The past month has seen many positive regulatory moves by the RBI, removing the rule that tied a business correspondent agent within 30 km of a bank branch, allowing non-deposit taking NBFCs to become business correspondents etc. The latest news that the Modi government will be going ahead with Aadhaar-enabled Direct Benefits Transfer (DBT) is also welcome, as it puts to rest speculation about the UPA-led programme. There are however many glitches to be fixed in the government benefits payment system and as India moves ahead on its financial inclusion mission, we need data-based policy to address the existing shortcomings. This month’s lead story focuses on InterMedia’s recent report,India: Financial Services Use and Emerging Digital Pathwaysthat provides valuable data and makes detailed recommendations for bettering the DBT process, furthering the uptake of digital financial services and raising financial awareness.
The report draws from two sources: a) The Tracker Survey: A nationally representative survey of 45,024 Indian adults on access and use of financial services, as well as barriers and potential for future use and b) The Digitized Government Payments Study: A qualitative study with government-payment beneficiaries across four districts in the state of Maharashtra, focusing on the potential for digital government payments to expand financial inclusion. The highlights of the report are as follows:
The financialservices market in India is characterized by a high reliance on cash. Most borrowers rely on those within their personal networks, including relatives, neighbours and friends (67 percent). 11 percent of borrowers borrow from a bank, 12 percent borrow from a private money lender and 4 percent borrow within their savings group.
Usage of banking services is low; access does not lead to usage. 48 percent of respondents have accessed a bank account and 25 percent ofrespondents actively use a bank account. Only 54 percent of bank account holders have used their bank accounts actively (i.e. in the past 90 days).
There are disparities in access and active use of bank accounts across gender and location within states that often mirror socio-economic differences in India e.g. borrowing through informal channels such as money lenders is more prominent in Bihar.
Nationally, 35 percent of all beneficiaries receive direct deposits. 12 percent of survey respondents said they receive payments from the government (excluding government salary payment). The majority of payments are received in full, but 13 percent, nationally, said they have to pay a bribe to be able to access their payments, regional variations exist.
Section I: Policy – the latest from India’s policymakers
The Indicus Centre for Financial Inclusion was launched in 2011 to distil and disseminate information on accelerating the poor’s access to high-quality financial services. The Centre is supported by the Bill & Melinda Gates Foundation. http://www.indicus.net/icfi
