ICC Financial Inclusion Proceedings

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Organized by
Indian Chamber of Commerce
ICC FINANCIAL INCLUSION SUMMIT 2014
INTEGRATING THE ECONOMY, BRIDGING GAPS
HOTEL LALIT GREAT EASTERN, KOLKATA NOVEMBER 8, 2014
PROCEEDINGS

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The Approach paper to the Twelfth Five Year Plan sets “Faster, Sustainable and More
Inclusive Growth” as the prime agenda for India during the plan period 1
. Inclusive
growth calls for increased participation and benefit sharing and financial inclusion is
the proven way out for reaching to the marginalized population. It promotes poverty
reduction and social inclusion. In this backdrop, the Indian Chamber of Commerce
organized the ICC Financial Inclusion Summit 2014 towards bridging the income
inequality in the country and forging workable steps for integrating the economy.
The summit was chaired by senior bankers, regulators, heads of leading micro finance
institutions and concerned stakeholders. Eminent panelists who graced the panel
included the likes of Dr. K C Chakrabarty, Former Deputy Governor, RBI on Financial
Inclusion, Mr. Tamal Bandyopadhyay, Consulting Editor MINT and Mr. Chandra
Shekhar Ghosh, CMD, Bandhan Financial Services Pvt Ltd. Over 20 speakers and 200
delegates participated in the forum. A co-branded ICC- Resurgent India Ltd.
Knowledge report was released at the Inaugural session.
1
http://planningcommission.gov.in/plans/planrel/12appdrft/appraoch_12plan.pdf

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Opening Session – “Financial Inclusion -The Road Ahead: Realizing the
Dream”
Welcome Address
Mr. Shiv Siddhant Kaul, Senior Vice President, ICC
Financial inclusion is defined as the delivery of financial services at affordable costs to
large sections of the society; particularly those who are disadvantaged and have
lower income said Mr. Shiv Siddhant Kaul, Senior Vice President, ICC. The standard
no-frills bank accounts and the business correspondent model have not caught on in
a big way felt Mr. Kaul. As per the Census 2011 estimates, there are about 25 crore
households in India and less than 60per cent of them are estimated to have access to
financial and banking services informed Mr. Kaul. In the rural segment, there exist an
estimated 17 crore rural households, and only 50 per cent to 55 per cent of them are
served by the banking sector he added.
Mr. Shiv Siddhant Kaul shared a set of sectoral recommendations from ICC. He
advocated widespread adoption of new technologies and ideas, and called for
greater leveraging of the available information technology resources. The industry
ought to promote increased collaboration between banks, micro-finance institutions,
and the non-banking financial sector companies felt Mr. Kaul. A unified credit history
framework would help to foster robust risk management in the industry. Improved
physical infrastructure is set to promote all-round economic development and will
augment credit –off take thereby ensuring financial inclusion. Electrification is also
critical for the computerization of bank branches, especially in the rural areas said Mr.

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Kaul. E-governance can confer the right kind of transparency and time bound
implementability to the financial inclusion mechanism added Mr. Kaul.
Address by Special Guest
Mr. Shrihari Bhat, Regional MD, India & Greater China, FIS
About 70per cent of the rural population in India is deprived of basic financial services
like payments, remittance, and savings etc informed Mr. Shrihari Bhat, Regional MD,
India & Greater China, FIS. India has got tremendous potential to foray into financial
inclusion and considerable opportunity lies at the bottom of the pyramid felt Mr.
Shrihari Bhat. GDP wise India ranks at number 10 and population wise it is just second
to China. To improve GDP, one of the most important levers is velocity of payments.
The country needs to improve the velocity of payments by reaching out to the
masses, the unbanked population. Savings, payments, and lending are the three basic
approaches to financial inclusion. Countries like India and Indonesia predominantly
use the savings based model, while Kenya and Philippines prefer the payments model
which involves remittance or electronic benefit transfer. Bangladesh has adopted the
lending model, which predominantly involves microfinance. Every country has
adopted a model which is most easily adaptable by the masses said Mr. Bhat. Mr.
Shrihari Bhat felt that every institution ought to adopt a financial inclusion strategy
based on its requirements. He singled out literacy as an important component of
financial inclusion.
Technology can bring down the cost of funding for the marginal population. Side by
side with technological innovation, the concerned financial institutions need to adopt

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disruptive models said Mr. Bhat. Banks need to work outside the cost plus model
which has been the norm till date, urged Mr. Bhat. Over the decade new concepts
like electronic channels and mobile phones have gained in popularity in pursuing
financial inclusion. India’s mobile penetration is close to about 800-900 million for a
population of 1.2 billion. The focus should be on frugal innovation which makes
technological innovation affordable summed up Mr. Bhat.
Mr. Vijay Mahajan, Founder and CEO of the BASIX Social Enterprise Group
Along with technology, general consensus based political will is also necessary for
forwarding the cause of financial inclusion observed Mr. Vijay Mahajan, Founder and
CEO of the BASIX Social Enterprise Group. Mr. Vijay Mahajan reiterated that just
opening a bank account would not suffice to forward the cause of financial inclusion.
Keeping the accounts alive is the main requirement.
Upgradation of government infrastructure is necessary for financial inclusion said Mr.
Vijay Mahajan. He praised the e-governance model of West Bengal, noting the
benefits of replacing the cash payments structure with e transactions in the form of
lower pilferage. Bank transactions are designed to augment the accountability &
audit trail said Mr. Mahajan.
Speaking on the positive side, Mr. Mahajan informed that India is now witnessing
nationwide mobile connectivity and increasing internet connectivity, with close to a
billion cell phone connections. The unique ID has crossed 700 million registrations.
The e-KYC is also a game changer.

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Mr. Chandra Shekhar Ghosh, CMD, Bandhan Financial Services Pvt Ltd.
Mr. Chandra Shekhar Ghosh, CMD, Bandhan Financial Services Pvt Ltd. informed that
out of the 1.15 lakhs bank branches in the country and 1.16 lakhs ATMs only 38per cent
of the total bank branch and ATM s serve the rural people, although 70per cent of
the Indian population resides in rural areas. In the last four years only 25per cent of
the bank branches have opened in rural areas, he added. However, as per the Human
development report, around 28.6per cent of the Indian population live in abject
poverty. Mr. Chandra Shekhar Ghosh felt that opening a no-frill account is not
enough for financial inclusion, if it sans financial transactions. Financial inclusion
involves regular access of bank accounts and getting banking services from therein.
He felt door step delivery of services is essential for enhancing the financial inclusion
drive. Often the small ticket size of loans becomes a deterrent for fund availability for
financial inclusion from the formal banking sector. Keeping products simple and
limited for the financially excluded population would help to augment financial
inclusion and will make it sustainable and financially viable.
Targeted talent acquisition is necessary for pushing the financial inclusion products.
Mr. Chandra Shekhar Ghosh felt people with basic level of education can be
effectively trained (by the micro finance institutions working with the financially
excluded population) to carry out door step delivery of services like deposit
collection, credit disbursal and client support services and they can effectively help to
contain NPAs to a reasonable level. Recruiting highly educated white collar
professionals would not be viable for this kind of low cost financial inclusion delivery

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business models observed Mr. Ghosh. Client education is also an important
prerequisite felt Mr Ghosh. Prior to awarding loans the customers should ideally be
awarded two weeks of education about the product, process, repayment, and usage,
he said. In this regard promotion of financial literacy is an imperative.
Mr. Arun Kaul, CMD, UCO Bank
Financial inclusion is a crucial driver for the all-around economic development of the
country said Mr. Arun Kaul, CMD, UCO Bank. Financial inclusion helps to promote the
culture of savings amongst the hitherto unbanked population, which in turn becomes
the resource base of the financial system fuelling further economic development.
The Pradhan Mantri Jan Dhan Yojana aims to enable the poor. They can operate bank
accounts using even low-end mobile phones with the help of appropriate technology
informed, Mr. Arun Kaul. The provision of debit cards for the account holders under
the Jan Dhan Yojana has some positive connotations for the economy. Empirical
estimates have shown that as advanced economies grow, substituting cash with the
electronic-based payment method becomes an imperative. Even with the associated
fees, the electronic mode of transaction can be less expensive compared to the other
channels maintained Mr. Kaul.
Spread of financial inclusion and ensuing digitalization of the banking system will
help to bring down the cash requirements for the economy and will help to contain
unaccounted money flows. The banks need to develop a sustainable financial
inclusion model to cater to a large geographically scattered base of consumers, who

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individually have very little money, but collectively are financially attractive said Mr.
Kaul. A viable financial inclusion model will be radically different from the traditional
banking model, in terms of distribution, technology, HR practices, and risk
management. It is critical to reduce the time for information collection and
verification in transfer to increase both on- field and operational productivity said Mr.
Kaul. E-KYC can be a boon as far as the customer acquisition is concerned he
maintained. It allows banks to authenticate the customer from the Aadhaar
database. This will eliminate the entire cost of the courier, paper management,
documentation and storage.
A major challenge to the banks in serving the unbanked is that banking channels
currently do not exhibit economies of scale. It is advocated that to accommodate the
low ticket size, transaction cost has to be reduced recommended Mr. Kaul.
Special Address
Mr. Kavish Sarawgi, Director, Resurgent India Ltd.
Out of the 35 states in India, 23 states are massively rural having more than 60per
cent of the rural population said Mr. Kavish Sarawgi, Director, Resurgent India Ltd.
Majority of these people are outside the purview of the formal financial system,
which adversely impacts the saving cycle resulting in lesser investments and
economic growth. In the post 2005 period initiatives like the MFI bill (which came in
2012), and the banking correspondent model have been major game changers.
Product pricing is an important component of financial inclusion, as it caters to the
marginalized section.

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Financial illiteracy is a key challenge for financial inclusion. Mr. Sarawgi spoke about
some of the significant policy changes ushered in recent times, which include branch
expansion through the Business Correspondent model in the rural areas, relaxed KYC
norms and product simplification etc.
Mr. Sarawgi felt the corporate can get involved in the financial literacy drives and can
effectively use their large staff strength base for ensuring the much required last mile
connectivity. The service of credit bureaus is much called for in financial inclusion
observed Mr. Sarawgi. He felt Information technology is a key enabler for scaling up,
largely due to the cost competitiveness factor.
Report Release at ICC Financial Inclusion Summit 2014

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Exclusive Interactive Session
Mr. Tamal Bandyopadhyay
Consulting Editor MINT
The Exclusive Interactive Session with Dr. K C Chakrabarty, Former Deputy Governor,
RBI on Financial Inclusion was moderated by Mr. Tamal Bandyopadhyay, Consulting
Editor MINT. Mr. Tamal Bandyopadhyay raised some pertinent issues on financial
inclusion. He noted that as per a World Bank working paper, 2012 only 35per cent of
India’s adult population has access to formal banking services. Currently, about 60per
cent of India’s adult population still does not have access to banking services added
Mr. Bandyopadhyay. He mentioned that financial inclusion based subsidies when
routed through the formal banking channel can contain pilferage. He added that the
public sector bankers are often averse to serving in the hinterland citing the low
ticket size of loans, high transaction costs, low last mile-connectivity and poor
technological infrastructure. However, places like unbanked regions in Eastern India
have a substantial collective fund base as evident from the huge volume of deposits
collected by the shadow banking entities.

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Dr. K C Chakrabarty
Former Deputy Governor, RBI on Financial Inclusion
Dr. K C Chakrabarty, Former Deputy Governor, RBI on Financial Inclusion felt
concerted effort on part of all industry stakeholders is needed for forwarding the
cause of financial inclusion. Dr. K C Chakrabarty was categorical that the prime
objective of financial inclusion was the provision of financial services at affordable
rates. According to him promotion of financial inclusion should be through a
regulated financial architecture like a bank. Dr. K C Chakrabarty observed that lending
rates of micro finance institutions are still quite high for the marginalized population,
way above the standard benchmark for medium and large industries from the formal
banking system. Banks are the best financial intermediary in any economy as they are
regulated maintained Dr. K C Chakrabarty. Huge Government Fiscal deficit is
responsible for the crowing out effect he reflected. Without increased access
(through bank accounts) there cannot be increased usage of these accounts
observed Dr. Chakrabarty. Any lending system is based on the premise that the
borrower has an obligation to pay the lender; he has the responsibility to do the
diligence and get back the money summed up Dr. Chakrabarty.

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Mr. Vijay Mahajan
Founder and CEO of the BASIX Social Enterprise Group
Mr. Vijay Mahajan, Founder and CEO of the BASIX Social Enterprise Group maintained
that the lending rate of micro finance institutions are higher than that of commercial
banks because they factor in the cost of a whole lot of other related services
provided. The microfinance institutions involved in providing credit to the financially
excluded need to organize multiple visits to the clients (as they mostly offer door
step services), acquaint them with the nitty gritties of the payment structure, form
groups and build considerable rapport with the clients to ensure timely collection of
loans and recovery and this entails a considerable hike in the distribution cost, which
is factored in the lending rates. He informed that the transactional returns of small
businesses are typically 20 per cent, and this high transactional return enables them
to accommodate the relatively high lending rates. Commenting on the efficacy of the
Indian Banking System on financial inclusion Mr. Mahajan suggested that any bank
branch where the CD ratio is less than 40per cent for 10 years continuously may be
closed.

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Mr. Chandra Shekhar Ghosh
CMD, Bandhan Financial Services Pvt Ltd.
Mr. Chandra Shekhar Ghosh, CMD, Bandhan Financial Services Pvt Ltd said that the
high lending rates in microfinance are partly explained by the level of customized
services rendered and also by the higher risk taken by the organizations. Mr Ghosh
felt that micro finance, besides being a sustainable business is also equally committed
to the social cause.
Mr. Arun Kaul
CMD, UCO Bank
Speaking on the below par performance of the nationalized banks in India in reaching
out to the financially excluded Mr. Arun Kaul CMD, UCO Bank observed that rural
segment penetration have been low due to factors like high cost, different HR

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processes etc. The nationalized banks ought to roll out innovative products and
processes to effectively reach out to the customers across different market
segments. The nationalized banks ought to usher in innovative talent management
policies, whereby focus can be laid on the use of locally based resources. A locally
based employee is more involved in the local economy and can pro-actively pursue
the cause of its growth. Activation of existent bank accounts is a major challenge for
financial inclusion observed Mr. Kaul. Government payments like NREGA or subsidies
can be routed through these accounts for keeping them activated.
Session I – “Role of Financial Institutions and Banks in driving Financial
Inclusion forward”
The session was moderated by Mr. Kavish Sarawgi, Director, Resurgent India Ltd.

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Mr. Sunil Srivastava
Deputy MD, State Bank of India
He started his deliberations praising the view of Mr. K.C. Chakraborty who considers
financial inclusion not as a financial policy choice, but as a policy compulsion. He is of
the opinion that it is not always feasible to follow the same kind of HR policy for
monitoring the activities in banks that is being followed in MFIs due to unavailability
of manpower. He pointed out that using the transfer pricing model the under
recovery for a bank has been narrowed down to 35per cent last year from 52per cent
two years back. Mr. Srivastava mentioned that this model has been proved to be very
viable due to opening of large number of accounts. It’s expected that with increase
in volume of transactions the transfer pricing model will become more viable. In this
content he said that in West Bengal the average balance in any account is counted to
be INR 708 which somehow indicates that banks are consciously involved into
monitoring transaction account, credit and debit transaction, transfer details and
records of micro insurance. He appreciated the active engagement of Government in
developing credit linkages and linkages to pension. The government has taken some
phenomenal steps to execute this job. While discussing about the spread of financial
inclusion he pointed out that even though the banks want to offer financial
assistance to the economically backward classes to lift them, they don’t want to
come forward to take the help. Mr. Srivastava said that he has personally
experienced this sort of incidences from the weavers and Jori workers of Nadia,
Purulia and Howrah. He thinks there is a particular reason for this kind of
apprehensive approach at the end of these villagers. According to him the primary
reason for these refusals is the sole concentration on the supply side. He feels there
is a need to look at the demand side simultaneously. He strongly feels that the with
suitable market support from the NGOs the interest among the small scale rural

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entrepreneurs can be generated. Mr. Srivastava is of the opinion that the banks’
role is not limited not only to provision of credit, but to enhance the value chain by
increasing the amount of transaction and to finance each part of the value chain to
complete the linkage. This kind of operations will actually devolve greater amount of
responsibility to the banks. Now to carry out this entire task banks need
considerable support from NGOs. Mr. Srivastava thinks to make the entire process of
financial inclusion in general customer friendly, there is a necessity to go beyond the
use of mobile technology. For the rural and semi urban people who are not very
much literate, the easy understanding of the usage of ATM card and other smart
cards is pre requisite. It calls for a more simplistic technology like biometrics which
doesn’t involve memorizing the PINs. Finally he opined that credit linkage being one
of the major responsibilities of banks, enumeration has become a major criterion
which banks need to fulfill. He said that the target of enumerating household will be
attained easily, but that is not the ultimate goal of financial inclusion. Technological
outspread is essential for credit linkage .To determine the way forward ,time has
come up when the rural households will be able to connect themselves via smart
phones which are Aadhar enabled and will have several necessary application
platforms.
Mr. V P Nandakumar
MD & CEO, Manappuram Finance Ltd
According to Mr. Nandakumar, NBFCs have the potential to play more essential role
than banks in attaining financial inclusion. He mentioned about a CRISIL study which
reveals that the averages return on assets of micro finance institutions in the country
is around 2.1per cent. He thinks that unless they offer2per cent return on asset, they

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won’t be able to attract much needed capital to sustain the business. Coming to gold,
he said that there is around 25000 tonnes of gold with the families in the country
which has got an estimated value of almost 1 trillion US dollars. Surprisingly much of
this gold is with rural households. He mentioned that adequate technology must be
available to assess the pricing of gold and to reach out the mass at an affordable rate
using a larger network. He strongly feels that gold loans play a very critical role in
financial inclusion as they provide low ticket loans at the convenience of customers
with hassle free money. He thinks NBFCs can play a very important role to expand
the reach ,as the cost of HR of NBFC is much less, which is only 1/3 of the HR cost of
public sector banks. Mr. Nandakumar feels that with lower operation cost associated
with rental and staffing, NBFCs act as a vital tool in financial conclusion. However he
feels the regulators need to put significant cap to monitor the pricing properly. Along
with that the expansion of technology to trained people should take place at
affordable cost to bring the excluded sections under the umbrella of financial
coverage.
Mr. K G Alai
CGM, Mumbai Head Office, SIDBI
Mr. Alai started his speech talking about the proactive measures that have been
taken by SIDBI for promoting the microfinance movement in the country. He thinks
the experiment of financial inclusion with microfinance playing the pivotal role has
helped the marginalized people to be self sustainable. They have become able to
come out of debt trap and survive economically. As most of them are trying to
improve their livelihood by getting involved in some kind of economic activity they
can reap the benefit of the microfinance institutions. He gladly announced that SIDBI
has been successfully ventured into microfinance and it has promoted more than 150

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institutions across the country including some big shots many of which are in the
verge of becoming banks. During his speech he pointed out that money is not the
only object that poor need. There are a lot of other nonmonetary support systems,
which are required to make the movement robust and take it forward. He noted that
in that direction SIDBI has introduced rating system of MFIs and formed lenders’
forum to ensure that all the lenders come on a common platform to have meaningful
dialogue and introduce best practices in the system. It has also formed a capacity
assessment tool to actually asses the capacity of the MFIs to deliver the credit to the
rural people. He also talked about the encouraging results that came out of the
impact assessment study undertaken by SIDBI in 2009. He particularly mentioned
about the improvement in livelihood of rural people who are the main beneficiaries
of these finance and also about the equality of gender. Mr. Alai noted that the overall
disbursement to MFI sector has been INR 8500 crores as a whole. He feels the total
requirement of microfinance is three times of what is presently available, so this
demand supply mismatch needs to be addressed to move forward. During his
deliberations he also talked about the large segment of urban poor who are still not
covered under any financial scheme. He strongly feels there is lack of penetration
amongst urban poor who need to be tapped with the provision of microfinance type
assistance. It calls for relaxation in various regulation norms to address these urban
poor in a big way. In this context he also referred to the grey zone between
microfinance and loan which commercial banks or financial institutions normally give
above a particular level. He called this segment as the missing middle segment and
even addressed them to be a part of the financial inclusion agenda which need to be
pursued. He briefly mentioned that parameters of the Credit Guarantee Trust Scheme
have got an important role to play to offer security to the lenders. He again thinks
handholding of all these stakeholders is very much important like the RRBs and the
NBFCs. But he thinks it is important to train the staffs of these institutions to really
make an impact at the grass root level. He mentioned that SIDBI has been doing this
for a good amount of time through its capacity building programmes. He is hopeful
that if all the articulated possibilities in this sector are explored, a huge positive
difference can be seen in coming years in terms of reduction in number of people
lying below poverty line.

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Mr. P.K Sharma
FGM, Punjab National Bank
In the beginning of his speech, Mr. Sharma praised the arrival of Jan Dhan Yojana as
he thinks it will prove to be an additional step towards financial inclusion. He also
mentioned that better infrastructure has been in place in last few years. According to
him the rural branches of banks have been actively engaged in the agenda of
financial inclusion over time. Business correspondents have also been taken up
through service providers. He noted that to bring success in the agenda of financial
inclusion, the banks are regularly being monitored by Ministry of Finance for getting
updates. Mr. Sharma said that banks are not only focusing on opening of accounts
across districts only, but are putting serious efforts to mobilize the money to the
bank. He feels this attempt will prove to be beneficial for the poor or lower economic
class of the society in the long run, as banks will become the safer option than the
chit funds. The banks are always ready to serve the poor people and provide them
with necessary financial assistance. According to Mr. Sharma, the 5P’s of financial
inclusion need to be learnt, which include product, place, price, protection and profit.
He thinks there should be provision of a simplified product which will address the
needs of poor. A basic savings account should be there which will satisfy their need.
They will become able to keep their money safely unlike chit funds. However he
thinks for the poor class of people the interest rate charged need to be considerable
so that they can borrow in a quick way in times of need. To simplify the procedures of
withdrawal and other banking operations, Mr. Sharma feels e-KYC can be a reliable
solution. He is of the opinion that Aadhaar card can be linked with opening of an
account which will ensure protection in future and no documental proof will be
needed. Mr. Sharma opined that to spread the financial literacy amongst all sections

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of the society, a lot of literature published by RBI can be utilized. These will help
people to be aware about their rights and benefits. He thinks banks can initiate this
by holding classes to reach out the concerned people. He said that banks have to be
very careful in case of any sort of mischief. As banks mostly depend on service
providers these issues need to be taken care of. Banks also have to come up with due
diligence service. Banks also need to keep a track whether sufficient amount of
transaction has been taking place in all accounts. He said with more opening of
accounts banks’ duty to provide proper facilitation of kiosks to provide timely service
also increases. He also mentioned that although some of the DBTs coming through
accounts involving subsidy (kerosene subsidy, LPG subsidy, and old age pension) may
not prove to be profitable for banks, but over a period of time they are going to be
gold mines. Mr. Sharma is of the opinion that banks should also start following
Bandhan in terms of providing doorstep delivery service. He also mentioned about
the problem of connectivity in reaching out rural areas. Because of lack of
connectivity in terms of infrastructure, only one –fourth of the accounts have been
given Rupay cards. Particularly in Northeastern states connectivity and staffing have
become major bottlenecks. These are actually creating hindrance in delivery of FI
services in North-east. Bancassurance needs to be promoted with opening of new
accounts to ensure availability of insurance products.
Ms. Sakshi Varma
Operations Officer, Finance & Markets, International Finance Corporation
In the beginning of her deliberations she talked about role of banks and other
financial institutions to bring in financial inclusion. Ms. Varma feels to really move
forward with the mission of financial inclusion, the entire ecosystem needs to be

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developed and mobilized with proper connectivity. She appreciated the role of
microfinance institutions to reach out a large scale of population with credit facility.
She also welcomed the initiatives taken by RBI to introduce entire business
correspondent model and push savings. She is of the opinion that of late though the
technology providers have started to offer low cost technological solutions, still easy
technological solution is considered to be one of the biggest roadblocks for financial
inclusion. She thinks Aadhar Card can be linked with some technological platform to
simplify the financial dealings. In this line she mentioned that Jan Dhan Yojna has
started to blend these together. She thinks that although several accounts have been
opened across different districts of country. Still proper market linkages are lacking
for which suitable initiatives need to be taken by Government. She thinks there is a
need to ensure that people do use their savings account regularly for depositing
savings no matter how nominal they are. If the accounts are left untouched, then
banks ‘purpose won’t be served. Therefore no incentive is there for the bank to do
anything beyond opening these accounts and that too, by force. She raised an
important point that when he people are earning very basic money and depositing
the amount into their account, they don’t need to keep withdrawing or go for direct
benefit transfer. So it is very important to look for suitable kind of transaction for
these people. According to her here lies the importance of Government to come
along with a proper system which can translate the workers of NREGA or health
workers payments into direct benefit transfers. Then the BPL population will also be
able to get the benefits of banks’ financial service. She thinks proper co-operation
from Government will help the banks to provide the required service to the mass to
make the Jan Dhan Yojna a grand success.

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Mr. Neeraj Maheshwari
Associate Vice President - Business Procurement, Micro & Mass Markets, Bajaj Allianz
life Insurance Co. Ltd.
In the beginning of his speech he talked about the increased insurance penetration
across India over the last few years. He thinks India is one of the largest markets as
far as the insurance opportunity is concerned. However only 3.7per cent insurance
penetration has taken place so far in urban and semi urban areas, where as in rural
market less than 1per cent penetration has taken place. The penetration of health
insurance is much less. According to Mr. Maheshwari, insurance is one of the four
pillars or parameters as far as overall financial inclusion pillars are concerned. But
still insurance market is lagging behind banking and other financial services. He
mentioned that as 75per cent of Indian population is still excluded from insurance
coverage, there lies huge opportunity to tap the market. According to Mr.
Maheshwari, in rural market there lies opportunity of 84000 crores new business
premium of which 20000 crores have been explored yet. He firmly feels that for
sustainable growth of Indian insurance industry, availability, affordability, awareness
and acceptability are the major criteria for an insurance company. He said that as for
an insurance company it is not easy to expand its branches in rural areas, the
companies can partner with rural banks and other financial institutions to reach out
the rural population. An affordable solution model needs to be designed. There
needs to be provision of customized product for rural insurance. In insurance market
also there is a need to build distribution models like MFIs or RRBs or business
correspondent. Another important aspect which Mr. Maheshwari mentioned is that
there is lack of awareness amongst rural people, which needs to be catered. For
different financial segments appropriate financial literacy programs can be organized

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to spread the awareness. Coming to acceptability of products, the application
procedures need to be simplified and customized. E-KYC can be a feasible solution to
help the rural people for buying an insurance product. Also along with talking about
the insurance product the agents must also clarify the claim procedures to the
customers. He feels these are some critical elements for success of insurance market.
Apart from these from regulator‘s side certain support is desirable to monitor the
compliance of different guidelines. The micro insurance products can be sold through
petrol pumps and business correspondents to penetrate more and more rural
markets. He also mentioned about building common service centre model by
Government with the assistance of private sector. He thinks the mobile insurance
should be linked with micro which will help in clarifying claim settlements and will
also help to be well connected with the customers.
Session II – “Role of Technology Providers, Mobile Network Operators
& Credit Bureaus in facilitating Financial Inclusion”
The session was moderated by Mr. Ankit Singhal, Senior Associate, Resurgent India
Ltd.

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Ms. Maya Vengurlekar
Senior Director, CRISIL Ltd.
Branch penetration, deposit penetration and credit penetration are the three basic
markers of financial inclusion for the institutionalized banking structure in the
country informed Ms. Maya Vengurlekar, Senior Director, CRISIL Ltd. One composite
score, the inclusion index collapses all these 3 different dimensions into a single
number she added. Deposit penetration has become the focus area of all financial
service providers including banks, which are trying to open the maximum saving
deposit accounts. However, the progress of credit penetration has been tardy. As
regards to deposit penetration 1 in every 2 Indians have a saving bank account,
whereas as regards to access to credit only 1 in every 7 individuals is actually
accessing credit from banks in India today said Ms. Vengurlekar. The bank regulator
may want to monitor the efficacy of the overall branch licensing policy based on the
district level inclusion data added Ms. Vengurlekar. Under the wider ambit of the Jan
Dhan Yojana focus should be on increased opening of bank accounts in the financially
excluded pockets of India, like the Northeast and Eastern states. Financial literacy is
also an imperative. Integrated technology based development is crucial for financial
inclusion but the process of finical awareness generation cannot be totally
technology dependent and need the human touch maintained Ms. Vengurlekar.

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Mr. Sundar Arumugam
Head of Microfinance, Equifax Credit Information Services Private Limited (ECIS)
Mr. Arumugam talked about the role of credit bureau in addition to other
technological infrastructure aspects which is going to enable financial inclusion in
future. According to him credit bureaus are very critical financial infrastructure in
terms of building credit history of customers. It provides the lenders with adequate
confidence to differentiate the good borrowers from bad borrowers. He thinks a
complete credit profile of the borrower must be understood by the vendor to
differentiate the borrowers in terms of customization of products and service. This
can be made feasible by collection of granular level credit data and maintaining the
credit history of the borrowers. The credit report and credit information can be
provided to the lenders. He mentioned that from an overlap analysis they have seen
that only 5per cent of the consumers in microfinance database are also part of the
banking database. This means that due to lack of proper credit history most of them
are not offered with credit. But gradually as they are becoming part of credit bureau
they are getting the opportunity to start building a credit history. Now microfinance
institutions have also started to drill down and find out the best customers for them
.this will help them to properly address the borrowers with right set of tools and
products. According to Mr. Armugam, the underlying incentivizing of a good
behavior drives the importance of credit bureau’s presence in the market. He opined
that for streamlining the ability of getting credit, it is necessary to bring in additional
data sources including Aadhar Card which will involve less amount of paper work. To
make the credit information system more integrated e KYC needs to be incorporated
for easy delivery of credit, along with that proper technological framework is
required for fulfilling the objectives of broader financial inclusion.

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Mr. Kuldip Maity
MD & CEO, Village Financial Services Pvt Ltd
During his deliberations he mentioned about the success of microfinance concept as
a whole over the last 5-6 years. The special status given by RBI to the NBFCs and
other microfinance institutions has helped to promote the MFIs amongst different
classes. Presently as most of the MFIs are now reporting to credit bureaus, the
chance of over-indebtedness is quite low. With the proper background details and
credit history of the borrowers it has become easier for the institutions to assess the
default probability of the borrowers. Also the improved application of technology
has helped in dealing with cash transactions and coping with fraud cases. Particularly
for big MFIs of late the chances of fraud has become a bit higher. With the
development of mobile technology, the issuance of e-receipts has brought a certain
level of comfort for the micro finance institutions and also the banks. Also to
compete with banks, the MFIs have to come up with transparent services being well
equipped with all kind of technology. Mr. Maity said that ultimately being a service
oriented task, all banks and MFIs need to focus on the quality of services provided to
the customers. If the entire transaction process can be converted into a technology
based practice, every sort of possibility of misuse can be reduced. Disbursement of
money through direct transfer and collection of money using ECS can put the cost of
MFIs downwards. He thinks regulation being an important task of the entire
operation; technology will help to bring in overall transparency and a better survival
for the microfinance institutions.

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Mr. Vishweshwaran R
AVP, Product Management, Financial Software & Systems (P) Ltd
Mr. Vishweshwaran R spoke about a grain procurement system where the farmers
will have the provision to supply the harvested grain directly to the Government and
the money will be directly credited to their bank accounts. He discussed about the
benefits of application of technological tools to improve efficiency, reduce the cost
of operation and reach out the customers. These are the three pillars which are
required to run financial inclusion programme. Mr. Vishweshwaran R also talked
about the challenges that need to be addressed in terms of operation of bank
accounts which will help in increasing the residual money. He thinks likewise
microfinance companies, portable micro ATM devices can be taken to the customers
for doing transactions. He felt that in the next generation much of the transactions
will be migrated to mobile based services from micro ATMs. He also dwelled on a few
challenges. These comprise low interoperability between one BC to another BC so
that customers don’t need to distinguish between branches and can get easy service
from any of the Business Correspondents. Mr. Vishweshwaran R is optimistic that
mobile technology will be able to break the divide between the urban customers and
rural customers. With the increase in usage of smart phones, technology is going to
be a great tool to take the financial inclusion to the masses effectively he
commented.

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Mr. Rajesh Mishra
President, My Mobile Payments Ltd.
Mr. Mishra started his deliberations talking about the availability of information and
credit bureau to build a strong ecosystem to serve the unbanked customers. He
mentioned that his organization offers mobile based service to their customer which
is available across any operator. He thinks the time has come when the focus should
be on unbanked customers and find out innovative ways to address them. He
believes technological tools are going to reach out the target customers across the
country in an integrated way. He believes that technology based payment service will
help to reduce the overall cost of operation, increase efficiency and give convenience
to the consumers. He believes the amount of financial transaction via mobiles should
increase manifold to bring more and more number of people under the umbrella of
financial inclusion. Proper distributional set up with sufficient number of retailers
should be present to facilitate the customers with proper service. According to him,
the elementary services including mobile and DTS recharge and other bill payment
and commodity services should also come under net banking. He is of the opinion
that the online payment solution can be incorporated in microfinance to reduce the
cost. He was of the opinion that more number of organizations should come up with
android based payment options.

29
ICC Recommendations
 Improve Product pricing and Process designing: The imperative is to innovate in
business processes, products, and technology for reaching out to the bottom of the
pyramid. Typically, banks earn revenue on transaction products with the float
income. However, in this segment, floats are very low. So, the business model will
need to be based on transaction charges. The pricing scheme has to be designed
accordingly.
 Attune financial products to income flow cycles: Rural households can be
segmented in terms of the cash flow profiles. Farmers have high risk cyclical
incomes. Fishermen have daily volatile incomes. Products need to be designed to
suit the customers’ varying cash flow profiles. Innovative products and processes are
the need of the hour for effectively reaching out to customers across different
market segments.
 Customize services: For the rural and semi urban people who are not much literate,
the easy understanding of the usage of ATM card and other smart cards is a pre
requisite. It calls for a more simplistic technology like biometrics, which doesn’t
involve memorizing the PINs.
 Usher in low cost Core Banking Solution (CBS) to reduce transaction cost: Attaining
the financial inclusion agenda calls for improved and innovative operating models,
with low cost manpower, smaller branches, simpler product portfolios and
processes. To reduce transaction costs a low cost core banking solution may be put
in place that might have limited functionality, but greater outreach. Typically, CBS
solution that works on low bandwidth should ensure that customers have a seamless
transaction experience through the banks’ gateway. Low transaction costs will
accommodate the problem of low ticket loan size, faced in catering to the
economically marginalized population.
 Tap locally based Human Resource: Nationalized banks ought to usher in innovative
talent management policies, whereby due focus is awarded on the use of locally
based resources. A locally based employee is more involved in the local economy and
can pro-actively pursue the cause of its growth.
 Promote Innovative strategies for Financial Inclusion: Simplified e-KYC norms can
boost customer acquisition. It allows banks to authenticate the customer from the
Aadhaar database and eliminates the cost of courier, paper management,
documentation and storage etc. Keeping products simple and limited for the
financially excluded population is advocated. Door step delivery of services is also
solicited. Activation of existent bank accounts is a major challenge for financial
inclusion. Banks ought to come up with due diligence service. They need to keep a
track whether sufficient amount of transactions are taking place in all the accounts.

30
 Promote Credit Bureaus: Credit bureaus provide credit history of customers to the
lenders. A complete credit profile of borrowers will enable the lender to differentiate
between borrowers in terms of customization of products and services. This can be
made feasible by collection of granular level credit data.
 Perk up basic infrastructure: For the success of financial inclusion, availability of
certain basic infrastructure facilities like digital and physical connectivity and
uninterrupted power supply is a prerequisite. Furthermore, since mobile banking is
said to play an increasingly important role, there is a need for greater coordination
between the mobile telephone companies and banks.
 Harness IT as a facilitator: A major challenge of the banks in serving the unbanked is
that banking channels currently do not exhibit economies of scale. Information
technology is a key enabler for scaling up, largely due to the cost competitiveness
factor.
 Forge greater Insurance penetration: Bancassurance needs to be promoted with
opening of new accounts to ensure availability of insurance products. The micro
insurance products can be sold through petrol pumps and business correspondents
in rural markets. Mobile insurance should be linked with micro as it will help in
clarifying claim settlements and will also be helpful in remaining well connected with
the customers.
 Augment domain Research activities: One area of research could be the most
appropriate delivery model for different geographical regions of the subcontinent.
Another could be the structure and business model of the unorganized sector, which
largely serves the unbanked population. Research agencies can inter alia conduct a
census of moneylenders in rural India, in order to measure the reach and influence of
these unsupervised lenders in those areas.
 Empower technology enabled delivery: Technology can provide real time data inputs
for real time transactions and insurance policy updations/ renewals etc. Technology
can enable end point user loan validation, where a farmer accessing loan for
purchasing cattle feed can directly avail the same from the cattle feed retailer, who
has been integrated on to the platform. Aadhar can promote the concept of
international remittance in India. The money on mobile system can provide payment
services to those persons, who cannot afford a card and is not even a banking
customer. Financial institutions need to adopt disruptive models. The focus should
be on frugal innovation which makes technological innovation affordable.
 Policy Enablers: Along with technology, general consensus based political will is also
necessary for forwarding the cause of financial inclusion. Upgradation of government
infrastructure is necessary for financial inclusion.

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 Payments: The country needs to improve the velocity of payments by reaching out to
the unbanked population. Just opening a bank account would not suffice to forward
the cause of financial inclusion. Keeping the accounts alive is the main requirement.
Bank transactions are designed to augment the accountability & audit trail. Benefits
of replacing the cash payments structure with e -transactions will be in the form of
lower pilferage.
 Customer education: Client education is an important prerequisite. Prior to awarding
loans, the customers should ideally be awarded two weeks of education about the
product, process, repayment, and usage.
 Credit linkage: Technological outspread is essential for credit linkage. To determine
the way forward, time has come up when the rural households will be able to
connect themselves via Aadhar enabled smart phones.
 Proper pricing of Gold loans: Much of the gold deposits in India are with the rural
households. Adequate technology must be available to assess the pricing of gold so
as to reach out to the masses at an affordable rate. Gold loans are low ticket loans
provided at the convenience of the customers; it is hassle free and depicts low
operating costs. Regulators need to put in significant cap for price monitoring.

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T: +91 33 2230 3242
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