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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affordable cost thereby bringing them into the mainstream financial sector. Implementation

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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Providing formal credit avenues – So far the unbanked population has been vulnerably

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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low-cost mode to access bank accounts. RBI also eased KYC (Know Your customer) norms

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






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customers can operate their accounts using their smart cards through biometric

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






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target for opening 334 branches in un-banked rural area as per the disintegrated FIP

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






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without depositing any amount which doesn’t attract any penalty and will be opened

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






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banking products amongst the population through Financial Literacy, wherever

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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• This Bank has launched its Urban Financial Inclusion drive by opening more than 1,000

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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villages having population above 2,000 by March 2012. Accordingly, your Bank was allotted

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

Bikash Kumar Nayak 2

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