Bikash Kumar Nayak 2

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A STUDY ON PRADHAN MANTRI JAN DHAN YOJANA – WITH REFERENCE TO NATIONALIZED BANK (BANK OF BARODA) Sri Lakshmi & D.Mamatha Final year MBA & Dr.Ponniah V M, Professor, Faculty of Management, SRM University, Kattankulathur

Abstract Even after 60 years of independence, a large section of Indian population still remains unbanked. In the recent years the government and Reserve Bank of India has been pushing the concept and idea of financial inclusion. The Financial Inclusion Plan aims at providing easy access to financial services to those sections of the society who are deprived of it so far at affordable cost thereby bringing them into the mainstream financial sector.RBI set up the Khan Commission in 2004 to look into financial inclusion and the recommendations of the commission were incorporated into the mid-term review of the policy (2005–06) and urged banks to review their existing practices to align them with the objective of financial inclusion. Honourable Prime Minister of India, Sri Narendra Modi announced this scheme for comprehensive financial inclusion on his first Independence Day speech on 15 August 2014. The scheme was formally launched on 28 August 2014 with a target to provide 'universal access to banking facilities' starting with Basic Banking Accounts with overdraft facility of Rs.5000 after six months and RuPay Debit card with inbuilt accident insurance cover of Rs. 1 lakh and RuPay Kisan Card & in next phase, micro insurance & pension etc. will also be added. An attempt is made in this paper to study and cover the following
An overview of Financial Inclusion.
Bank of Baroda’s performance with reference to Financial Inclusion.
Latest trends being implemented for Financial Inclusion by PMJDY. Keywords: Financial inclusion, Banking services, Unbanked, Business, Technology

Introduction Financial Inclusion is delivery of banking services at an affordable cost to the vast sections of disadvantaged and low income groups. The Financial Inclusion Plan aims at providing easy access to financial services to those sections of the society who are deprived of it so far at

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3 I s s u e 1, O c t o b e r 2014 affordable cost thereby bringing them into the mainstream financial sector. Implementation Vo l

of Financial Inclusion is not a new concept for your Bank. Financial Inclusion activities are being implemented by your Bank since inception through various government-sponsored programmes, lending to the poorest of the poor, lending to the minority communities, lending to SC/ST, lending to priority sectors, etc. However, the RBI formalized the concept of Financial Inclusion in 2005, when it permitted rendering of banking services through Business Correspondent (BC) channel. It then advised all commercial banks in the year 2010 to submit Board-approved Plan for providing banking services in rural unbanked areas under Financial Inclusion.

Review of Literature According to Indian institute of banking and finance, “financial inclusion is delivery of banking services at an affordable cost ('no frills' accounts,) to the vast sections of disadvantaged and low income group. Unrestrained access to public goods and services is the sine qua non of an open and efficient society. As banking services are in the nature of public good, it is essential that availability of banking and payment services to the entire population without discrimination is the prime objective of the public policy." According to Dr. K.C.Chakrabarty, Deputy Governor, Reserve Bank of India, financial Inclusions the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular at an affordable cost in a fair and transparent manner by main stream institutional players.

Need for Financial Inclusion Creating a platform for inculcating the habit to save money – The lower income category has been living under the constant shadow of financial duress mainly because of the absence of savings. The absence of savings makes them a vulnerable lot. Presence of banking services and products aims to provide a critical tool to inculcate the habit to save. Capital formation in the country is also expected to be boosted once financial inclusion measures materialize, as people move away from traditional modes of parking their savings in land, buildings, bullion, etc.

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3 I s s u e 1, O c t o b e r 2014 Providing formal credit avenues – So far the unbanked population has been vulnerably Vo l

dependent of informal channels of credit like family, friends and moneylenders. Availability of adequate and transparent credit from formal banking channels shall allow the entrepreneurial spirit of the masses to increase outputs and prosperity in the countryside. A classic example of what easy and affordable availability of credit can do for the poor is the micro-finance sector. Plug gaps and leaks in public subsidies and welfare programmes – A considerable sum of money that is meant for the poorest of poor does not actually reach them. While this money meanders through large system of government bureaucracy much of it is widely believed to leak and is unable to reach the intended parties. Government is therefore, pushing for direct cash transfers to beneficiaries through their bank accounts rather than subsidizing products and making cash payments. This laudable effort is expected to reduce government’s subsidy bill (as it shall save that part of the subsidy that is leaked) and provide relief only to the real beneficiaries. All these efforts require an efficient and affordable banking system that can reach out to all. Therefore, there has been a push for financial inclusion. Support from RBI for Financial Inclusion RBI set up the Khan Commission in 2004 to look into financial inclusion and the recommendations of the commission were incorporated into the mid-term review of the policy (2005–06) and urged banks to review their existing practices to align them with the objective of financial inclusion.

RBI also exhorted the banks and stressed the need to

make available a basic banking 'no frills' account either with 'NIL' or very minimum balances as well as charges that would make such accounts accessible to vast sections of the population Of the many schemes and programmes pushed forward by RBI the following need special mention. Initiation of no-frills account – These accounts provide basic facilities of deposit and withdrawal to accountholders makes banking affordable by cutting down on extra frills that are no use for the lower section of the society. These accounts are expected to provide a

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3 I s s u e 1, O c t o b e r 2014 low-cost mode to access bank accounts. RBI also eased KYC (Know Your customer) norms Vo l

for opening of such accounts. Banking service reaches homes through business correspondents – The banking systems have started to adopt the business correspondent mechanism to facilitate banking services in those areas where banks are unable to open brick and mortar branches for cost considerations. Business Correspondents provide affordability and easy accessibility to this unbanked population. Armed with suitable technology, the business correspondents help in taking the banks to the doorsteps of rural households. EBT – Electronic Benefits Transfer – To plug the leakages that are present in transfer of payments through the various levels of bureaucracy, government has begun the procedure of transferring payment directly to accounts of the beneficiaries. This “human-less” transfer of payment is expected to provide better benefits and relief to the beneficiaries while reducing government’s cost of transfer and monitoring. Once the benefits starts to accrue to the masses, those who remain unbanked shall start looking to enter the formal financial sector.

Financial Inclusion status of Bank of Baroda as of now Models used by Bank of Baroda for FI Your Bank has adopted various models for providing banking services under financial inclusion such as: • ICT (Information & Communication Technology) based BC model and POS (Point of Sale/Service) • Kiosk • Mobile Van • Brick & Mortar Branches Information and Communication Technology (ICT) based Business Correspondent (BC) model: POS based BC Model This solution is based on Application Service Provider (ASP) model with smart cards based technology for financial inclusion. Under this model, Business Correspondents are appointed by banks through service providers who are provided with point-of-service (POS) devices, using which, they carry out transactions for the smart card holders at their doorsteps. The w w w .e e c m b a j o u r n a l .i n

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3 I s s u e 1, O c t o b e r 2014 customers can operate their accounts using their smart cards through biometric Vo l

authentication. In this system, all transactions processed by the BC are online real time basis in CBS of the bank. Kiosk Bc Model It is a web-based application that can be accessed through internet connectivity on laptop or desktop by authorized individuals. The CSC e-governance Service India Ltd, FIA Technology Services Pvt Ltd and Geosansar are appointed as BCs for providing banking services in the villages allocated to the Bank as well as for implementation of Urban Financial Inclusion. This is a card less solution; account holder can operate the account on the basis of account number as well as Aadhaar number. The Kiosks are connected with your Bank’s CBS through web-based connectivity from authentication on online real time basis. As on 31st March, 2014, your Bank covered 7,525 villages through 2,780 Kiosk centers and also established 1034 urban kiosk centers across the country the computer system/laptop of the kiosk operator. The transactions are processed through biometric Mobile Van The customized vehicle (van) is specifically designed for the purpose of banking activity. The exterior of the van is covered with the Bank advertisements and information about products offered by the Bank in rural areas. Thereby, it is also an advertising media for the Bank in rural segment. The van is equipped with computer hardware and connectivity to access the CBS. The Bank staff is deployed on the van to provide banking services in the villages. The van is moving into the cluster of villages on predetermined days and time which are in proximity to the existing branches, for providing online banking services. The banking services are being provided during fixed days in a week. At present, 15 mobile vans have been deployed for catering financial services to 211 villages in the states of Uttar Pradesh, Rajasthan, Gujarat, Uttarakhand, Bihar and Goa. Brick and Mortar Branch The brick and mortar branches are opened in a comparatively bigger village having the potential and viability. Such centers are identified during the course of finalization of the Bank’s branch expansion plan. As per the Bank’s FIP, 1,772 rural branches have been opened as against a target of 1,554 for the current financial year. Your Bank had annual w w w .e e c m b a j o u r n a l .i n

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3 I s s u e 1, O c t o b e r 2014 target for opening 334 branches in un-banked rural area as per the disintegrated FIP Vo l

submitted to the RBI, which is comfortably achieved by opening of 430 branches in FY14. New Initiatives of Bank of Baroda under Financial Inclusion Kiosk banking Model The Kiosk banking model was launched by Shri S.S.Mundra, Chairman & Managing Director, by virtually inaugurating 1,000 Kiosks on the 106th foundation day of Bank i.e. 20th July 2013. The Bank has arrangements with Common Service Centers (CSCs) to avail their services as Business Correspondent of your Bank for running the Kiosk centers. The common service centers are ICT enabled front end service delivery points at the village level and urban centers for delivery of government, financial, social & private sector services in the areas of agriculture, health, education, entertainment, banking, insurance, pension, utility payments, etc. Bank of Baroda has also engaged other service providers for similar banking Kiosks in urban/rural centers. These Kiosks would be connected with the CBS of your Bank through web-based connectivity from the computer system/laptop of the kiosk operator. Urban Financial Inclusion The rural inhabitants have largely remained the focus of the financial inclusion efforts since, a large proportion of the villages are still unbanked. Besides people living in rural and far flung areas, urban poor still have no access to formal financial products and services like savings, credit, remittance and insurance, forcing them to depend on usurious informal sources to meet their personal, health, and livelihood-related needs. Many of those are normally migrant labours, hawkers, slum dwellers from rural areas that generally leave their villages for livelihood. In order to cover them under financial inclusion, the Government of India has started campaign in all states through SLBC for a to bring these vulnerable groups under mainstream financial system. Bank of Baroda has introduced urban kiosks at various locations across the country. Shri S.S. Mundra, Chairman & Managing Director launched urban kiosk at Abgaonkala in Harda district of Madhya Pradesh on 19th January 2014. As on 31st March 2014, Bank of Baroda set up more than 1,000 urban kiosk at various locations across the country. Products Offered under Financial Inclusion Basic Savings Bank Deposit Account with in-built OD Facility. This product is specially devised for individuals from Financial Inclusion villages as per the RBI guidelines. The account can be opened w w w .e e c m b a j o u r n a l .i n

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3 I s s u e 1, O c t o b e r 2014 without depositing any amount which doesn’t attract any penalty and will be opened Vo l

through BC. These accounts can be operated through business correspondents as well as at the branches. In–built overdraft facility up to Rs 10,000 is available under the scheme. Overdraft of Rs 250 can be availed immediately on opening of the account by the customer and availability of higher amount of overdraft up to Rs 10,000 is performance linked. Recurring Deposit (RD) Account This is money back RD facility duly designed for financial inclusion account holders to provide liquidity. The product offers money back facility, at the end of six months, an amount equivalent to 50.0% of the outstanding credit balance in the account can be paid back as per the requirement of depositor. Baroda Kisan Credit Card (BKCC) This product is for farmers which cover their needs like production credit, investment credit, personal loan needs as well as consumption needs. It is flexible in utilization of the limit as he can utilize the limits as per his requirements during the year. Baroda General Credit Card (BGCC) The BGCC is implemented through all the branches of Baroda Bank. The credit facility offered under the scheme would include working capital and term loan requirements of the entrepreneurs. Baroda Swabhimaan Suraksha (Low Premium Insurance) Bank of Baroda has introduced life insurance product with low premium for financial inclusion customers in coordination with India-first Life Insurance Company. An insurance cover of Rs 5,000 to Rs 50,000 is available at premium of Rs 20.88 per thousand for five years. Financial Literacy Key to Successful Inclusion The desired objective of Financial Inclusion can be achieved only when we are able to generate equal responses from the villages. In order to invoke responses amongst villagers, there is a need to educate them on various banking facilities and its benefits to them. In other words, financial literacy would be the key for success of financial inclusion initiatives of the bank. Therefore, all constituents of FI need to develop a bond with each other for not only to provide banking facilities, but also to create a massive awareness of banking and w w w .e e c m b a j o u r n a l .i n

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3 I s s u e 1, O c t o b e r 2014 banking products amongst the population through Financial Literacy, wherever Vo l

implementing Financial Inclusion programme. The Bank’s link branches are arranging Financial Literacy campaign by conducting meetings and addressing the habitants in different forums.
Baroda Swarojgar Vikas Sansthan (Baroda RSETI) is a trust formed by the Bank way back in 2003 for undertaking skill building activities for unemployed rural youth and providing hand holding support to them till their settlement in their venture.
Around Forty six Financial Literacy & Credit Counseling Centres (FLCCs) “SAARTHEE” are operational across the country. Since inception, around 19,731 individuals visited FLCCs of which in 10,460 cases, the issues were resolved.
Around Fifty two Baroda Grameen Paramarsh Kendrasfacilitate financial education, credit counseling, information sharing and problem solving on technical issues, synergy & liaison with otherorganizations for value added services and development activities in rural areas.
“BYST-BoB Entrepreneurship Development Programme” (BYST) provides end-to-end support to disadvantaged young dynamic micro-entrepreneurs in the form of Loans, Business Mentors, Training, Networking and Marketing. Highlights of the Bank’s Performance under Financial Inclusion in FY14 • Bank of Baroda covered 14,161 villages against a target of 11,124. • It opened 74.66 lakh “Basic Savings Bank Deposit Account” against target of 63.74 lakh, out of which 18.71 lakhs accounts were opened through the Business Correspondents. • The balance outstanding in the “Basic Savings Bank Deposit Account” of Baroda Bank is around Rs 1,918 crore. • Baroda Bank has sanctioned overdraft of Rs 11.31 crore as against a target of Rs. 6.22 crore in Basic Saving Bank Deposit Account. • Bank of Baroda opened 2,584 Ultra Small Branches (in villages with population above 2,000) to strengthen functioning of BC model. • Bank of Baroda approved a disaggregation plan up to the branch level to implement its FIP for 21,526 villages by March 2016.

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3 I s s u e 1, O c t o b e r 2014 • This Bank has launched its Urban Financial Inclusion drive by opening more than 1,000 Vo l

Kiosk at various locations in metro and urban centers across the country.• Also, it surpassed all targets set under disaggregated FIP for FY14.

Latest Trend -Pradhan Mantra Jan Dhan Yojana Pradhan Mantri Jan Dhan Yojana is an ambitious scheme for comprehensive financial inclusion launched by the Prime Minister of India, Narendra Modi on 28 August 2014. He had announced this scheme on his first Independence Day speech on 15 August 2014. In a run up to the formal launch of this scheme, the Prime Minister personally mailed to CEOs of all banks to gear up for the gigantic task of enrolling over 6.0 crore (75 million) households and to open their accounts. In this email he categorically declared that a bank account for each household was a "national priority". The scheme has been started with a target to provide 'universal access to banking facilities' starting with Basic Banking Accounts with overdraft facility of Rs.5000 after six months and RuPay Debit card with inbuilt accident insurance cover of Rs.1 lakh and RuPay Kisan Card. In next phase, micro insurance & pension etc. will also be added. Reports said on August 28, more than 1.5 crore bank accounts were opened in a single day.
Within a few days of the PM's address on Independence Day, this bank had received a directive on the scheme.
On August 28, the bank's branches in Ghaziabad, Noida and Greater Noida, had been given a target to open more than 10 lakh accounts under the scheme.
The Prime Minister said that though the initial target of PMJDY was to open bank accounts for 7.5 crore families in one year, he had exhorted the concerned officials to complete the task before the next Republic Day. On the inauguration day of the scheme, 1.5 Crore (15 million) bank accounts were opened. Bank’s Board had approved a Financial Inclusion Plan (FIP) for implementation by your Bank within a period of three years commencing from 2010-11. The plan had envisaged covering 20,000 villages in a span of three years under Financial Inclusion utilizing various technology based initiatives. Thereafter, Ministry of Finance and RBI advised your Bank to cover the

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3 I s s u e 1, O c t o b e r 2014 villages having population above 2,000 by March 2012. Accordingly, your Bank was allotted Vo l

2,855 villages which are covered well within the timelines.

References 1. CGAP publications, 2012, ‘Financial Inclusion and the Linkages to Stability, Integrity and 2. Protection: Insights from the South African Experience’ 3. Dr. SupravatBagliand PapitaDutta, (Aug. 2012)‘A Study Of Financial Inclusion In India’, RadixInternational Journal Of Economics & Business ManagementVol.1, Issue 8, pp.1-18. 4. Dr.Chakrabarty.K.C (2013), ‘Financial Inclusion in India: Journey So Far And Way Forward’ Keynote address delivered by Deputy Governor, Reserve Bank of India at the Finance Inclusion Conclave organized by CNBC TV 18 at New Delhi on September 6, 2013. 5. Dr. Chakrabarty. K.C (2012), ‘Financial Inclusion – Issues in Measurement and Analysis’ Keynote Address by Dr. K. C. Chakrabarty, Deputy Governor, Reserve Bank of India at the BIS-BNM Workshop on Financial Inclusion Indicators at Kuala Lumpur on November 5, 2012. 6. FICCI, ‘Promoting FinancialInclusionCan the constraints of political economybe overcome?’,UNDP-NABARD Financial Inclusion Project reportunder a Micro Capital Grant toFederation of Indian Chamber of Commerce and Industry. 7. Press Information Bureau, GOI (2008),‘Ministry of Finance Recommendations of the Committee on Financial Inclusion’ 8. RajeshJeganathan(2012), ‘Measures for achieving financial inclusion in India’ Infosys Finacle, Thought paper, pp.1-5. 9. SeshadriT. V.,‘Financial inclusion – not by banks alone’, Business line, November 8, 2012

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