PRADHAN MANTRI JAN DHAN YOJNA AN APPROACH TO TAKE IT AHEAD

Transcription

1 PRADHAN MANTRI JAN DHAN YOJNA AN APPROACH TO TAKE IT AHEAD

2 Contents PMJDY - Pradhan Mantri Jan Dhan Yojna... Achievements of PJMJDY... Issues faced by PJMJDY... Threats... Way ahead... The Current and Future... AltiFIn Our product offering in the Financial Inclusion space... Appendix - References... About the Author

3 PMJDY Pradhan Mantri Jan Dhan Yojna PMJDY is a nationwide scheme launched by the government of India to bring in the unbanked population into the umbrella of banked. Financial inclusion of the rural lower income community who had limited access to the financial products and services is the intention of the scheme. These financial services include Banking/savings and deposit accounts, remittance, credit, pension and insurance. Anyone above the age of 10 can open a savings account with zero balance. The account can be opened directly at a branch or through a business correspondent specifically designated for this purpose. They are also issued a Rupay debit card and an accident insurance cover up to 1 lakh rupees. Achievements of PMJDY: Last Mile financial coverage: The scheme has ensured penetration into the last mile which has resulted in the number of accounts moving from million in 2010 to million in S. No Bank Classification No. of Accounts (In Lacs) Rural Urban Total No. of Rupay Debit Cards (In Lacs) Balance in Accounts (In Lacs) No. of Account with Zero Balance (In Lacs) 1 Public Sector Banks Regional Rural Banks Private Banks Total Source: Table 1 Statistics on PMJDY number of accounts and cards as on Cards - no more a rare commodity: With the introduction of native Rupay cards, the interchange fees have come down and debit cards has become accessible to every citizen million Rupay cards have been issued so far. As per NPCI, Rupay has a clear plan ahead which will give its users an end to end high end card experience. 2

4 Phase 1 Acceptance at ATMs and Micro ATMs Phase 2 Debit card, Prepaid Card, Acceptance at PoS Phase 3 E-Commerce Acceptance and Virtual Card Phase 4 EMV and Contactless Phase 5 Credit Card Savings Habit: The habit of savings has been put into the minds of illiterates too which will enable them to lead a better life style. Pensions, Insurance and Credits taken to all: PMJDY has taken other financial products like pension schemes, insurance and various credit products to every nook and corner of the country and made it an easily accessible service for the ignorant. Issues faced by PMJDY High investment and operational Cost: The FI business is high investment and high recurring cost for the TSPs and BCs. The cost of handled POS devices and the customer service providers are high. Added to this is the cost of tele connectivity, field trips, software, cost of smart cards and Rupay cards. NonOperational Accounts Out of the 136 million no frills accounts opened so far Out of which 70-80% are nonoperational accounts. The Agents have also indulged in the practice of opening several duplicate accounts to achieve targets and get the commission paid. These duplicate accounts are dormant from day one for obvious reasons. Poor Balance According to the RBI Annual report 2013 the average balance per account has dipped from Rs 80 to Rs22. Though these accounts are opened with an intention of bettering the financial service coverage and it is offered to the last mile customer, the cost associated with it is high. The low level of savings mobilized, compounded with the poor recovery rates in the ODs, the banks are hardly making any margins. Unutilized services Nearly 60 million accounts were added compared to last year and BC outlets were opened but the transaction volume increased from 250 million to 328 million as per the RBI 3

5 annual report This indicates that the number the services offered are not being utilized. Particulars Year ended March 2010 Year ended March 2013 Year ended March 2014 Progress April 2013 March Banking Outlets in Villages - Branches 33,378 40,837 46,126 5,289 Banking Outlets in Villages - Branches Mode 34,316 2,27,617 3,37,678 1,10,061 Banking Outlets in Villages - Total 67,694 2,68,454 3,83,804 1,15,350 Urban Locations covered through BCs ,143 60,730 33,587 Basic Savings Bank Deposit a/c through branches (No. in million) 60,2 100,8 126,0 25,2 Basic Savings Bank Deposit a/c through branches (Amt. in billion) 44,3 164,7 273,3 108,6 Basic Savings Bank Deposit a/c through BCs (No. in million) 13,3 81,3 116,9 35,7 Basic Savings Bank Deposit a/c through BCs (Amt. in billion) 10,7 18,2 39,0 20,7 BSBDAs (No. in million) 73,5 182,1 243,0 60,9 BSBDAs (Amt. in billion) 55,0 182,9 312,3 129,3 OD facility availed in BSBDAs (No. in million) 0,2 4,0 5,9 2,0 OD facility availed in BSBDAs (Amt. in billion) 0,1 1,6 16,0 14,5 KCCs (No. in million) 24,3 33,8 39,9 6,2 KCCs (Amt. in billion) 1240,1 2623,0 3684,5 1061,5 GCC (No. in million) 1,4 3,6 7,4 3,8 GCC (Amt. in billion) 35,1 76,3 1096,9 1020,6 ICT A/Cs-BC - (No. in million) 26,5 250,5 328,6 328,6 GCC (Amt. in billion) 6,9 233,9 524,4 524,4 Note: Figures in column 5 might not tally due to rounding off of numbers. Source: RBI Annual report 2014 Table 2 : Financial inclusion plan summary 4

6 Inference from the above statistics Service % Increase No. of Accounts million 136 million 900% Opened Total Savings Balance (amount) Total Over Draft (amount) 55 billion 129 billion 130% 0.1 billion 14.5 billion 14400% The number of accounts opened has increased by 900% whereas the total savings balance has only increased 130%. The over drafts availed has seen a humungous 14400% increase. The credits would bring income to the bank provided they are recoverable. The target customers are more vulnerable to defaults due to their inconsistent monthly income and financial conditions. This will result in the banks with a huge pile of NPAs. Threats BCs and TSPs will leave the market: If enrolment of accounts provides a onetime revenue, the transactions in the account provide subsequent revenues and helps sustainability of the business. With 70-80% of the accounts being dormant, many TSPs and BCs have exited the business. Several banks have even terminated the contracts with TSPs for nonperformance. This has resulted in opening duplicate accounts in order to meet targets. If the TSPs and BCs exit the business, banks will not be able to provide branchless banking service easily and the entire model will meet its dead end. Banks will loose interest in promoting: Banks treat the FI business as a para function and never as one of their main streams. The credits are handled directly by the banks and branchless banking is operated through BCs. This results in a disjoint and the credits and related operations happen independent of the savings account which in turn results in in operational accounts. The cost of account maintenance thus increases for the banks and they will be unable to sustain. Customers will forget the existence of the scheme: Needless to say, the group of customers in consideration now are the ones comfortable with cash and are yet to get into the habit of using a bank account and debit card. They also do not see the importance of a pension scheme or insurance policy because they have never seen the fruits of it. With lesser concentration from banks and BCs, customers would conveniently drop the pie. Access to the services would also get difficult to them if the outlets decrease thus making it more vulnerable to slip out of the entire eco system. 5

7 Way ahead Wages/Salary to be credited to the account: To ensure transactions through these accounts, daily or weekly wages will have to credited to these accounts. The transfers will have to be made as simple as mobile money to enable this. Treatment of these accounts like corporate salary accounts: Customers in every village will have to be segregated into baskets based on their profession. The villagers could be small time laborers or entrepreneurs who mostly transact with cash. The end proceeds of their labor is taken to the consumer through a channelized and organized body. For instance in Orissa, some of the major professions are: S no. Prefession 1 Fishing Exporters 2 Silk Silk society 3 Agriculture Horticulture and Agri societies and Mills 4 Milk State Gov. / Private milk Cooperatives 5 Handicraft Khadi 6 Mineral Industries These Business Facilitators mostly transact with the villagers in cash and they transact with the distributors and consumers on a banking environment. In the end to end value chain, at the lowest level where the commodity leaves the source, cash transactions hold a major share. If this can be brought into a banking environment, then it will ensure the effectiveness of Financial Inclusion. Ensuring the effectiveness starts from the root will make the business model succeed. The Business facilitators to serve as BCs or Agents: If a Kadhi Gramodya Bhavan s outlet keeper becomes an agent, he would prefer to route the payments to the doll makers through their accounts. The construction contractors and the zamindars should be mandated to pay the daily wages into the savings accounts of the laborers. This way, the government bodies can monitor if minimum wages are paid. This puts a completion on every individual to use their accounts. Once they see the convenience, they would never leave it. That can make the scheme truly useful. With IMPS the credits are really quick and eliminates the issue of delay in credits too. 6

8 Eliminate even cards from the system and use mobile wallets Its always easier to straightaway take a quantum leap as we can avoid resistance to change from time to time. Instead of moving the ecosystem from cash to card and then to mobile wallets, its easier to directly move them to mobile wallets. This way, the infrastructure like a POS machine can be avoided. With the penetration of mobile phones, mobile wallet can be used for peer to peer, purchases and bill payments. How feasible is this? In India 72% of the citizens hold a mobile phone whereas only 35% have a bank account. With Payment bank licenses being widely issued, it is easier to use mobile wallets to replace the cash than a card. Mobile wallet operators and telecos are aspiring to be more than just wallets and replicate many banking services. Hence it will be very feasible and quicker to achieve the financial inclusions target with mobile wallets favored than bank accounts. Eventually Mobile wallets users will start making mobile payments and eventually move to mobile banking and get banked. Mobile Payment Mobile Wallet Mobile Banking

9 The current and Future Wages in Cash Spent in Cash FI Product Current State Wage Payment Construction workers Dormant Savings Bank Account Money Lenders Overdue Farmers Wage Payment Credit Purchase by middle men Handicraft Maker Kirana Shop Unpaid Pension Scheme Unpaid Micro Insurance Inactive Debit Card 8

10 Wages credited to account Cashless ecosytem FI Product Future State Active Wages credited to account Kirana Shop Savings Bank Account Regular Credit Labourers free of queue & cash ATM Paid Pension Scheme Paid Micro Insurance Active Debit Card 9

11 AltiFIn Our product offering in the Financial Inclusion space - Customer Onboarding - Aadhaar Link - Demographic Details - Verification - Account Management - Financial Inclusion - Insurance & Loans - Entitlements - Utility and Other Payments - Mobile Banking - Mobile Money - Mobile Wallet - Funds Transfer - Retail Payment (POS) Enrolment (KYC) Banking Payments Financial Inclusion Caters to Enrollment and Banking through BC-CSP channel. - Community Based Organization (SHG/JLG) Manages the CBO activity & monitoring. - Mobile Wallet & Mobile Banking Provides power to end customers to manage Banking & Wallet/prepaid account directly through their Mobile/Tab - Payment System Provides Payment environment (Merchant customer) using Mobiles & Tablets apart from regular POS machines. 10

12 Appendix References RBI reports Follow Altimetrik on our channels Key Contact Details 11

13 About the Author Author: Ramya Padmanabhan Designation: Product Manager 12