. The highest weightage in the index (45%) is given to the usage of various financial services, followed by access (35%) and quality (20%).

The index captures information on various aspects of financial inclusion in a single value, ranging between 0 and 100, where 0 represents complete financial exclusion and 100 indicates full financial inclusion.

One of the biggest drivers of financial inclusion in the country has been the Pradhan Mantri Jan Dhan Yojana (PMJDY). There are about 42.6 crore PMJDY account holders with more than 55% being women. While the JDY was launched in 2014, the usage of the accounts picked up with the increase in direct benefit transfers (DBTs), which were facilitated by digital platforms and Aadhaar.

The impact of the digital payment in DBT can be discerned from the fact that Rs 5.5 lakh crore was transferred digitally across 319 government schemes spread over 54 ministries during 2020-21.

Since the pandemic, financial inclusion got a boost due to the increased usage of digital platform by small merchants and peer-to-peer payments.

“Lessons from the past and experiences gained during the Covid pandemic clearly indicate that financial inclusion and inclusive growth reinforce financial stability,” RBI governor Shaktikanta Das had said, speaking at the financial inclusion summit.

“As of March 2021, banks have achieved a digital coverage of 95.9% of individuals, while the achievement for businesses stood at 89.8%,” Das said in the summit.

The rise of the fintech’s have also supported financial inclusion as they innovated to simplify and promote digital payments like the UPI (Unified Payments Interface).

According to a report by Macquarie, while the retail payments (by value) have grown at an 18% CAGR over FY15 to ’21, UPI has grown at a CAGR of around 400% over FY17-21 and now forms 10% of overall retail payments (excluding RTGS) from 2% seen couple of years ago.

“Despite being a late entrant, UPI’s FY21 annual throughput value of around Rs lakh crore was almost 2.8x that of credit and debit card (at POS) combined largely,” the report said.



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RBI’s first financial inclusion index at 53.9

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The first reading of the Reserve Bank of India’s annual Financial Inclusion (FI) Index for the period ending March 2021 has come in at 53.9 against 43.4 for the period ending March 2017.

The index captures information on various aspects of financial inclusion in a single value ranging between 0 and 100, where 0 represents complete financial exclusion and 100 indicates full financial inclusion.

The FI Index comprises three broad parameters (weights indicated in brackets) – Access (35 per cent), Usage (45 per cent), and Quality (20 per cent), with each of these consisting of various dimensions computed based on a number of indicators.

RBI comes up with Digital Payments Index

The Index, which has been has been constructed without any ‘base year’ and as such reflects cumulative efforts of all stakeholders over the years towards financial inclusion, is responsive to ease of access, availability and usage of services, and quality of services, comprising all 97 indicators, the RBI said in a statement.

A unique feature of the Index is the Quality parameter, which captures the quality aspect of financial inclusion as reflected by financial literacy, consumer protection, and inequalities and deficiencies in services, it added.

The FI Index, which will be published annually in July every year, has been conceptualised as a comprehensive index incorporating details of banking, investments, insurance, postal as well as the pension sector in consultation with government and respective sectoral regulators.

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Covid-19 pandemic considerably accelerated adoption of digital payments in India: RBP Finivis

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Sam Gupta, Director & CEO, RBP Finivis

Amid the Covid-19 pandemic in the country, fintechs have been at the forefront of India’s financial inclusion efforts. Among the new crop of fintechs in the country, Panchkula-based RBP Finivis is rapidly expanding its footprint. In an interaction with Financial Express (Online), its director & chief executive officer Sam Gupta shared his views on Covid-19’s impact on the fintech industry, the importance of financial inclusion, and RBP Finivis’ growth and expansion plans. Edited excerpts:

India has a strong banking system. Why do you think fintechs are crucial for financial inclusion in India?
The implementation of financial inclusion held in the 1960s kept an eye on the economic development in India with the nationalisation of banks. The regulator advised all banks to include financial inclusion in their business outreach. Since then, its progress was monitored by the Reserve Bank of India (RBI) through the implementation of Financial Inclusion Plans (FIP) in terms of predetermined parameters. The key role of fintechs in financial inclusion is by making changes in the traditional business model of banks and financial institutions; it can deliver financial products and services to the financially excluded population in a more accountable and efficient manner in the least possible time.

How has Covid-19 impacted the Indian fintech industry and your business?
The pandemic has considerably accelerated the adoption of digital payments, and seen lending solutions grow at a breakneck speed, resulting in the mass inclusion of factions of the society that were ill-served by traditional financial methods. The usage of digital and contactless payments surged during the pandemic, as people opted for safer ways to transact financially. Our business and employees have been impacted, too, by the pandemic. In terms of business, we have seen more digital transactions during this period.

Amid the pandemic, when do you see revival in the fintech industry?

We do not see the pandemic as a lost opportunity; rather it has generated unexpected revenues that were never imagined. The fintech industry has seen a steep rise in the number of transactions amid the lockdown. The year 2020 is seen to be a boom for the industry and things are happening at a fast pace. To an extent, the pandemic has proved beneficial for the fintech industry players to execute their plans and try to maximise reach with their offerings.

There are already established players like Paytm and PhonePe, etc. present in the Indian fintech market. What makes RBP Finivis different from others?

Our unique offering in the market for the B2C segment is a key differentiator from other existing players. We have a qualified technology team with 10 years of experience. Digital India success is our main mantra which we leverage in our services and offerings. The launch of MEGO will be path-breaking in the fintech industry. And, an important factor that the products such as AEPS (Aadhaar Enabled Payment system) and Micro ATMs are not operated by Paytm and PhonePe like brands.

What is MEGO Pay ATM? How is it different from other bank ATMs?
MEGO conceptualises the key digital offering of RBP Finivis. Micro ATM is one of the core components of our offerings. The device includes a card reader with features of deposit, balance inquiry, and cash withdrawal from all bank debit cards. It is a mini version of large ATMs with a POS (point of sales) terminal. Micro ATM facilitates the feature of a swipe machine to connect with the core banking system. With our micro ATM services also known as mini ATM services in India, we are determined to change a common man’s life.

What is your present market share and who are your competitors in the market?
Our market share is minimal at present. By 2021-end and 2022 we would have a percentage in the overall market share as we operate in both B2B and B2c segments. Our competitors are Paytm, GooglePay, Mobikwik, and PhonePe.

How many states/markets do you have a presence in now? Any expansion plan?

We are currently based out of Panchkula (Haryana) and have a research team operating from Kolkata. We have plans to expand our branches and services to a number of states which include Delhi NCR, Assam, Mizoram, Tripura, Arunachal Pradesh, Himachal Pradesh, Jammu & Kashmir, Punjab, and Haryana.

What is the size of your customer base, and its growth rate?
With the introduction of artificial intelligence (AI) which will increase the efficiency of digital payments, and during the pandemic, the trend has seen an immense upsurge in terms of usage of it (digital payments). It will change the complete dimensions of the Indian economy. Our target segments are school and college students, unemployed youth, rural people, and consumers who are market smart and look for discounts and offers in their spending. In our B2C offerings, we provide unique and advanced technology-enabled features to our consumers to redeem their offers and cash backs via web app and cards. Bringing digital banking to rural India is our main target to achieve by acquiring 15% of the rural subscribers base.

Where do you see RBP Finivis in the next two years, in terms of company size (number of employees), revenue, and growth?

We are driving on 12% steep growth and plan to accelerate it in the second half of the year. In the next two years, we are aiming to enroll 500+ employees on the payroll. And in terms of growth, we are considerably aiming at a gross turnover of Rs 4,000 crore in 2021 and Rs 9,000 crore in 2022.

When are you expecting to break even?

We expect our break-even by July 2022 with a turnover of over Rs 200 crore. We could have achieved break-even much earlier but due to Covid-19 things got slow after the lockdown.

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CreditAccess Grameen raises $25 mn from Swedfund International AB, BFSI News, ET BFSI

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CreditAccess Grameen has raised $25 million from Sweden’s development finance institution, Swedfund International AB. The transaction was facilitated by Northern Arc Capital.

The first tranche of $15mn has been availed by CreditAccess in July 2021 and the funds are utilised to provide loans to female borrowers from low-income households.

This is CA Grameen’s first ESG fundraise, and the facility qualifies under the 2X Challenge that seeks to promote women entrepreneurship and leadership. The transaction has an agreed-upon Environmental, Social, and Governance Action Plan which will not only further CAGL’s ESG commitments but also support Swedfund’s sustainable investment vision.

Udaya Kumar Hebbar, MD & CEO, CreditAccess Grameen, said, “This is a significant milestone, as it forms the first foreign currency ECB for CA Grameen. It has not only added to our diversified funding source but has also been part of the strategy of long-term stable funding, positively impacting on the ALM.” He further added such stable funding will support our growth over the coming months.

Jane Niedra, Head of Financial Inclusion at Swedfund, said “We are delighted to partner with CreditAccess Grameen in this investment to promote improved financial inclusion for women in rural India, which is expected to contribute to Swedfund’s mission to fight poverty by investing in sustainable businesses.
Bama Balakrishnan, COO of Northern Arc, said “The transaction is proof of Northern Arc’s ability to partner with clients across the size and credit rating spectrum. The platform’s network effects and relationship with diverse investor segments help attract new investors to its asset classes and partners”.



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Debasish Panda, BFSI News, ET BFSI

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The pandemic underscored India’s disruptive progress on the touchstone of financial inclusion, with federal welfare payouts directly reaching the intended beneficiaries in a largely fraud-proof ecosystem undergirded by legacy lenders, nimble fintech firms and pertinent digital regulations. “Financial inclusion was actually tried and tested in terms of scale and volume during the pandemic,” financial services secretary Debasish Panda said at the ET Financial Inclusion Summit. Reliance on the digital infrastructure largely cut out the scope of pilferage in the distribution of federal welfare packages, Panda said.

“This is thanks to the vision of our PM, who thought so in 2015,” Panda said. “Today, it’s a reality and during the pandemic, we used it to the full extent.” Panda said that the government has been asking banks to partner with fintechs, as these new-age firms operate in different ecosystems and geographies, carving out innovative solutions.

“What we are doing now is bringing more, new-to-credit micro enterprises in the formal banking channel. We are taking help from fintechs, carving out innovative solutions for segments and geographies,” he said, adding that fintech firms are trying to connect alternative data points. “I don’t have a credit history but I have a spending history; so they collect those sets of data, do an analysis, use technology and then build a dossier for that individual which then becomes comfortable for the bank to lend,” he said, adding that banks and insurance companies also see value here. Panda said that the regulatory arrangement is already there for fintech firms to operate. “The RBI and IRDAI have provided a sandbox kind of an arrangement where fintech or insurance tech can try and test it on the ground and once the proof of concept is established, they can straightway get the licence and carry the work forward,” he said.

The financial services secretary noted that the basic tenets of the financial inclusion plan are banking the unbanked, securing the unsecured and funding the unfunded. “The three pillars have then created a digital pipeline of Jan Dhan accounts, Aadhaar and the Mobile (JAM), which have built a regular flow of benefits and services,” he said. The number of Jan Dhan accounts stand at 420 million, and more than 55% of these belong to women beneficiaries. Panda said that through opening bank accounts, the initial target was to saturate every household.

“The next target was to saturate every adult and that has also happened to a large extent; there are certain pockets where there is a little shortfall and work is in progress,” he said. The government is now identifying districts not matching with the national-level average. The government further aims to ensure availability of a banking touchpoint for any habitat within a radius of 5 kilometres.

Panda noted that micro finance institutions have the connect with the last-mile borrower. “Banks are tying up with MFIs under the co-lending arrangement of the RBI, where the interest gets blended so it comes down also to the end borrower and the credit is flowing,” he said.

Panda said that the transition toward New India is gathering pace. “We are trying to power India toward a $5-trillion economy; so unless we take this population above that threshold, we will be left behind. So efforts are on,” he said.



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Why PMJDY must be scaled up to next level

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The Pradhan Mantri Jan Dhan Yojana (PMJDY) should be scaled up to the next level to provide access to formal credit and push digital transactions further, according to experts.

Launched under the National Mission for Financial Inclusion in August 2014, the Jan Dhan scheme has now been labelled as the largest financial inclusion scheme in the world, with over 42.3 crore no-frills accounts (beneficiaries) and a total balance of ₹1,44,169 crore as on May 12.

Of the total beneficiaries, about 28 crore are from rural- and semi-urban areas and over 50 per cent are women.

The flagship scheme of the Centre has resulted in almost every household having access to formal banking services, along with a platform for availing low-value credit, insurance and pension schemes, and a delivery channel in emergency situations such as the Covid-19 pandemic.

Notwithstanding these gains, it is the need of the hour to scale up the scheme to the next level to reap complete benefits of financial inclusion and digital advantages achieved so far.

Digital push

“With Aadhaar and minimal documents, the digital identity is established for the creation of Jan Dhan accounts,” D Janakiram, Director, Institute for Development and Research in Banking Technology (IDRBT), an arm of the RBI, told BusinessLine. Once the bank account is linked to the UPI (unified payment interface), this enables mobile payments with a number of third-party apps, including Google Pay.

“The sheer convenience of cashless payments using mobile phones has enabled a large number of people to adopt digital payments during the pandemic. UPI has witnessed manyfold increase in terms of the number of transactions in recent times, touching a few billion transactions per month,” said Janakiram.

First objective

According to Janakiram, the Jan Dhan scheme has achieved the first objective of creating digital identity, but there is a need to scale up the digital infrastructure to reduce costs per transaction. At the moment, the number of ATM withdrawals for these accounts is kept at four in a month, which leads to heavy cash withdrawals and cash transactions. “If there is no limit for ATM withdrawals in a month (which can happen only when costs per transaction reduce drastically, which will need technology adoption, including cloud adoption), speculative cash withdrawals will reduce,” he observed.

“The economy also needs to move from financial inclusion to financial empowerment, which means we need to transform Jan Dhan accounts into Jan Dhan Vriddhi accounts with access to credit and digital infrastructure to monitor and model risk,” Janakiram added.

Credit access

A research study undertaken by Prasanna Tantri, Executive Director, Centre for Analytical Finance, Indian School of Business, also underscores the need to take the scheme to the next level.

“My research has shown that the programme has made a significant positive difference to the economic lives of the poor. The movement of account balances during the pandemic shows that poor households have used these balances during difficult times. In the next stage, the government should focus on improving access to formal credit to the poor,” said Tantri.

As per the structure of the scheme, PMJDY beneficiaries in the age group of 18-65 are eligible for an OverDraft (OD) of ₹10,000.

However, no information is available about the status of overdrafts. The government also announced a group loan scheme for PMJDY beneficiaries a couple of years ago.

“I am not sure about the status of those loans. Instead of focussing on newer plans to push credit, the government will do well to make sure that the information about PMJDY accounts is made available to credit bureaus and, more importantly, to the emerging fintechs,” said Tantri.

There is rich information in the transaction pattern, the nature of the transactions, the quantum of balance, the sources of funding, and the timing of transactions, which will enable the development of a credit score for PMJDY account holders.

The government may take the initiative in this regard by asking credit bureaus to work on it. Once a score is developed, formal private credit is likely to follow, said Tantri, adding that the 44 crore PMJDY beneficiaries could serve as an attractive market for fintechs.

Financial education

The government can also think of a financial education programme for PMJDY beneficiaries. It appears there is a permanent component of savings in savings accounts. The savers can earn more by converting some of the balances into fixed deposits.

According to RBI Governor Shaktikantha Das, financial inclusion in the country is poised to grow exponentially, with digital-savvy millennials joining the workforce, social media blurring the urban-rural divide, and technology shaping the policy interventions. Going forward, there needs to be greater focus on penetration of sustainable credit, investment, insurance and pension products by addressing demand-side constraints with enhanced customer protection, said Das in a speech in December 2020.

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Fino Payments Bank goes live with enhanced deposit limit of Rs 2 lakh for MSMEs, small traders, others

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Fino Payments Bank has 410 branches and more than 25,000 banking points. (Image: Fino Payments Bank)

Fino Payments Bank on Wednesday announced increasing its end-of-the-day account balance limit to Rs 2 lakh for customers including MSMEs, small traders, and retail customers. The bank, which became profitable in the fourth quarter of FY20, went live with the enhanced limit effective May 1, 2021. The move was in line with the Reserve Bank of India’s (RBI) announcement last month to increase the maximum balance limit at the end of the day for payments banks to Rs 2 lakh from Rs 1 lakh earlier in order to boost financial inclusion. “After reviewing the performance of payments banks and to encourage their efforts for financial inclusion it was decided to enhance the limit of maximum balance at end of the day from Rs 1 lakh to Rs 2 lakh per individual customer,” a notification by RBI on April 7 had said.

“The increased deposit limit allows our customers to save more money in their account. Further, our existing sweep account mechanism continues with our partner bank wherein customers can save funds in excess of Rs 2 lakh,” said Ashish Ahuja, COO, Fino Payments Bank. Up to Rs 2 lakh in the Fino account, the existing savings interest rate will be applicable while funds in the sweep account will get interest rates as set by its partner bank Suryoday Small Finance Bank.

Also read: RBI’s relief measures for MSMEs: 4 key takeaways from Shaktikanta Das speech; experts opine mixed bag

Fino Payments Bank’s micro ATM and AePS enabled financial services distribution network including 410 branches and more than 25,000 banking points allow people to open a new bank account, get debit cards, do deposit, withdrawal, or money transfer transactions, pay utility bills, loan EMIs, and buy health, life and motor insurance. Unlike regular banks, payments banks are not allowed to lend money to their customers, they can’t open Fixed deposits or recurring deposits, and also can’t allow a balance of more than Rs 1 lakh in any account. Currently there are five other RBI-approved payments banks operating in the country viz., Airtel Payments Bank, India Post Payments Bank, Paytm Payments Bank, Jio Payments Bank, and NSDL Payments Bank.

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