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 Rural Infrastructure Development Fund (RIDF) deposits, Warehousing Infrastructure Fund deposits and Food Processing Fund deposits placed by the Commercial Banks as deposits with NABARD out of priority sector shortfalls. Contribution for GoI schemes/ initiatives, which is monitored by the Sub-Committee of the Advisory Board, is provided by Government of India.
The operations, functioning and utilization of FIF are governed by the decisions of the Advisory Board of FIF constituted by the Government of India. A Sub-Committee of Advisory Board governs the GOI funded schemes on FI and its recommendations are submitted to Advisory Board.
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 infrastructureUndertaking policy formulation, capacity building and networking with various stakeholders to achieve the above objectives
- Providing support to RRBs and RCBs to on-board various regulatory platforms
5. NABARD’s Initiatives
NABARD has supported Financial Literacy efforts through various initiatives keeping in mind its importance to augment demand for financial services, especially for those offered on the digital platform. In addition, in order to augment the supply side of the financial ecosystem, NABARD had facilitated the process for on-boarding of Regional Rural Banks and Rural Co-operative Banks to CBS. Support is also extended to the banks including Scheduled Commercial Banks, Small Finance Bank and Payments Banks for on-boarding to digital platforms, improving connectivity and meeting regulatory requirements. Some of the major achievements of the Department are:
(i) On-boarding 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.
(ii) On-boarding 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.
(iii) Expansion of Payment Infrastructure: The shift to digital mode of transactions in rural areas is being promoted vigorously 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.
(iv) Adopting Post CBS Technologies: The banks are expected to adopt new financial technologies in view of the technological and product innovations which can enhance their outreach for greater financial inclusion. Banks have been supported to adopt new post CBS technologies like BHIM UPI, Mobile Banking, PFMS, CKYCR, AEPS, Green Pin, Bharat Bill Payment System etc.
(v) Initiatives undertaken to mitigate COVID-19 Pandemic effect vis-à-vis NABARD’s mandate and the outcome:
- PMJDY woman A/c holders: During the COVID-19 pandemic, DFIBT, NABARD played a crucial role in collating the data on ‘PMJDY woman A/c holders for direct cash transfer’ from all RCBs which was required by DFS, GoI. With the efficient coordination of the department with all Regional Offices (ROs) which further followed up closely with the respective banks in their state, the information could be furnished to GoI within a very short span of time.
- Demonstration of Banking Technology through Mobile Van: In order to bring digital financial literacy in the remote areas and to give further thrust to effective financial inclusion, the scheme for providing support for mobile vans was modified to support a maximum of five demo vans per district on a select basis. This has greatly helped in delivering banking services during the pandemic.