CAIIB Rural Banking Module C Unit 4 : Initiatives Of RBI Under Financial Inclusion & Financial Education Programs And Implementation Of Various Poverty Reduction Programs

03/01/2024

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CAIIB Rural Banking Module C Unit 4 : Initiatives Of RBI Under Financial Inclusion & Financial Education Programs And Implementation Of Various Poverty Reduction Programs (New Syllabus)

IIBF has released the New Syllabus Exam Pattern for CAIIB Exam 2023. Following the format of the current exam, CAIIB 2023 will have now four papers. The CAIIB Rural Banking includes an important topic called “ Initiatives Of RBI Under Financial Inclusion & Financial Education Programs And Implementation Of Various Poverty Reduction Programs”. Every candidate who are appearing for the CAIIB Certification Examination 2023 must understand each unit included in the syllabus.

In this article, we are going to cover all the necessary details of CAIIB Rural Banking Module B Unit 4 : Initiatives Of RBI Under Financial Inclusion & Financial Education Programs And Implementation Of Various Poverty Reduction Programs, Aspirants must go through this article to better understand the topic, Initiatives Of RBI Under Financial Inclusion & Financial Education Programs And Implementation Of Various Poverty Reduction Programs and practice using our Online Mock Test Series to strengthen their knowledge of Initiatives Of RBI Under Financial Inclusion & Financial Education Programs And Implementation Of Various Poverty Reduction Programs. Unit 4 : Initiatives Of RBI Under Financial Inclusion & Financial Education Programs And Implementation Of Various Poverty Reduction Programs

National Strategy For Financial Inclusion

The National Strategy for Financial Inclusion (NSFI) 2019-24, seeks to address the inherent barriers of access to a gamut of financial products and services.
The National Strategy for Financial Inclusion for India 2019-2024 has been prepared by RBI, under the aegis of the Financial Inclusion Advisory Committee and is based on the inputs and suggestions from GOI, other financial sector regulators viz. Securities Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority of India (PFRDA).

Strategic Objectives:

The NSFI visualizes to make the financial services available, accessible and affordable to all the citizens in a safe and transparent manner, to support inclusive and resilient multi-stakeholder led growth.
Universal access to financial services, providing basic bouquet of financial services, access to livelihood and skill development, financial literacy and education, customer protection and grievance redressal and effective coordination have been identified as the strategic pillars for holding up the aforesaid vision.

Universal Access to Financial Services

Providing Universal Access to Financial Services by expanding the outreach is the key foundation for a successful financial inclusion strategy. The NSFI has spelt out the following action plans and milestones for the accomplishing the task:-

Increasing outreach of banking outlets of Scheduled Commercial Banks/Payment Banks/Small Finance Banks, to provide banking access to every village, within a 5 km radius/hamlet of 500 households in hilly areas
Strengthen the eco system for various modes of digital financial services in all the Tier II to Tier VI centres, to create the necessary infrastructure to move towards a less cash society.
Leverage on the development in fin-tech space, to encourage financial service providers, to adopt innovative approaches for strengthening outreach through virtual modes, including mobile apps so that, every adult has access to a financial service provider, through a mobile device
Move towards an increasingly digital and consent-based architecture, for customer on-boarding.

Providing Basic Bouquet of Financial Services:

Every willing and eligible adult who has been enrolled under the PMJDY to be enrolled under an insurance scheme (Pradhan Mantri Jeevan Jyoti Bima Yojana-PMJJBY, Pradhan Mantri Suraksha Bima Yojana- PMSBY, etc.) Pension Scheme.
Capacity building of all BCs either directly by the parent entity or through accredited institutions.
Make the Public Credit Registry (PCR) fully operational so that authorized financial entities can leverage on the same for assessing credit proposals from all citizens.

Access to livelihood and skill development:

While ensuring access to livelihood and skill development to the targeted group, it has been recommended convergence of objectives of various employment generation and skill development programs like National Rural Livelihoods Mission (NRLM), National Urban Livelihoods Mission (NULM), Pradhan Mantri Kaushal Vikas Yojana (PMKVY) and other state level programs, through an integrated approach.

Financial Literacy And Education

The following action plans have been identified for the purpose:-

Develop financial literacy modules through National Centre for Financial Education (NCFE) that cover financial services in the form of Audio-video content/booklets, etc.
Focus on process literacy along with concept literacy, which empowers the customers to understand not only what the product is about, but also helps them how to use the product by using technology led digital kiosk, mobile apps, etc.,
Expand the reach of Centres for Financial Literacy, at every block in the country.

Customer Protection and Grievance Redressal:

The following strategies are proposed:-

Strengthening the internal grievances redressal mechanism of financial service providers, for effectiveness and timely response.
Develop a robust customer grievance portal/ mobile app, which acts as a common interface for lodging, tracking and redressal status of the grievances, pertaining to financial, collectively by all the stakeholders.
Operationalize a Common Toll-free helpline, which offers response to the queries pertaining to customer grievances across banking, securities, insurance and pension sectors.
Develop a portal to facilitate inter-regulatory coordination for redressal of customer grievance.

Effective Co-ordination

The following action plans are suggested to ensure effective and successful coordination:-

Strengthen the various fora under Lead Bank Scheme, to ensure the achievement of the vision of the strategy at the ground level.
Leverage on the emerging developments in technology to promote effective stakeholder coordination by having in place a digital dashboard/MIS monitoring.
Encourage decentralized approach to planning and development, by creating a forum to actively involve Gram Panchayats/Civil Society/NGs to accelerate financial inclusion using various tools like social audit.

Direct Benefit Transfer

With the aim of reforming Government delivery system by re-engineering the existing process in welfare schemes for simpler and faster flow of information / funds and to ensure accurate targeting of the beneficiaries, de-duplication and reduction of fraud, Direct Benefit Transfer (DBT) was started on 1st January, 2013. With the rapid rollout of Aadhaar in the country, it was felt possible to move to a system of transferring cash benefits directly to the poor.

With a view to facilitating DBT for the delivery of social welfare benefits by direct credit to the bank accounts of beneficiaries, RBI has advised banks to:

Open accounts for all eligible individuals in camp mode with the support of local government authorities
Seed the existing accounts or the new accounts opened with Aadhaar numbers
Put in place an effective mechanism to monitor and review the progress in the implementation of DBT.

SLBC Convenor Banks and the Lead Banks have been advised to institute a monitoring and review mechanism to periodically assess and evaluate the progress made in the implementation of DBT by banks.

Guidelines Issued By RBI Under DAY-NRLM

The guidelines issued by RBI to the banks for successful implementation of the scheme are as follows:-

Guidelines Issued By RBI Under NULM

Relief Measures By Banks In Areas Affected By Natural Calamity- RBI Guidelines To Banks

Meetings of State Level Bankers’ Committee/District Consultative Committee: In the event of the calamity covering entire State/ larger part of a State, the convener of the State Level Bankers’ Committee (SLBC), will convene a meeting immediately after the occurrence of natural calamity, to evolve a coordinated action plan for implementation of the relief program, in collaboration with the State Government authorities. However, in case the calamity has affected only a small part of the State/few districts, the conveners of the District Consultative Committees (DCC) of the affected districts should convene a meeting immediately.
Declaration of Natural Calamity: It is recognized that the declaration of natural calamities is in the domain of the Sovereign (Central/State Governments). Common thread to extend relief measures is that the crop loss assessed should be 33% or more.
Restructuring/Rescheduling of Existing Loans
Short-term Production Credit (Crop Loans): All short-term loans, except those which are overdue at the time of occurrence of natural calamity, should be eligible for restructuring. The principal amount of the short-term loan as well as interest due for repayment in the year of occurrence of natural calamity may be converted into term loan. Banks may allow a maximum period of repayment of up to 2 years (including the moratorium period of 1 year) if the loss is between 33% and 50%. If the crop loss is 50% or more, the restructured period for repayment may be extended to a maximum of 5 years (including the moratorium period of one year). In all cases of restructuring, moratorium period of at least one year should be considered. Further, the banks should not insist for additional collateral security for such restructured loans.
Agriculture Loans – Long term (Investment) Credit: The existing term loan installments will have to be rescheduled, keeping in view the repaying capacity of the borrowers and the nature of natural calamity viz., While the total repayment period for the restructured/ fresh term loan will differ on case-to-case basis, generally it should not exceed a period of 5 years.

Asset Classification:

The asset classification status of these loans will be as under:

The restructured portion of the short term as well as long-term loans may be treated as current dues and need not be classified as NPA. The asset classification of these fresh term loans would thereafter be governed by the revised terms and conditions. Nevertheless, banks are required to make higher provisions for such restructured standard advances as prescribed by Reserve Bank of India from time to time.
With the objective to ensure that banks are sufficiently proactive in extending the relief to the affected persons, the benefit of asset classification of the restructured accounts as on the date of natural calamity will be available only if the restructuring is completed within a period of three months from the date of natural calamity.
The accounts that are restructured for the second time or more on account of natural calamities would retain the same asset classification category on restructuring. Accordingly, for once restructured standard asset, the subsequent restructuring necessitated on account of natural calamity would not be treated as second restructuring, i.e., the standard asset classification will be allowed to be maintained.

Utilization of Insurance Proceeds:

Under the Prime Minister Fasal Bima Yojana (PMFBY), all Seasonal Agricultural Operations (SAO) loans for notified crops in notified areas are to be compulsorily provided insurance cover for all stages of the crop cycle including post-harvest risks in specified instances.
Farmers’ details are required to be entered by banks in the unified portal for crop insurance which is available at agri-insurance.gov.in in order to facilitate assessment of coverage of crops insured, premiums deducted, etc.

Sanctioning of Fresh Loans:

The fresh loan may be granted even if the value of security (existing as well as the asset to be acquired from the new loan) is less than the loan amount. For fresh loans, a sympathetic view will have to be taken, to provide relief to farmers availing short term crop loans and affected by a natural calamity, an interest subvention of 2 percent per annum shall be made available to banks for the first year on the restructured loan amount. Such restructured loans shall attract normal rate of interest from the second year onwards.

Know Your Customer Norms: Relaxations:

They can open a small account based on the photograph and signature or thumb impression in front of the bank official. The above instructions will be applicable to cases where the balance in the account does not exceed Rs. 50,000/- or the amount of relief granted (if higher) and the total credit in the account does not exceed Rs. 1,00,000/- or the amount of relief granted, (if higher) in a year.

Providing access to Bank Accounts:

In areas where the bank branches are affected by natural calamity and are unable to function normally, banks may operate from temporary premises, under advice to RBI. For continuing the temporary premises beyond 30 days, specific approval may be obtained from the concerned regional office (RO) of RBI.

Natural Calamities Portal: Monthly Reporting:

The Reserve Bank of India has developed a dedicated portal (https://dbie.rbi.org.in/DCP/) for collection and compilation of data on natural calamities on a real time basis through a centralized system.
The portal provides facility for uploading data files relating to relief measures extended by banks and notification issued by State Government with regard to natural calamities. Banks shall upload the actual data on relief measures every month by the 10th of the following month.

Credit Facilities to SCs / STs

RBI has been periodically advising the banks to step up their advances to SCs/STs, which are reckoned as advances to weaker section, under the priority sector.
Banks shall not insist on deposits while considering loan applications under Government sponsored poverty alleviation schemes/self-employment programs from borrowers belonging to SCs/ STs. It shall also be ensured that applicable subsidy is not held back, while releasing the loan component, till the full repayment of bank dues.
The National Scheduled Tribes Finance & Development Corporation and National Scheduled Castes Finance & Development Corporation have been set up under the administrative control of Ministry of Tribal Affairs and Ministry of Social Justice & Empowerment, respectively. The banks shall advise their branches/ controlling offices to render all the necessary institutional support to enable the institution to achieve the desired objectives.
Deendayal Antyodaya Yojana – National Rural Livelihoods Mission: The Ministry of Rural Development, Government of India has launched Deendayal Antyodaya Yojana-National Rural Livelihoods Mission (DAY-NRLM), DAY-NRLM would ensure adequate coverage of vulnerable sections of the society such that 50% of these beneficiaries are SC/STs.
Deendayal Antyodaya Yojana – National Urban Livelihoods Mission: The Ministry of Housing and Urban Affairs (MoHUA), Government of India, has launched the Deendayal Antyodaya Yojana – National Urban Livelihoods Mission (DAY-NULM). Under DAY-NULM, advances should be extended to SCs/STs to the extent of their strength in the local population.
Differential Rate of Interest Scheme: Under the DRI Scheme, banks provide finance up to Rs. 15,000/- at a concessional rate of interest of 4 percent per annum, to the weaker sections of the community, for engaging in productive and gainful activities.
The eligibility criteria under DRI that size of land holding should not exceed 1 acre of irrigated land and 2.5 acres of unirrigated land are not applicable to SCs/STs. Members of SCs/STs satisfying the income criteria of the scheme can also avail of housing loan up to Rs. 20,000/- per beneficiary over and above the individual loan of Rs. 15,000/- available under the scheme.
Credit Enhancement Guarantee Scheme for Scheduled Castes (CEGSSC): The CEGSSC was launched by Ministry of Social Justice & Empowerment on 6th May, 2015, with the objective to promote entrepreneurship amongst the Scheduled Castes (SCs), by providing Credit Enhancement Guarantee to Member Lending Institutions (MLIs), who shall be providing financial assistance to these entrepreneurs.
IFCI Ltd. has been designated as the Nodal Agency under the scheme, to issue the guarantee cover in favour of MLIs, who shall be encouraged to finance SCs entrepreneurs. Amount of Guarantee cover under CEGSSC (Minimum Rs. 0.15 crore and maximum Rs. 5.00 crore; Tenure of Guarantee – Maximum 7 years or repayment period whichever is earlier).

Credit Facilities To Minority Communities

As notified by the Ministry of Minority Affairs, GOI, the persons bellowing to the following communities shall be deemed to be belonging to the minority communities (a) Sikhs (b) Muslims (c) Christians (d) Zoroastrians (e) Buddhists and (f) Jains.
The banks shall set up a special cell, to ensure smooth flow of credit to minority communities and it shall be headed by an officer holding the rank of Deputy General Manager/Assistant General Manager or any other similar rank, who shall function as a ‘Nodal Officer’.
The Lead Bank in each of the minority concentration districts shall have an officer who shall exclusively look after the problems regarding the credit flow to minority communities.
Names, designation and office addresses of (i) the officer-in-charge of the Special Cell at Head Office and (ii) officer appointed by Lead Banks in the identified districts to look after exclusively the problems of minority communities, shall be furnished by banks to the National Commission for Minorities located at New Delhi.
National Minorities Development and Finance Corporation (NMDFC) was established in September 1994, to promote economic and developmental activities for the backward sections, amongst the minorities. NMDFC works as an apex body and channelizes its funds to the beneficiaries, through the State Minority Finance Corporation of the respective State/Union Territory Governments.
The NMDFC is operating, the Margin Money Scheme. Bank finance under the scheme will be up to 60 percent of the project cost. The remaining amount of the project cost is shared by NMDFC, the State channelizing agency and the beneficiary in the proportion of 25%, 10%, and 5%, respectively. Banks may implement the Margin Money scheme evolved by the NMDFC.

Prime Minister’s 15 Point Program for the Welfare of Minorities:

GOI has revised the “Prime Minister’s New 15-Point Program for the Welfare of Minorities”. An important objective of the Program is to ensure that an appropriate percentage of the priority sector lending is targeted for the minority communities and that the benefits of various government sponsored schemes reach the under-privileged, which includes the disadvantaged sections of the minority communities.
All scheduled commercial banks are required to ensure that within the overall target for priority sector lending and the sub-target of 12 percent for the weaker sections, sufficient care is taken to ensure that minority communities also receive an equitable portion of the credit. Lead Banks have been advised to keep this requirement in view while preparing district credit plans.

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CAIIB Rural Banking Module C Unit 4- ( Ambitious_Baba )