Tag Archives: Financial Inclusion

ePayments View – First Bi-monthly Monetary Policy Statement, 2014-15 Press Statement by the Governor

 

As a Safe ePayments Motivator, the following are the most important aspects of the ‘First Bi-monthly Monetary Policy Statement, 2014-15’.

    • To enlarge the Banking Correspondent (BC) base, the inclusion of new entities, as well as a relaxation of existing distance restrictions, is being considered, enlargement of catchment area of the Business Correspondents (BCs), including through possible inclusion of new entities as BCs, are under examination. To overcome the challenge of cash management of BCs which is impeding the scaling up of the BC model, the Reserve Bank will collate best practices and issue a fresh set of guidelines to commercial banks.
  • A number of measures to protect consumers are being envisaged. For example, Banks should not levy penal charges for non-maintenance of minimum balance in ordinary savings bank account and inoperative accounts, but instead curtail the services accorded those accounts until the balance is restored.
  • Measures have been taken to expand banking services to the financially excluded sections of society with the appropriate application of technology. The GIRO Advisory Group (GAG) has recommended a tiered structure approach for a centralised bill payment system that will enable inter-operability viz., (a) Bharat Bill Payment System (BBPS) and (b) Bharat Bill Payment Operating Units (BBPOUs). The recommendations of the GAG report are under examination.
  • A Technical Committee (Chairman: Shri B. Sambamurthy) set up to examine the challenges being faced by banks in taking mobile banking forward for achieving financial inclusion submitted its report in January 2014. This was placed in the public domain for feedback. The recommendations of the Committee will be examined closely, and plans for the way forward will be discussed with stakeholders.
  • Consumer protection is an integral aspect of financial inclusion. The Reserve Bank proposes to frame comprehensive consumer protection regulations based on domestic experience and global best practices.
  • In the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty.
  • Banks should also not take undue advantage of customer difficulty or inattention. Instead of levying penal charges for non-maintenance of minimum balance in ordinary savings bank accounts, banks should limit services available on such accounts to those available to Basic Savings Bank Deposit Accounts and restore the services when the balances improve to the minimum required level.
  • Banks should not levy penal charges for non-maintenance of minimum balances in any inoperative account.
  • Banks should also limit the liability of customers in electronic banking transactions in cases where banks are not able to prove customer negligence.
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Unsecured Exposure Norms for UCBs – RBI’s revised guidelines

Vide RBI our circular No. UBD.BPD.(PCB) Cir No.21/13.05.000/2010-11 dated November 15, 2010 on ‘Maximum Limit on Unsecured Loans and Advances’  RBI had prescribed that that the total unsecured loans and advances granted by a UCB to its members should not exceed 10 per cent of its total assets.

To boost lending to priority sector and also to speedup the financial inclusion goal, UCBs fulfilling certain conditions laid down by RBI may, with the prior approval of the Reserve Bank, grant unsecured loans (with or without surety) upto 25% of their total assets:

The following are the pre-conditions, before the UCBs can apply to RBI.

  • The entire loan portfolio of the bank should be covered under priority sector.
  • All the loans should be sanctioned as small value loans ie upto `20,000/- in a single account.
  • The UCB should have assessed CRAR of 9%.
  • The assessed gross NPAs of the UCB should be less than 10 per cent of gross advances.
  • Financial parameters for the above purposes, may be considered as on March 31 of the previous year.
  • Assessed CRAR and gross NPAs would be as assessed by the latest inspection carried out by the Reserve Bank of India.

UCBs fulfilling the above conditions and desirous of being part of the financial inclusion drive, can approach the RBI Regional Office of UBD for permission.

 

UCBs are broadly classified into Tier I or Tier II

Tier I UCBs were defined as UCBs with:

  • Deposit base below Rs1 billion operating in a single district.
  • Deposit base below Rs1 billion operating in more than one district provided the branches were in contiguous districts, and deposits and advances of branches in one district separately constituted at least 95 per cent of the total deposits and advances, respectively, of the bank.
  • Deposit base below `1 billion, whose branches were originally in a single district but subsequently became multi-district due to re-organisation of the district.

 

All other UCBs were defined as Tier II UCBs.

PM constitutes National Committee on Direct Cash Transfers

 

 

The Prime Minister under his direct leadership has constituted a high-level coordination committee to speed up the Direct Cash Transfers mechanism for various government schemes and programs.

The committee has been named National Committee on Direct Cash Transfers and the chief aim of the committee is to coordinate action amongst various stakeholders for the smooth take of Direct Cash Transfers.

The Direct Cash Transfers are envisaged for its various government programs, be it Central or Stage. It is expected that the private sector too will be part of the program in the near future.

The National Committee chaired by the Prime Minister will have as its members eleven Cabinet Ministers, two Ministers of State with independent charge, the Deputy Chairman Planning Commission, the Chairman UIDAI, the Cabinet Secretary with the Principal Secretary to the PM as the convenor.

Apart from the National Committee an Executive Committee is also being setup to assist the National Committee.

Once the broad outlines are finalized by the National Committee and Executive Committee, the nitty-gritty of the actual pilot implementation would be taken care by 3 Mission Mode Committees.

The 3 Mission Mode Committees are the Technology Committee, Financial Inclusion Committee and Implementation committees at the individual ministries and departments.

The objectives of the Mission Mode Committees are:

a) Technology Committee to focus on the technology, payment architecture and IT issues.

B) Financial Inclusion Committee to focus on ensuring universal access to banking and ensuring complete financial inclusion.

c) Implementation Committees on Electronic Transfer of Benefits at the Ministry/ Department level to work out the details of cash transfers for each department such as data bases, direct cash transfer rules and control and audit mechanisms.

The National Committee on Direct Cash Transfers would engage in the following tasks:

a) Provide an overarching vision and direction to enable direct cash transfers of benefits under various government schemes and programmes to individuals, with the objective of enhancing efficiency, transparency and accountability in the whole process.

b) Determine broad policy objectives and strategies for direct cash transfers.

c) Identify Government programmes and schemes for which direct cash transfers to individuals can be adopted and suggest the extent and scope of direct cash transfers in each case.

d) Coordinate the activities of various Ministries/ Departments/ Agencies, for speedy rollout of direct cash transfers across the country.

e) Specify timelines for the rollout of direct cash transfers.

f) Review the progress of implementation of direct cash transfers and provide guidance for mid-course corrections.

g) Any other related matter.

 

The National Committee on Cash Transfers will be assisted by an Executive Committee on Direct Cash Transfers chaired by the Principal Secretary to PM and the Secretaries of the concerned Ministries and the DG UIDAI. The Secretary Planning Commission will be the convenor.

The Executive Committee on Direct Cash Transfers would engage in the following tasks:

a) Identify and propose for the consideration of the National Committee on Cash Transfers such Government programmes and schemes for which direct cash transfers to individuals can be adopted.

b) Ensure the preparation of and approve strategies and action plans for the speedy rollout of direct cash transfers in areas agreed to and in line with the agreed timelines.

c) Coordinate the activities of various Ministries/ Departments / Agencies involved in enabling direct cash transfers to ensure that the architecture and framework for direct cash transfers is in place for rolling out direct cash transfers across the country.

d) Review and monitor the rollout of direct cash transfers and undertake mid-course corrections as and when necessary.

e) Any other related matter entrusted by the National Committee on Cash Transfers or relating to direct cash transfers.

As and when required, other experts will be invited to join the National Committee or the Executive Committee as the case might be.

As the ‘Direct Cash Transfer’, is UPA’s major tool to gain visibility and increase its vote-bank, the combined effort of the political and bureaucracy should minimize ground-level complaints.

Otherwise the tide of the ground level complaints will throw surprises at the polling booth.

Related News Article: Direct Cash Transfer

 

Disseminated by Prashant N. Banker by daytime, Blogger by night.