Department of Financial Services Coordination Section New Delhi Background Material for Economic Editor s Conference (EEC)-2016 Financial Inclusion and Social Security Schemes Financial Inclusion is the process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair and transparent manner by mainstream Institutional players. Pre- Jan Dhan status of financial inclusion in the country: Census, 2011 estimated that out of 24.67 crore households in the country, 14.48 crore (58.7%) households had access to banking services. Of the 16.78 crore rural households, 9.14 crore (54.46%) were availing banking services. Of the 7.89 crore urban households, 5.34 crore (67.68%) households were availing banking services. In the year 2011, Banks covered 74,351 villages, with population more than 2,000 ( as per 2001 census), with banking facilities under the Swabhimaan campaign with Business Correspondent, however the program had a very limited reach and impact. The present banking network of the country (as on 30.06.2016) comprises of a bank branch network of 1,33,429. Of these, 50,702 branches are in rural areas. As on 30.06.2016, there are 2,01,182 ATMs network across the country. Moreover, more than 1.25 lakh Business Correspondents (BCs) of Public Sector Banks, Regional Rural Banks and Private Sector Banks have been deployed in rural Sub Service Areas (SSAs)/ urban wards. Pradhan Mantri Jan Dhan Yojana (PMJDY) : With a view to increasing banking penetration and promoting financial inclusion and with the main objective of covering all households with at least one bank account per household across the country, a National Mission on Financial Inclusion named as Pradhan Mantri Jan Dhan Yojana (PMJDY) was announced by Hon ble Prime Minister in his Independence Day Speech on 15 th August, 2014. The scheme was formally launched on 28 th August, 2014 at National level by Hon ble Prime Minister. Objectives of PMJDY: (i) Universal access to banking facilities for all households across the country through a bank branch or a fixed point Business Correspondent (BC) within a reasonable distance. (ii) To cover all households with atleast one Basic Bank Account with RuPay Debit card having inbuilt accident insurance cover of Rs.1 lakh (Customer initiated transaction at the bank branch/atm/bank Mitra in 90 days will suffice to claim the insurance). (iii) An overdraft facility upto Rs.5000/- after satisfactory operation in the account for 6 months. 1
(iv) A Life Cover of Rs.30,000/- to those beneficiaries who open their accounts for the first time from 15.08.2014 to 31.01.2015. (v) Financial literacy programme which aims to take financial literacy upto village level. (vi) The Mission also envisages expansion of Direct Benefit Transfer under various Government Schemes through bank accounts of the beneficiaries. (vii) Providing micro insurance to the people. (viii) Unorganised sector Pension schemes through the Business Correspondents. How PMJDY differs from previous programmes on Financial Inclusion : (i) Household coverage instead of village; (ii) Both Rural and Urban areas are covered instead of only Rural Areas; (iii) Strategy based on technology intensive project using Aadhaar, e-kyc, fixed point interoperable and mobile bank Mitra. (iv) Mission Mode Project with branding and visibility to the programme; (v) Involvement of State Govt. and District Administration. Advantages of PMJDY (a) To the beneficiaries: (i) Inculcating savings habit; (ii) Providing Financial Literacy; (iii) Provides a way to come out of the clutches of usurious money lending. (b) To the economy: (i) The scheme improves and enables growth by bringing savings into financial system; (ii) Improves savings to GDP ratio; (iii) Bank trail by transforming cash transactions to digital transactions. Guinness Word Record: A record 1,80,96,130 accounts were opened under PMJDY in one week ending 29.08.2014, which has been recognized by Guinness World Records and a certificate to this effect has been awarded to DFS. Achievement of Target : The original target of opening of 7.5 crore accounts under the Yojana was completed well before the target date of 26 th January, 2015. 2
Achievements under PMJDY: (i) As on 12.10.2016: 25.05 crore accounts have been opened under PMJDY out of which 15.36 crore accounts are in rural areas and 9.69 crore in urban areas. Total number of accounts of male customers is 12.06 crore and of female 12.99 crore. Deposits of Rs.44480.12 crore have been mobilized.. Aadhaar seeding in PMJDY accounts 13.16 crore. (ii) Household Coverage: 99.99% households out of the 21.22 crore households surveyed have been covered under PMJDY. (iii) As on 14.10.2016, out of total requirement of 1,27,326 fixed location Bank Mitras in Sub Service Areas (SSAs), 1,26,592 Bank Mitras have been deployed by banks. Monitoring of Banks Mitras is being done at Banks and DFS level to arrest the attrition. (iv) Overdraft (OD) in PMJDY accounts: As on 07.10.2016, 42.14 lakh accounts have been sanctioned OD facility of which 23.55 lakh account-holders have availed this facility involving an amount of Rs. 312.74 crore. (v) Insurance Claims settled: (a) As on 14.10.2016, out of 1552 claims lodged, 1511 claims have been disposed off and 41 claims are under process under accidental insurance cover of Rs. 1 lakh under RuPay debit card. (b) As on 14.10.2016, out of 3677 claims lodged, 3664 claims have been disposed off and 13 are in process under Life Cover of Rs.30,000/- to those beneficiaries who opened their accounts for the first time from 15.08.2014 to 31.01.2015. From Jan Dhan to Jan Suraksha: Insurance, being an integral part of the financial sector, plays a significant role in India's economy. Apart from protecting against mortality, property and casualty risks and providing a safety net for individuals and enterprises in urban and rural areas, the insurance sector encourages savings and provides long-term funds for infrastructure development and other long-term gestation projects of the Nation. The development of insurance in India is necessary to support continued economic transformation. Overview: The insurance sector was opened for private participation with the enactment of the Insurance Regulatory and Development Authority Act, 1999. Since opening up of the sector, the number of participants in the industry has gone up from seven insurers (including Life Insurance Corporation of India, four public sector general insurers, one 3
specialized insurer viz. Export Credit Guarantee Corporation and General Insurance Corporation as the National Re-insurer) in the year 2000 to 55 insurers as on 31 st March, 2016 operating in the life, non-life and re-insurance segments (including specialized insurers, viz. Export Credit Guarantee Corporation and Agriculture Insurance Company of India Limited (AICIL). Six of the general insurance companies viz. Star Health and Allied Insurance Company, Apollo Munich Health Insurance Company, Max BUPA Health Insurance Company, Religare Health Insurance Company, Cigna TTK Health Insurance Company and Aditya Birla Health Insurance Co. Ltd function as standalone health insurance companies. Of the twenty three life insurance companies which have set up operations in the life segment post opening up of the sector, twenty one are in joint venture with foreign partners. Of the twenty four companies which have commenced operations in the non-life segment, nineteen have been set up in collaboration with foreign partners. Thus, forty insurance companies in the private sector are operating in the country in collaboration with established foreign insurance companies from across the globe as on 31 st March, 2016. During 2015-16, the share of life insurance business in India has been very high at 79% while that of non-life insurance business has been 21% (globally the share of life insurance business in total premium was 55.6% during this period). In life insurance business, India is ranked 10 th among the 88 countries, for which the data was published by Swiss Re. India s share in global life insurance market was 2.24% during 2015 where as it was 2.08% in 2014. Further, during 2015 the life insurance premium in India (inflation adjusted) increased by 7.8% whereas the global life insurance premium increased by 4%. The Indian non-life insurance sector witnessed a growth of 8.1 percent (inflation adjusted) during 2015 whereas the growth in global non-life insurance premium has been only 3.6%. During this period, the share of Indian non-life insurance premium in global non-life insurance premium was at 0.75% and India ranks 18 th among the 88 countries. With the regulator playing an enabling role and the players exploiting the previously untapped potential, insurance penetration and insurance density increased substantially in the past decade. Insurance penetration (i.e. premium volume as a ratio of GDP), which was 2.71% of GDP in 2001-02 has increased to 3.44% of GDP in 2015-16 [3.3% in 14-15]. Insurance density measured as the ratio of premium to population (per capita premium) increased from US$ 11.5 in 2001-02 to US$ 54.70 in 2015-16 [$55 in 14-15]. The global average for insurance penetration and density figures in the year 2015 was 6.23% and US $ 621.2. Thus, although India lags behind the global average in terms of coverage and penetration, the situation has improved and is further projected to improve based on the recent initiatives of the Government. The total insurance premium underwritten in 2000-01 was Rs. 37,550 crore which has increased to Rs. 4,66,277 crore as on 31/3/2016. This figure was Rs. 4,15,406 crores as on 31/3/2015. Life insurance industry recorded a premium income of Rs. 3,67,661.91 crore during 2015-16 as against Rs. 328101.14 crore in the previous financial year, registering growth of 12.06 per cent (4.39 per cent growth in previous year). While private sector insurers posted 14.24 per cent growth (14.32 per cent growth in previous year) in their 4
premium income, LIC recorded 11.25 per cent growth (1.15 per cent growth in previous year). The non-life insurance industry underwrote total premium of Rs. 96,399.28 crore for the year 2015-16 as against Rs. 84,693.42 crore in 2014-15, registering a growth of 13.82 ( 9.19 per cent in the previous year). The public sector insurers exhibited a growth rate of 12.63% in 2015-16 as compared to the previous year s growth rate of 10.23%. The private sector general insurers registered a growth rate of 15.29% as compared to the 9.62% growth achieved during the previous year. Recent initiatives/achievements/developments: a. From Jan Dhan to Jan Suraksha- Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY): These schemes were launched by Hon ble PM Nationally on 9th May, 2015 at Kolkata. They are envisaged as insurance based Social Security Schemes aimed at moving towards creating a universal social security system and involve convenient bank account linked enrolment with implementation in IT mode, and premium payment through auto-debit from the bank account of the subscriber. Implementation of these schemes enables affordability and targeting in favour of the poor and the under-privileged and would address the situation of low penetration of life and accident insurance in the country. While the Pradhan Mantri Suraksha BimaYojana (PMSBY) is a one year personal accident insurance scheme, renewable from year to year, offering coverage for Rs. two lakh for death or permanent total disability and Rs. one lakh for permanent partial disability due to an accident and is available to people in the age group of 18 to 70 years having a bank account, who give their consent to join and enable autodebit, the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) is a one year life insurance scheme, renewable from year to year, offering coverage of Rs. two lakh for death due to any reason and is available to people in the age group of 18 to 50 years (life cover up to age 55 on payment of premium after enrolment up to age 50 years) having a bank account, who give their consent to join and enable auto-debit. Gross enrolment reported by Banks as on 07.10.2016, subject to verification of eligibility, etc. is over 3.06 Crore under PMJJBY and over 9.72 Crore under PMSBY. 44,720 Claims were registered under PMJJBY till 07.10.2016 of which 40,375 have been disbursed and of the 8,821 Claims registered under PMSBY, 5,878 have been disbursed. b. Senior Citizen Health Insurance Scheme: Government of India launched a Senior Citizen Health Insurance scheme with effect from 1 st April, 2016, as a top up scheme of Rashtriya Swasthya Bima Yojana (RSBY). This would provide health cover to senior citizens who are aged 60 years and above belonging to BPL category. Under the said scheme the health coverage is for Rs 30,000/- per annum per senior citizen for treatment package, over and above RSBY entitlement. 5
c. Indian Nuclear Insurance Pool: The India Nuclear Insurance Pool (INIP/Pool) is formed primarily to cater to the Third party liability exposure emanating from the passage of Civil Liability for Nuclear Damage Act, 2010. The Pool was launched on 12th June, 2015 at Mumbai with the total capacity of Rs. 1500 Cr. from GIC Re and 11 Non-Life Insurers. Atal Pension Yojana (APY) APY implemented w.e.f 1.6.2015 focuses on all citizens in the unorganised sector, who join the National Pension System (NPS) administered by the Pension Fund Regulatory and Development Authority (PFRDA). It is open to all bank account holders in age group of 18 to 40 and the contributions differ, based on pension amount chosen. Subscribers would receive guaranteed minimum monthly pension of Rs. 1,000 or Rs. 2,000 or Rs. 3,000 or Rs. 4,000 or Rs. 5,000 at the age of 60 years. Minimum pension is guaranteed by the Government. Central Government would co-contribute 50% of the total contribution or Rs. 1,000 per annum, whichever is lower, for a period of 5 years for those eligible subscribers joining the scheme between the period 1.6.2015 and 31.3.2016 who are not members of any statutory social security scheme and not income tax payers. The monthly pension would be available to the subscriber, and after him/her his/her spouse and after their death, the pension corpus, as accumulated at age of 60 years of the subscriber, would be returned to the nominee of the subscriber. As on 07.10.2016, a total of 35.46 lac subscribers have been enrolled. In case of death of the subscriber before 60 years of age, the Government has decided to give an option to the spouse of the subscriber to contributing to APY account of subscriber, for the remaining vesting period, till the original subscriber would have attained the age of 60 years. New Pension System With a view to provide old age income, a defined contributory system named the National Pension System (NPS) was introduced by the Government of India. It has been made mandatory for all new recruits to the Government (except armed forces) with effect from January 1, 2004 and has also been rolled out for all citizens with effect from May 1, 2009 on a voluntary basis. PFRDA has initiated a focused approach for acquisition of NRI subscribers under NPS. NRIs can open NPS account on both repatriable and on non-repatriable basis both through the PoPs and online through enps portal. The No. of subscribers under NPS has increased from 65.06 lakhs in March 2014 to 136.20 lakhs in September 2016 with an additional corpus of Rs. 1,02,172 crores. Under NPS, Employee s own contribution upto 10 % of salary (basic plus dearness allowance) to NPS are tax deductible under section 80 CCD (1) of Income Tax Act subject to a ceiling of Rs. 1,50,000/- under section 80 CCE. An additional tax benefit on 6
investment upto Rs. 50000/- under Sec 80CCD(1b), is also available. This exclusive tax benefit is available only to NPS which is over and above Rs. 1,50,000/-. 40% of the final corpus has been tax exempted from this financial year 2016-17. The amount payable to nominee in case of death of the subscriber has also been exempted from taxation. The benefits available to NPS have also been extended to APY. The lump sum received by nominees in the event of the death of the annuity holder are made tax-free in their hands. The annuity services under NPS have been exempted from service tax from financial year 2016-17. Pradhan Mantri Mudra Yojana (PMMY) To promote & ensure bank finance to unfunded and underfunded segments of the economy, Hon ble Prime Minister has launched Pradhan Mantri Mudra Yojana (PMMY) on 08.04.2015. It will provide formal access of financial facilities to Non Corporate Small Business Sector (NCSBS). All loans of Rs.10 lakh for income generating activities, Activities allied to Agriculture (excluding crop loans, land improvement such as canals, irrigation, wells ) and services supporting to these, which promote livelihood or are income generating will be branded as PMMY loans. Loans are available under 3 categories i.e. Shishu (Up to Rs.50000/-), Kishore (Above Rs.50000/- and up to Rs. 5 Lakh) and Tarun (Above Rs. 5 lakh and up to Rs.10 lakh). Borrowers can avail loan facility from any Public/Private/ Regional Rural Banks, NBFCs and MFIs. These loans are Collateral free. Credit Guarantee for Micro Units available upto 50% of portfolio for Member lending institutions (MLIs). Refinance available to MLIs through Mudra Ltd. The Scheme is available to Non Corporate Small Business Segment (NCSB), including women, comprising of proprietorship / partnership firms running as small manufacturing units, service sector units, shopkeepers, fruits / vegetable vendors, truck operators, food-service units, repair shops, machine operators, small industries, artisans, food processors and others, in rural and urban areas, pisciculture, beekeeping, poultry, livestock, rearing, grading, sorting, aggregation agro industries, diary, fishery, agriclinics and agribusiness centers, food & agro-processing, etc (excluding crop loans, land improvement such as canals, irrigation, wells). As on 31.03.2016 - Total 3.48 crore borrowers were disbursed Rs. 1,32,954.73 crore against the target of Rs.1,22,188 crore under Shishu, Kishore and Tarun categories during 2015-16. As on 30.09.2016 - Total 1.45 crore borrowers were disbursed 54,402.46 crore under Shishu, Kishore and Tarun categories during 2016-17. Rs. Stand Up India Scheme 7
The Stand Up India Scheme was launched by the Hon ble Prime Minister on 05.04.2016 to facilitate composite bank loans between Rs. 10 lakh and Rs. 1 crore to at least one SC/ST and one woman borrower, including tribal woman, per bank branch in the manufacturing, services or the trading sector for greenfield enterprises through 1.25 lakh branches of all Scheduled Commercial Banks. Effective handholding support is available before loan sanction and post disbursal of the loan to borrowers. A corpus of Rs. 5,000 crore has been approved for credit guarantee of the loans through National Credit Guarantee Trustee Company Ltd. (NCGTC, beginning with Rs. 500 crore in 2016-17. A dedicated portal (www.standupmitra.in) for the Stand Up India Scheme is active. The portal as a virtual market place endeavors to provide End to End' solutions not only for credit delivery but also for a host of handholding services. SIDBI has organized training programs, state level awareness programs, entrepreneurship development program, sensitization programs and district level workshops for stakeholders. NABARD has organized national level training programs & also state level awareness programs (in all states) in May for stakeholders. As on 30.09.2016, an aggregate amount of Rs. 1990.74 crore has been disbursed by banks to 13450 accounts. Bank Board Bureau Bank Board Bureau, an autonomous body aimed at improving the governance of PSBs has started functioning. It recommends selection of heads of PSBs and Financial Institutions (FIs), and is also to help Banks in developing strategies and capital raising plans. Towards bringing in holistic banking reforms, 7 step scheme called Indradhanush was launched, including setting up of Bank Board Bureau (BBB), streamlining the appointments, capitalization, de-stressing, empowerment, framework of Accountability and Governance Reforms in Public Sector Banks (PSBs). Position of Chairman and Managing Director in PSBs was split. Appointment of Non Official Directors on the Boards of Public Sector banks, insurance companies, FIs and Regional Rural Banks The process has been reformed through receipt of applications from eligible candidates on-line through a web-portal and selection process has been streamlined. Agriculture Credit Flow The Government sets annual targets for flow of credit to agricultural sector taking, inter alia, into account the overall banking credit growth. Target for flow of agricultural credit has increased from Rs. 3,25,000 crore in 2009-10 t Rs. 9,00,000 crore in 2016-17. During 2015-16 Rs. 8,77,527 crore agriculture credit was achieved against the target of Rs. 8,50,000 crore. During 2016-17, Rs. 3,98,689.93 agriculture credit has been achieved so far against the target of Rs. 9,00,000 crore. 8
The Revised Kisan Credit Scheme has since been simplified and converted into ATM enabled debit card with, inter alia, facilities of one-time documentation, built-in cost escalaration in the limit, any number of withdrawls within the limit. As on 30.06.2016, the ATM enabled/rupay KCCs to total operative KCCs, in PSBs is at 71.39%. The Government of India, through its Budget Announcements, 2014-15, took a novel initiative by announcing a corpus of Rs. 200 crore in NABARD for Producer s Development and Upliftment (PRODUCE) in order to promote 2000 producers organisation across the Country to solve the difficulties and constraints faced by farmers. As on 31.08.2016, NABARD has sanction 2174 Farmers Producers Organisation. The Government has released Rs. 673.29 crore as interest-free loan under Scheme for Revival of 23 unlicensed District Central Cooperative Banks (DCCBs) in Uttar Pradesh, Jammu & Kashmir, Maharashtra and West Bengal. Small Finance Banks and Payment Banks The RBI granted approval to open Small Finance Banks with the objective of further financial inclusion by (a) provision of savings vehicles, and (ii) supply to credit to small business units; small and marginal farmers; micro and small industries; and other unorganised sector entities, through high technology-low cost operations. The Small Finance Banks will be required to extend 75 per cent of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as Priority Sector Lending by RBI and atleast 50 percent of its loan portfolio should constitute loans and advances of upto Rs. 25 lakh. The RBI granted approval to open Payments Bank with the objective of further financial inclusion by providing (i) small savings accounts and (ii) payments/remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users. Payments Bank will initially be restricted to holding a maximum balance of Rs. 1,00,000 per individual customer. The payments Bank can not undertake lending activities. Bills passed Negotiable Instruments (Amendment) Act, 2015 was passed by Parliament and published in the Gazettee of India on 29.12.2015 focussing on clarifying the jurisdiction related issues for filing cases of offence committed under Section 138 of the Negotiable Instruments Act, 1881. The NI (Amendment) Act, 2015 facilitates filing of case in a court within whose local jurisdiction the bank branch of payee is situated, except in case of bearer cheques, which are presented to the branch of the drawee bank and in that the case the local Court of that branch would get jurisdiction. The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016 was introduced in Lok Sabha on 11 th May 2016. The Bill was referred to Joint Committee on 12 th May 2016. 9
The Bill was considered and passed by Lok Sabha on 2 nd August 2016, and was introduced and passed by Rajya Sabha on 9 th August 2016. The Bill received assent of Hon ble President of India on 12 th August 2016 and was published in Gazette of India on 16 th August 2016. Amendments brought to make the SARFAESI and RDDB & FI Acts more responsive to demands of present day banking, as part of ease of doing business agenda and for speedier resolution of defaulted loans. Salient features : 1. Expansion of definition of Security interest To suit changing credit landscape and augment ease of doing business, definition of security interest is modified and financial lease, hire-purchase or conditional sale transactions are included. Change in definition of asset by explicitly including intangible assets. 2. Inclusion of Debenture Trustees The SARFAESI Act has been extended to debenture trustees by including them as secured creditor with rights of enforcement security. This will boost investment in Debentures and provide alternate source of funding for companies. 3. Central Registry System (National Database) Presently, security interests created in favour of banks & FIs are registered with the Central Registry (CERSAI). Now, all secured creditors and taxation authorities issuing attachment orders are enabled to register with CERSAI. This will help in creating a central database at National level of encumbrances on property rights. There is a duplication of registration requirement with various registration systems under the Companies Act, Motor Vehicles Act, Patents Act, Designs Act etc. After integration, such registrations will be deemed registration with CERSAI. 4. Priority to Secured creditors under both the Acts - 10
Secured creditors like Banks, FIs, ARCs, Debenture Trustees will get priority over any other dues including taxation dues of Central Government, State Governments or any local authorities. 5. Strengthening ARCs Restrictions on holding and controlling interest in the capital of ARCs are relaxed. However, provision is made for minimum requirement of Rs. 2 crore of net owned funds; non institutional investment in security receipts issued by ARCs is permitted; Since the ARCs are only acquiring right to reconstruct or recovery of nonperforming loan as pass through, such transactions are exempted from Stamp Duty. This will incentivize the ARCs to acquire more NPAs. However, there is no exception of stamp duty where ARC acquire the assets; 6. Strengthening of RBI to regulate ARCs RBI will specify higher net-owned funds of ARCs, fit and proper person criteria, approve change in management coupled with powers for carrying out audit and inspection of ARCs, issue directives etc. 7. Specific timeline for DMs/CMMs Now, DMs/CMMs has to decide on applications by banks and FIs within specific time limit of 30 days. However, this period may be extended by 30 days further in exceptional situation for reasons to be recorded. 8. Empowering DRTs Specific powers to DRTs to decide applications filed by borrowers and third parties including tenants, on the basis of guidelines issued by the Apex Court. 9. Rationalising procedures and timelines under the RDDB & FI Act- The procedures followed by DRTs are rationalised and certain timelines are reduced to complete the proceedings in 180 days. 10. Electronic filing system 11
Enablement of filing through an electronic system to enable people to get any information about status of their application, cause list, interim/final orders and recovery certificates from anywhere through the website of Tribunal / Appellate Tribunals. However, option of physical filing of cases will continue until Government prescribes exclusive electronic filing. 11. Re-appointment of Presiding Officers and Chairperson- To fill up the vacancies and for smooth functioning of Tribunal / Appellate Tribunals, re-appointment of Presiding Officers (P.O.s) and Chairperson for fresh term of 5 years in same or any other Tribunal is allowed; enhanced the retirement age of P.O.s from 62 to 65 years and Chairpersons from 65 to 70 years; provision made for entrusting additional charge of Tribunals and Appellate Tribunals to any other equivalent Judicial officer of any other Tribunal. 12. Present Status: The Bill has been passed by Parliament on 09.08.2016 and out of 44 sections, 37 sections had been notified in Official Gazette on 01.09.2016. Rules are under preparation. ****** 12