The Reserve Bank placed greater emphasis on effective credit delivery during the year by intensifying its ongoing
efforts under the financial inclusion plans as well as adopting innovative approaches in expanding credit and
spreading financial literacy. The major thrust was on operationalising a market mechanism for enhancing
priority sector credit, strengthening the business correspondent (BC) model through BC registry and certification
to promote financial inclusion, and enhancing financial literacy through a digital focus in literacy camps,
experimenting with ground level camps, capacity building of financial literacy counsellors and observation of a
financial literacy week. Work is also underway for the formulation of a National Strategy for Financial Inclusion.
IV.1 The role of the Reserve Bank in the area
of financial inclusion involves developing policies
towards ensuring the availability of banking
services at affordable costs for those vulnerable
sections of society who have hitherto been left
outside the scope of formal financial services
due to factors such as illiteracy, lack of banking
infrastructure, difficulty in physical access to such
services in far flung areas and perceived lack
of creditworthiness. Recognising that financial
illiteracy is a major impediment to the diffusion of
financial inclusion, the Reserve Bank focused on
the dissemination of simple messages introducing
people to the benefits of active savings, prudent
borrowing practices, financial planning as well
as unravelling the world of digital transactions
for them. Consumer protection also forms an
important aspect of these messages, which are
also issued in vernacular language. During 2016-17, the Reserve Bank aimed to provide a fillip to
financial literacy through a digital focus in literacy
camps, experimenting with ground level camps,
capacity building of financial literacy counsellors
and observation of a financial literacy week. In
order to propel the economy onto a medium-term
sustainable inclusion path, greater emphasis
was placed on strengthening the business
correspondent (BC) model through the creation of a BC registry and introduction of a framework
for BC certification. In this context, the Financial
Inclusion and Development Department of the
Reserve Bank formulates policies for promoting
financial inclusion.
IV.2 Given the significant role of micro, small
and medium enterprises (MSMEs) in employment
generation and GDP growth, a number of initiatives
were undertaken to enhance the flow of credit to
these sectors, including trading in priority sector
lending certificates (PSLCs), expanding the scope
of the ‘additional working capital limit’ for banks to
account for possible cash flow mismatches faced
by micro and small enterprises (MSEs) borrowers
due to withdrawal of legal tender status of Specified
Bank Notes (SBNs), scaling-up the capacity
building programmes by launching Version 2 of the
National Mission for Capacity Building of Bankers
for Financing the MSME Sector (NAMCABS) and
laying down a framework for accreditation of credit
counsellors.
Agenda for 2016-17: Implementation Status
IV.3 Drawing upon the recommendations of
the Committee on Medium-term Path on Financial
Inclusion (Chairman: Shri Deepak Mohanty),
the Reserve Bank focused on strengthening
the mechanism for effective credit delivery to the productive sectors of the economy. Major
recommendations of the Committee viz., creating
a BC registry; formalising certification training
programmes for BCs; and designing a framework
for accreditation of credit counsellors are nearing
the final stage of implementation.
IV.4 The Financial Inclusion Advisory
Committee (FIAC) which is tasked with the
preparation of the National Strategy for Financial
Inclusion (NSFI) deliberated extensively on its
formulation, while also drawing upon international
best practices on digital financial inclusion. The
strategy document is slated to be launched
nation-wide in the coming year. For more
effective monitoring of the financial inclusion
initiatives being undertaken, granular data up to
district level is being called for from the banks,
as part of the third phase of Financial Inclusion
Plan (FIP) progress reports. A 2-tier training
programme focusing on the core competencies
of financial literacy has been designed for the
capacity building of financial literacy counsellors
in collaboration with the College of Agricultural
Banking (CAB), Pune.
CREDIT DELIVERY
Priority Sector
IV.5 Priority sector lending aims to ensure
adequate and timely availability of credit for those
vulnerable sections of society which are often
deprived of credit due to the perceived lack of
viability and creditworthiness. Priority sector loans
include small value loans to farmers for agriculture
and allied activities, MSMEs, poor people for
housing, students for education, other low income
groups and weaker sections. Social infrastructure
and renewable energy are also eligible categories
under this mechanism. The performance in
achievement of priority sector lending targets by various groups of scheduled commercial banks
(SCBs) is given in Table IV.1.
Table IV.1: Performance in Achievement of
Priority Sector Lending Targets |
(₹ billion) |
End-March |
Public
Sector Banks |
Private
Sector Banks |
Foreign
Banks |
1 |
2 |
3 |
4 |
2016 |
19,850 |
6,480 |
1,104 |
|
(39.3) |
(44.1) |
(35.3) |
2017* |
19,889 |
7,110 |
1,238 |
|
(39.5) |
(42.5) |
(36.9) |
* : Provisional.
Notes: Figures in parentheses are percentages to adjusted net
bank credit (ANBC) or credit equivalent of off balance sheet
exposures (OBE), whichever are higher, in the respective
groups. |
IV.6 An important development during 2016-17 was the operationalisation of priority sector
lending certificates (PSLCs) scheme in April 2016.
The PSLC scheme is a mechanism to incentivise
banks having surplus in lending to different
categories of the priority sector and thereby to
boost overall priority sector lending. PSLCs allow
the market mechanism to drive priority sector
lending by leveraging the comparative strength
of different banks. This scheme allows a bank to
benefit by selling over-achievement of its target
in a particular sector through PSLCs to another
bank, which can buy it to meet its target in that
sector, while selling its own over-achievement of
the target in another sector to another bank and so
on. A platform to enable trading in the certificates
has been provided by the Reserve Bank through
its core banking solution (CBS) portal (e-Kuber).
IV.7 The PSLC platform recorded active
participation from all the eligible entities including
urban co-operative banks and small finance banks
during 2016-17. Among the four PSLC categories,
the highest trading was observed in case of PSLC
– Small & Marginal Farmer, and PSLC – General Categories, with the transaction volumes being
₹229.9 billion and ₹200.2 billion, respectively. An
expected cyclical trend, however, was observed
in the trading volume, which peaked mostly in the
last month of every quarter.
IV.8 In view of the introduction of quarterly
monitoring of priority sector targets, the timing
of the transactions in the earlier or later part of
the year also had an impact on the premium.
Accordingly, PSLCs traded during the first quarter
of 2016-17 witnessed higher premiums in the
range of 3-5 per cent. The total volume of PSLCs
on offer was ₹1,265.5 billion, while the amount
finally settled was ₹498.0 billion as on March 31,
2017. This indicates that with better information
dissemination and increased awareness among
all the eligible participants, the PSLC market is
expected to pick-up in the future, which should lead
to higher margins for all PSLC sellers, incentivising
increased lending to the priority sector.
Flow of Credit to Agriculture
IV.9 The Government has been fixing the target
for agricultural credit every year. During 2016-17,
commercial banks over achieved the target by 28.0
per cent. All other bank groups under-performed
in achieving their targets for agricultural credit
though the overall flow of credit had exceeded the
target as in the previous year (Table IV.2).
Table IV.2: Targets and Achievements for Agricultural Credit |
(₹ billion) |
Year |
Commercial
Banks |
Co-operative
Banks |
RRBs |
Total |
Target |
Achievement |
Target |
Achievement |
Target |
Achievement |
Target |
Achievement |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
2015-16* |
5,900 |
6,430 |
1,400 |
1,533 |
1,200 |
1,193 |
8,500 |
9,155 |
2016-17* |
6,250 |
7,998 |
1,500 |
1,428 |
1,250 |
1,232 |
9,000 |
10,658 |
*: Provisional.
Source: National Bank for Agriculture and Rural Development (NABARD). |
New Initiatives for the MSME sector
IV.10 The Government took several initiatives
related to the MSME sector as it plays a crucial
role in the economy both from the point of view of
its employment generation and poverty alleviation
potential. The Reserve Bank also accords
significant importance to this sector in its agenda
for financial inclusion, with its policy focused on
improving access, adequacy, timeliness, and
price of credit for MSMEs. The Reserve Bank
took several unique initiatives, one of which
was launching NAMCABS in collaboration with
CAB, Pune, in August 2015. Continuing in this
direction, the Reserve Bank launched Version
2 of NAMCABS by employing newer and more
comprehensive training material covering the
latest developments in the sector and providing
professional advice to MSME entrepreneurs in the
form of credit counsellors.
Sanction of Additional Working Capital Limits to
Micro and Small Enterprises (MSEs)
IV.11 In August 2015, banks were advised to
incorporate with their Boards’ approval, a clause
for fixing a separate additional limit in their
lending policy to MSEs, at the time of sanction/
renewal of working capital limits, specifically for
meeting the temporary increase in working capital
requirements arising mainly due to unforeseen/
seasonal increase in demand for products
produced by them. During 2016-17, keeping in
view the possible cash flow mismatches likely to
be faced by MSE borrowers due to the withdrawal
of legal tender status of SBNs, banks were further
advised to use the same facility of providing
‘additional working capital limit’ to their MSE
borrowers to overcome such difficulties. This was
announced as a one-time measure up to March
31, 2017 and to be normalised thereafter in the
fresh working capital assessment cycle.
Framework for rolling out Certified Credit
Counsellors (CCC) through SIDBI
IV.12 Following the recommendation of the
Committee on Medium-term Path on Financial
Inclusion to explore a system of professional credit
intermediaries/advisors for MSMEs, the Reserve
Bank had announced in its first bi-monthly monetary
policy statement for 2016-17 that a framework for
accreditation of credit counsellors who can act
as facilitators for entrepreneurs to access the
formal financial system with greater ease and
flexibility would be drawn up. Credit counsellors
were to also assist MSMEs in preparing project
reports in a professional manner which would,
in turn, help banks make more informed credit
decisions. Accordingly, the Reserve Bank finalised
a framework for accreditation of credit counsellors
and the same was provided to Small Industries
Development Bank of India (SIDBI) for rolling out
the certified credit counsellors scheme by acting
as their registering authority. SIDBI, after finalising
the board-approved operational guidelines,
launched the scheme in July 2017.
IV.13 Credit flow to the MSE sector is reflective
of these measures taken by the Reserve Bank
during the year and several Government initiatives
undertaken during the past few years (Table IV.3).
Table IV.3: Credit Flow to MSEs |
Year |
Number of Accounts
(million) |
Amount Outstanding
(₹ billion) |
MSE credit as per cent of
ANBC |
1 |
2 |
3 |
4 |
2015-16 |
20.4 |
9,964.3 |
14.6 |
2016-17* |
23.2 |
10,698.2 |
14.3 |
*: Provisional. |
Studies on the Efficacy of Credit Delivery Models
IV.14 The Reserve Bank conducted a study on the
efficacy of the Self Help Group (SHG)-Bank Linkage
Programme (SBLP) with a view to analysing in detail the inter-connectedness between SBLP and
the National Rural Livelihoods Mission (NRLM) as
well as the long-run feasibility and usefulness of the
SHG programme so that it can serve its intended
purpose without building up excessive credit risk
in the system. The report is under finalisation.
The Reserve Bank also conducted an impact
assessment survey, modelled on a randomised
control trial (RCT) basis, with the completion of
a year of conducting the NAMCABS workshops
for the branch managers of the specialised
MSME branches through its select nine regional
offices. The survey revealed that the branches
with trained personnel generally outperformed
those with untrained ones, especially in lending
to micro enterprises. The impact on qualitative
parameters also showed positive developments
by way of work process innovations, viz.,
(i) helping borrowers in preparing project reports
and assisting in documentation; (ii) introduction
of simplified application formats for MSME loans;
(iii) branch officials going to the doorsteps of the
borrowers to educate them on various schemes;
and (iv) introduction of the lending automation
processing system (LAPS) for speedy processing
and sanction of MSME loans. It was, therefore,
decided to continue with an enhanced and
comprehensive capacity building programme as
NAMCABS Version 2 by incorporating, inter-alia,
newer developments in terms of government
initiatives, Reserve Bank policy initiatives and use
of technology in MSME financing.
FINANCIAL INCLUSION
IV.15 The Reserve Bank continued with its
efforts towards fulfilling the financial inclusion
agenda during the year to help realise the intended
economic and social objectives. In this direction,
several new initiatives were undertaken during the
year.
IV.16 The Committee on Medium-term Path on
Financial Inclusion, which submitted its report in
December 2015, sought to propel the economy
on to a medium-term sustainable inclusion path.
The Committee had recommended for setting up
a framework for a BC registry and BC certification,
following which instructions regarding the
same were issued to Indian Banks’ Association
(IBA) during the year. As recommended by
the Committee, a financial literacy week was
conducted across the country from June 5-9,
2017. The literacy week focussed on four broad
themes, viz., Know Your Customer (KYC),
Exercising Credit Discipline, Grievance Redressal
and Going Digital (UPI and *99#). During the
week, banks were advised to display posters on
the four common themes inside branch premises
and also display one message each day on the
homepage of their respective websites as well as
ATM screens across the country. Further, Financial
Literacy Centres (FLCs) and rural branches were
advised to conduct special camps during the
week. A movable asset registry was also launched
by the Central Registry of Securitisation Asset
Reconstruction and Security Interest of India
(CERSAI), as recommended by the Committee to
facilitate lending to the MSME sector.
Strengthening the BC Model
IV.17 Strengthening the BC model has been
one of the important development agendas,
recognising the significant role played by BCs in
providing last mile financial services in the under-banked
and unbanked regions of the country.
Having a BC registry and certification process in
place would go a long way in strengthening the BC
model.
BC Registry
IV.18 A BC registry is proposed to be structured
as a database of comprehensive information pertaining to the existing or potential business
correspondents. The BC registry will give a
holistic view of under-banked and less penetrated
areas in a region and accordingly the delivery
of financial services can be improved in such
areas through appropriate policy interventions. It
will help in effective monitoring and oversight of
BC operations. It is expected that banks and the
regulators would utilise this database to gather
critical insights and frame policies accordingly for
strengthening the BC infrastructure. The Reserve
Bank has developed the framework for the BC
registry and IBA is in the process of setting up the
online registry portal.
BC Certification
IV.19 As the customers served by the BCs
are usually new to the formal financial system,
it is essential to have knowledgeable business
correspondents. Thus, a need was recognised
to upgrade the skill sets of the BC agents
thereby making them more sensitive towards the
requirements of various customer groups who use
the BC channel, viz., small and marginal farmers,
SHGs, micro, medium and small entrepreneurs,
migrant labourers and retired people. Accordingly,
the Reserve Bank has developed a framework
for BC certification with basic and advanced level
courses to enhance the functional and behavioural
competencies of BCs. On the basis of this
framework, IBA has set up a Governing Council
comprising members each from IBA, NABARD,
two members each from academics and experts
from industry. The Council is in the process of
developing the course curriculum.
Financial Inclusion Plans
IV.20 The Board approved Financial Inclusion
Plans (FIPs) prepared by the domestic scheduled
commercial banks provide a structured and planned approach to financial inclusion. The Plans
capture self-set targets of the banks on parameters
such as the number of outlets (branches and BCs),
Basic Savings Bank Deposit Accounts (BSBDAs)
opened by bank branches and BCs, overdraft
facilities availed in those accounts, transactions
in Kisan Credit Card (KCC), General Credit Card
(GCC) accounts and transactions through the
BC-ICT channel. The progress made on these
parameters is reported to the Reserve Bank by
banks on a monthly basis and the progress in
this regard as on end-March 2017 is set out in
Table IV.4.
Table IV.4: Financial Inclusion Plan : A Progress Report |
Particulars |
End- March 2010 |
End- March 2016 |
End- March 2017 |
1 |
2 |
3 |
4 |
Banking Outlets in Villages – Branches |
33,378 |
51,830 |
50,860 |
Banking Outlets in Villages>2000-BCs |
8,390 |
98,958 |
105,402 |
Banking Outlets in Villages<2000- BCs |
25,784 |
432,271 |
438,070 |
Total Banking Outlets in Villages – BCs |
34,174 |
531,229 |
543,472 |
Banking Outlets in Villages- Other Modes |
142 |
3,248 |
3,761 |
Banking Outlets in Villages -Total |
67,694 |
586,307 |
598,093 |
Urban Locations covered through BCs |
447 |
102,552 |
102,865 |
BSBDA-Through branches (No. in million) |
60 |
238 |
254 |
BSBDA-Through branches( Amt. in ₹ billion) |
44 |
474 |
691 |
BSBDA-Through BCs (No. in million) |
13 |
231 |
280 |
BSBDA-Through BCs (Amt. in ₹ billion) |
11 |
164 |
285 |
BSBDA-Total (No. in million) |
73 |
469 |
533 |
BSBDA Total (Amt. in ₹ billion) |
55 |
638 |
977 |
OD facility availed in BSBDAs (No. in million) |
0.2 |
9 |
9 |
OD facility availed in BSBDAs (Amt. in ₹ billion) |
0.1 |
29 |
17 |
KCCs -Total (No. in million) |
24 |
47 |
46 |
KCCs -Total (Amt. in ₹ billion) |
1,240 |
5,131 |
5,805 |
GCC-Total (No. in million) |
1 |
11 |
13 |
GCC-Total (Amt. in ₹ billion) |
35 |
1,493 |
2,117 |
ICT A/Cs-BC-Total Transactions (No. in million) |
27 |
827 |
1,159 |
ICT A/Cs-BC-Total Transactions (Amt. in ₹ billion) |
7 |
1,687 |
2,652 |
IV.21 During 2016-17, the banking outlets
opened through BCs in villages increased by
12,243, while the number of accounts opened
through BCs increased by 49 million. Similarly,
the total number of transactions through the BC channel increased by 332 million, while the
amount transacted increased by ₹965 billion.
IV.22 With the conclusion of the second phase
of FIP on March 31, 2016, all domestic scheduled
commercial banks (including RRBs) were advised
to set new Board approved FIP targets for the next
three years (April 2016-March 2019). Recognising
the importance of granular data for effective
monitoring of the progress made by banks,
the third phase FIP template has been revised
incorporating new parameters keeping in view
the emerging financial inclusion landscape. In this
phase, banks have been asked to provide data
up to the district level across population groups
of metro, urban, semi-urban and rural segments.
Work is also underway for the formulation of a
National Strategy for Financial Inclusion (NSFI)
(Box IV.1).
Box IV.1
National Strategy for Financial Inclusion
The Reserve Bank had set up the Financial Inclusion
Advisory Committee (FIAC) in 2012 to review financial
inclusion policies on an on-going basis and to provide
expert advice to the Reserve Bank in this matter. Given the
renewed focus on financial inclusion by the Government of
India, the on-going implementation of the Pradhan Mantri
Jan-Dhan Yojana (PMJDY) and the need for convergence
of the financial inclusion efforts of various stakeholders,
FIAC was reconstituted in June 2015. Apart from continuous
reviewing of the financial inclusion policy, monitoring the
progress of financial inclusion and financial literacy, and
assessing their impact, the reconstituted FIAC has been
actively involved in the process of formulating the National
Strategy for Financial Inclusion (NSFI), a public document.
NSFI will comprehensively present the strategy developed
at the national level to systematically accelerate the level
of financial inclusion. It is being developed through a broad consultative process involving, among others, public and
private sector stakeholders engaged in financial sector
development. Typically, it will include an analysis of the
current status of, and constraints on, financial inclusion in
the country; a measurable financial inclusion goal; how the
country proposes to reach this goal and by when; and how it
will measure the progress and achievements of the strategy.
The proposed strategy pillars for NSFI include: developing
physical and digital infrastructure, regulatory framework,
fostering competition, increased financial awareness,
grievance redressal mechanism and scientific assessment
measures.
Given the recent thrust on digital financial inclusion and
in line with international best practices, NSFI also seeks
to draw upon the G-20 High Level Principles on Digital
Financial Inclusion, adapted to meet the India-specific
requirements. |
Penetration of Banking Services: Achievement of Roadmaps
IV.23 The Reserve Bank had taken several steps
to provide banking facilities in all the unbanked
villages in the country. A roadmap to cover villages
with population more than 2,000 was first rolled out
in 2010. A total of 74,414 villages with population
more than 2,000 were identified and allotted to
various banks (public sector banks, private sector
banks and regional rural banks) through State
Level Bankers’ Committees (SLBCs) for coverage.
All the identified villages have been provided
banking services through branches or business
correspondents or through other modes such as
ATMs and mobile vans. In June 2012, a roadmap
was rolled out to provide banking services to
unbanked villages with population less than 2,000.
A total of 491,825 unbanked villages across the
country with a population of less than 2,000
were allotted to various banks through SLBCs for
coverage. As on March 31, 2017, 96.0 per cent
(472,136 villages) of the total villages allotted had been covered comprising of 19,875 villages
through brick and mortar branches, 431,359
villages through BCs and 20,902 villages through
other modes.
IV.24 Continuing with its efforts to provide
banking services in unbanked villages, the SLBC
convenor banks were advised in December 2015
to identify villages with population above 5,000
without a bank branch of a scheduled commercial
bank in their State and allot these villages
among scheduled commercial banks for opening
branches.
IV.25 On May 18, 2017, the Reserve Bank
issued revised guidelines on branch authorisation
policy with a view to facilitate financial inclusion as
also to provide flexibility to banks on the choice
of delivery channel. Accordingly, SLBC convenor
banks have been advised to review and identify
the unbanked rural centres (URCs) in villages
with population above 5,000 and ensure that
such unbanked rural centres are banked forthwith by opening of CBS enabled banking outlets by
December 31, 2017.
Assignment of SLBC Convenorship, Telangana
IV.26 In view of the merger of State Bank of
Hyderabad with State Bank of India, the SLBC
Convenorship of Telangana has been assigned to
the State Bank of India.
Assignment of Lead Bank Responsibility
IV.27 During the year, 21 new districts were
formed in Telangana, taking the total number of
districts in the State to 31. State Bank of Hyderabad,
Andhra Bank, Syndicate Bank and Canara Bank
were assigned lead bank responsibility of the new
districts. In Manipur, seven new districts were
formed taking the total number of districts in the
State to 16. United Bank of India and State Bank
of India were assigned lead bank responsibility of
the new districts. In Haryana and West Bengal, one
new district each was created and Punjab National
Bank and State Bank of India were assigned
lead bank responsibility of the new districts,
respectively. Lead bank responsibility of the three
newly created districts in Arunachal Pradesh was
assigned to the State Bank of India. Further, in
view of the merger of Associate Banks with the
State Bank of India, the lead bank responsibility
of districts hitherto held by the Associate Banks
in the states of Karnataka, Kerala, Rajasthan,
Telangana and Punjab have been assigned to
State Bank of India. As on June 2017, lead bank
responsibility has been assigned in 706 districts
across the country.
FINANCIAL LITERACY
IV.28 Financial literacy has been an important
element in the financial inclusion plan of the
Reserve Bank. During 2016-17, added importance
was attached to spreading financial literacy, given
the skewed distribution and limited reach of
financial literacy centres in some states as well
as in view of the withdrawal of legal tender status of SBNs and the push for digital transactions. A
number of initiatives were undertaken, which
included conducting a pan-India Financial Literacy
and Inclusion Survey (Box IV.2), Pilot Project on
Setting up Centres for Financial Literacy at the
block levels (Box IV.3), digital focus in literacy
camps, capacity building for FLC counsellors
and rural branch managers, and observation of a
financial literacy week (Also see para IV.16).
Financial Literacy by Financial Literacy Centres and Rural Branches of Banks - A Policy Review
IV.29 Following withdrawal of legal tender status of
SBNs, the policy on conduct of camps by FLCs and
rural branches of banks was reviewed with a focus
on going digital. Accordingly, banks were advised
to conduct special camps through their FLCs (2
camps per month) for a period of one year on
‘Going Digital’ through UPI and *99# (USSD). Two
posters on UPI and *99# have been prepared for
this purpose. The Financial Awareness Messages
(FAME) booklet that contains 11 institution-neutral
financial awareness messages has been
published in 13 languages for the benefit of the
trainers and the camp participants. Rural branches
of banks are required to conduct one camp per
month covering all the messages that are part of
the FAME booklet and the two digital platforms
UPI and *99# (USSD).
Train the Trainers Programme (TOT)
IV.30 A two-tier training programme has
been designed for the capacity building of FLC
counsellors and rural branch managers. During
Tier-1 of the program, CLOs (Chief Literacy Officer
attached to the corporate office of the banks),
LLOs (Lead Literacy Officers - faculty members
of the Banks’ training/staff colleges) and RLOs
(Regional Office Literacy Officers from regional
offices of the Reserve Bank) have been trained
at CAB, Pune. In Tier-2 of the programme, faculty
members of the Bank’s training/staff colleges will undertake training sessions for FLC counsellors
and rural branch managers. A comprehensive
curriculum on the core competencies of financial
literacy has been prepared for the benefit of the
trainers.
Box IV.2
Pan India Financial Literacy and Inclusion Survey
The Reserve Bank of India undertook a pan-India Financial
Literacy and Inclusion Survey based on the OECD/INFE
(International Network on Financial Education) Toolkit. The
survey was conducted in 29 states and 5 union territories
(excluding Andaman & Nicobar Islands and Lakshadweep
Islands). Quotas for age, gender and socio economic classes
were fixed across the locations to achieve a representative
sample. The total sample size for the survey was 20,573
respondents.
As per the OECD/INFE methodology, financial literacy is
measured across three components viz. financial knowledge,
attitude, and behaviour. Questions on financial knowledge
test the concepts of time value of money, calculation of
interest, compounding, definition of inflation, risk and return,
and diversification. Financial attitude captures the tradeoff
between short term gratification (consumption) and
long term planning (saving). Financial behaviour questions
are designed to test decision making in the household,
budgeting, active saving, considered purchasing, paying
bills on time and choosing financial products.
The maximum score for the three components of financial
knowledge, financial attitude and financial behaviour are 7, 5 and 9, respectively. India’s average scores in the three
components are 3.7, 2.6 and 5.6, respectively. In India, the
average score is 11.9 out of the total score of 21.
OECD/INFE considers the threshold score as 5 out of 7 for
financial knowledge, 3 out of 5 for financial attitude, and 6
out of 9 for financial behaviour. The percentage of Indian
population scoring above the minimum required threshold
score is 32 per cent for financial knowledge, 28 per cent
for financial attitude, and 56 per cent for financial behaviour.
The results of the survey are presented in the chart below.
|
IV.31 As at end-March 2017, 1,376 FLCs were
operational in the country. During the year ended
March 2017, 96,315 financial literacy activities
were conducted by the FLCs as against 87,710
activities during the preceding year.
Box IV.3
Pilot Project on Setting up Centres for Financial Literacy (CFLs)
To explore innovative and participatory approaches to
financial literacy, the Reserve Bank is initiating a pilot
project on financial literacy at the block level. The pilot
project is being commissioned in nine states across 80
blocks by NGOs in collaboration with the sponsor banks.
Six NGOs registered with the Depositors Education and
Awareness Fund (DEA Fund) viz., CRISIL Foundation,
Dhan Foundation, Swadhaar FinAccess, Indian School of Micro Finance for Women (ISMW), Samarpit and PACE
Foundation have been selected to execute the pilot project
in collaboration with the banks. The pilot project will be
executed with the objectives of active saving and good
borrowing, financial planning and goal setting, going digital
and consumer protection. CFLs would be set up under a
common name and logo “Moneywise Centre for Financial
Literacy”. |
Agenda for 2017-18
IV.32 Going forward, work related to the
preparation of National Strategy for Financial
Inclusion, which will comprehensively lay down
the policy approach to hasten the process of
financial inclusion, will be completed. Financial
literacy content for certain target groups like
SHGs, farmers, MSEs, students and senior
citizens will be introduced. The block level CFLs
are expected to begin financial literacy activities in 2017-18, following which an independent impact
assessment study would be conducted by the
Reserve Bank. As integrity and consistency of
data are crucial for framing policy and designing
strategies, an Automated Data Extraction Project
(ADEPT) from banks to the Reserve Bank and a
portal to capture data relating to natural calamities
will be implemented to strengthen the existing
processes for information and data collection from
banks on a real time basis. |