The Committee on Financial Inclusion, chaired by Dr. C Rangarajan, Ex-Governor of the Reserve Bank of India in its report (2008) defined financial inclusion as “the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low-income groups at an affordable cost.”
The committee recommended the constitution of two funds – Financial Inclusion Fund (FIF) and Financial Inclusion Technology Fund (FITF) with NABARD to meet the costs of various promotional and developmental initiatives that will lead to better credit absorption capacity among the poor and vulnerable sections and for application of technology for facilitating the mandated levels of inclusion.
The FIF and FITF have since been merged into a single Financial Inclusion Fund (FIF) in July 2015. The objective of the FIF is to support “developmental and promotional activities” including creating FI infrastructure across the country, capacity building of various stakeholders, creation of awareness to address demand side issues, enhanced investment in Green Information and Communication Technology (ICT) solution, research and transfer of technology, increased technological absorption capacity of financial service providers/users with a view to securing greater financial inclusion.
2. Corpus and Sources of Funds
The contribution to FIF is from the interest differential in excess of 0.5% in respect of deposits placed by banks under RIDF and STCRC, which is credited to FIF w.e.f. 01 April 2012.
The operations, functioning and utilization of FIF are governed by the decisions of the Advisory Board of FIF constituted by the Government of India.
4. Core Functions of the Department
(i) Financial Inclusion
• Giving high priority to the agenda of financial inclusion, expanding the scope of various financial literacy activities and coverage of capacity building initiatives through differentiated banks and institutions is a thrust area of Financial Inclusion Fund (FIF)
• Sensitizing the staff of Regional Rural Banks (RRBs) and Rural Co-operatives Banks (RCBs) on financial inclusion in a focused manner
• Training of business correspondents (BCs) / business facilitators (BFs) of banks with the support of institutions like the Indian Institute of Banking and Finance (IIBF)
• Providing support to Banks for setting up Financial Literacy Centres and strengthening RSETIs
(ii) Banking Technology:
- Providing support to RRBs and CBS-enabled cooperatives for adopting ICT solutions to extend their outreach
- Encouraging RCBs and RRBs across the country to issue RuPay Kisan Credit Cards to all eligible farmers
- Actively pushing the issuance of cards through coordination with the National Payment Corporation of India (NPCI) and interaction with sponsor banks of RRBs and cooperative banks
- Working towards the goal of developing a cashless ecosystem in rural India by supporting the creation of digital payments acceptance infrastructure
- Undertaking policy formulation, capacity building and networking with various stakeholders to achieve the above objectives
5. Major Achievements of the Department
Onboarding 27 weak RRBs on CBS: Financial Inclusion in India is essentially a bank-led model. A major forward push was given by extending support under the erstwhile FITF to 27 financially-weak RRBs to migrate to Core Banking Solutions (CBS) to be on par with other RRBs. This helped all RRBs in the country to migrate to the CBS environment.
Onboarding RCBs on CBS: NABARD has encouraged and supported the process of bringing all the Co-operative Banks onto Core Banking Solution (CBS) platform. A special initiative in this regard was facilitating 201 RCBs (14 StCBs and 187 DCCBs) from 16 states & 03 UTs with 6,953 branches to join the “NABARD initiated Project for CBS in Co-operatives”. This initiative was brought together through two vendors TCS and Wipro using for the first time the cloud-based Application Service Provider (ASP) model for RCBs.
Expansion of Payment Infrastructure: The shift to digital mode of transactions in rural areas is being promoted vigourously by Government of India. In order to strengthen the GoI initiatives NABARD has been working closely with NPCI, RRBs and RCBs in issuance and activation of RuPay Kisan cards to all eligible farmers. As on 30th June 2019, 1.17 crore eligible farmers having accounts in RRBs (100% of eligible farmers) and 1.99 crore farmers having accounts in Co-operative Banks (87% of eligible farmers) have been issued RuPay Kisan Cards.
Comprehensive Financial Inclusion (CFI): A pilot project on CFI was carried out in one SSA each in five states (Uttarakhand, Uttar Pradesh, Rajasthan, Assam and Tamil Nadu) with the objective of complete financial inclusion. The successful pilot is being upscaled. Films highlighting the specific interventions undertaken and their impact were released on NABARD Online channel. Major learnings emanating from CFI pilot project are:
- Comprehensive coverage and provision of financial services on area based approach can be successful.
- Assisted mode of financial literacy is necessary to remove fear of digital banking.
- Demand driven financial inclusion initiatives go a long way in sustainability.
- Involvement of community and local bodies, like Gram Panchayat, help to crystallise demand.
- Livelihood initiatives acted as a catalyst for financial inclusion.
- Multi-faceted and multiple interactions between bankers and community led to mutual trust, better credit and recovery culture.
- Effective financial inclusion can become a reality in an ecosystem where all stakeholders play their part in a concerted manner.