ROLE OF BANKS IN PROMOTING FINANCIAL INCLUSION

 

The Indian economy is growing strongly which ensures better recovery and asset valuation. Progressive bank reforms and low interest rates will increase borrowing activity to meet their financial targets. Banking industry is making rapid strides with Information technology driven initiatives and has led to expansion of products (i.e.) expansion of financial services giving birth to the concept of Financial Inclusion. Financial Inclusion is the availability of banking services at an affordable cost to the disadvantaged and low income groups. In India, the basic concept of financial inclusion is having a saving or current account at any bank. In reality, it includes loans, insurance services and much more, for all members of an economy. An inclusive financial system has several merits. It facilitates efficient allocation of productive resources and thus can potentially reduce the cost of capital. In addition, access to appropriate financial services can significantly improve the day to day management of finances.

An inclusive financial system can help in reducing the growth of informal sources of credit such as money lenders, which are often found to be exploitative. Thus, an all inclusive financial system enhances efficiency and welfare by providing avenues for secured and safe saving practices and by facilitating a whole range of efficient financial services.

In line with the above, after liberalization, the banking environment in India had grown more competitive with the relaxation of restrictions and adoption of International standards banks are forced to adopt measures to survive. The recent financial reforms and greater competition in the banking industry have made it necessary for banks in India to concentrate towards the excluded mass. Successful banks in India focus on the rural sector by providing Financial Inclusion service. The importance of an inclusive financial system is widely recognized in the policy circle and recently Financial Inclusion has become a policy priority in many countries. Legislative measures have also been initiated in some countries.

Further more, in recent years, Indian Banking System has become dynamic and there is an increasing trend in the number of depositors in Banks.  The quest of financial inclusion is indispensable for the well being and growth of any country, more for a developing country like India with large sections of population in the unorganized sector. The Government of India as well as Reserve Bank of India has been taking steps over the years to make financial services accessible to all .It is in this context, it is worth to mention the perils of financial exclusion.. Financial exclusion not only hurts the excluded by keeping them trapped in a vicious circle of poverty but also has ramifications for the entire country. Financial empowerment leads to economic and social empowerment. There is empirical evidence on the critical role of finance in economic growth. Therefore financial inclusion, financial literacy and inclusive growth are the themes of modern banking in India It is found that, the commercial banks in India work broadly through three segments namely,. Corporate, retail and treasury.

 For Instance, in the United States, The Community Reinvestment Act (1997) requires banks to offer credit throughout their entire area of operation and prohibits them targeting only the rich neighborhoods. In France, the Law on Exclusion (1998) emphasizes an individual’s right to have a bank account. In the United Kingdom, a “Financial Inclusion Task Force” was constituted by the Government in 2005 in order to monitor the development of financial inclusion.

Amidst this background, the Banking sector is the most leading sector in India has been among the top performers in the markets. It is quite remarkable to note that, Indian Banking industry can have itself as one of the most impressive branch network comprising of about 47,000 branches of Scheduled Commercial Banks (including RRB”S) and over 100,000 Co-operative Credit outlets in rural and semi urban areas. Despite this, a large number of poor continue to remain outside the fold of formal banking system. The problem of financial exclusion is very acute in India. According to the 59th round of the NSS survey, only 48% of the cultivable households availed credits from the formal sector. According to a recent NCAER–World Bank Rural Financial Access survey (RFAS), 70% of the marginal landless farmers do not have a bank account and 87% have no access to formal credit. Hence, the banks in India felt the need for Financial Inclusion. The Government of India, Reserve  Bank of India and NABARD together have initiated a number of programs like Poverty Alleviation programs, SHG – Bank linkage program, Micro Finance Institutions (MFI), Kisan Credit Card (KCC), General Credit Card (GCC), No Frill Account, opening up of more Rural Banks, and immediate workable options like NGO’S / CBO’S / CSO’S, Farmers club’s, Co-operatives, Agri Clinics / Agri Business Centres / Kiosks, Self Help Groups (SHG), local volunteers, Rural Development and Self Employment Training Institutes (RUDSET), Post Offices, etc.

 According to FICCI survey, the strong focus of the Indian Banking industry is the regulatory system, enabled India to carve a place for itself in the global banking scene. The regulatory systems of Indian banks are rated above China and Russia, and at par with Japan and Singapore.

 In India, the Reserve Bank of India has initiated several measures to achieve greater financial inclusion, such as facilitating “no frill” accounts and “General Credit Cards” for low deposits and credits. The German Bankers’ Association introduced a voluntary Code in 1996 providing for an “everyman” banking transactions. In South Africa, a low cost bank account called “Mzansi” was launched for financially excluded people in 2004 by the South African Banking Association. Alternative financial institutions such as micro finance institutions and Self Help Groups have also been promoted in some countries in order to reach financial services to be excluded.

 

 

 

 

 

 

Dr.R.SRINIVASAN is a Post graduate in commerce and Management. He received his doctoral degree from Alagappa University in 1997. He is now Working as an ASSOCIATE PROFESSORin Post graduate and Research Department of Corporate Secretaryship at Bharathidasan Government College for Women (Autonomous), Pondicherry University, Puducherry.He currently teaches Accounting ,financial management and Research Methodology Subjects. Before Joining BGCW, he was teaching in SNR College, Coimbatore, Sindhi college, Chennai& T.S.Narayanasamy College, Chennai for eight years. He was with the industry for a short term at Salzar Electronics Pvt. Ltd, Coimbatore. He has about 20 years of teaching experience and having research experience of 15 years. His interests are in Accounting and finance, Capital Market, Quantitative Methods. He underwent the Faculty Development Programme at Indian Institute of Management Ahmedabad during 2000-01. He has presented 20 papers in national and international conferences and has published twenty papers in the areas of Finance and Human resource Management in National Journals. Co-authored a book titled, ‘Investors Protection, published by Raj Publications, New Delhi He has delivered lectures in contemporary finance topics at Pondicherry University. He is involved in consultancy projects for Godrej Saralee, Chennai in the areas of Statistical Applications. He has supervised a number of research projects in the area of corporate finance and Human Resource Management. He is the Board of examiner in corporate Secretaryship and Management for the past two decades.
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Article Source:http://www.articlesbase.com/banking-articles/role-of-banks-in-promoting-financial-inclusion-1516161.html

What Is Money Really?

Have you ever wondered what money really was? What is behind its mystique? Well, it is not gold coins. It is not a basket of fish, or a truck load of bread. Money is an idea. It is an idea backed by confidence. Nothing more. Once we had to have gold as the standard of that confidence, but now there is enough confidence in the production of products that money was backed by the production of the country and land instead.

So what else is money? Money can be considered a negotiable receipt for deposited goods. How it  once worked was that a goldsmith would accept somebody’s gold and give that person a receipt in exchange, which in turn became money. But then, one day, realising the goldsmith’s repute was good with these receipts and that they had become negotiable, he loaned a receipt based on the gold someone else, as had deposited. Then the goldsmith loaned out several receipts on the same gold. And that is how banking started.

Today a bank will loan out against almost anything that can be produced. The only real trouble comes when too many people want to cash in their receipts to get the gold or goods that have been deposited. If there is too much money loaned out and confidence downturns, then a run can start  with the bank unable to honour the receipts, causing bankruptcy. Banks vary as to how many times they will loan out against what is deposited with them. Some are ten times and some are as much as 70 or more. Even a thousand is not heard of. The higher the amount loaned out compared to what is deposited the greater the risk of economic collapse. And that is what the current threatened financial collapse is about.

But for money to work, and confidence to remain steady, there needs to be a simple recognition of exchange between giving and taking. Exchange builds confidence. When the world produces real products, then financial confidence goes high. But often then banks will issue more recipients per deposited goods and that starts inflation.

As people go into ‘dealing’ in commodities and other things, buying and selling without adding real value to what is sold, then the so called production aspect diminishes and financial confidence begins to wane.

With the exchange factor, there is what we refer to in Scientology as ‘exchange in abundance’. So, instead of giving – as an example – a day’s labour for a committed return, a person could give an abundance for that same return. I have worked where I worked extra hard, I was extra courteous, and gave extra care. In return I was paid extra fast, got an extra tip with an extra meal and an extra smile. Try out exchange in abundance.

That is all money is. I hope this takes out some of its mystique.

Nick Broadhurst is the Executive Director of the Church of Scientology of Canberra. He has been in Scientology for 20 years and has read over 20,000 pages, and listened to over 300 taped lectures on the subject. That Is Banking , Financial Success Course

Article Source:http://www.articlesbase.com/banking-articles/what-is-money-really-1514653.html

Understanding the Role of a Retail Bank

The basic banking services provided by retail banks to the public include the following:

• Saving
• Transacting
• Credit

When deciding on a retail bank, one should look out for the following to ensure that they nurture a relationship with a bank that is truly beneficial to them:

• Find the lowest-cost way – In the current economic climate, this is a given. You need to find a retail bank that offers you the best return and value for money.  Take time to research their various bank charges and find an option that best suits your banking needs, with the lowest costs.
• Source the most innovative way – With technology advancing, most banks are now moving on to use different platforms to make their customers’ experiences and interactions, easier. If you are investing in a bank, you need to be sure that it is one that is forward thinking and innovative in its methodology.
• Seek the fastest way – No one likes to stand in bank queues for hours waiting to be seen or log onto a banking site that take ages to load and features lots of unnecessary steps. People lead busy lives and can’t afford to waste time on superfluous, time-consuming banking activities.
• Go the easiest way – For those who have little time to spend on their banking, simplicity really is key. Internet banking can be pretty confusing for many and with for those trying to conduct their banking in a hurry, a simple and easy to navigate site is always welcomed.
• Find the friendliest way – Customers can get so much pleasure out of dealing with a retail bank that truly understands their needs. Investing your money or setting up an account with a retail bank is a big step – you need to be sure that the bank you have chosen is the right one for you.

The most beneficial retail bank would be one that allows you to conduct transactions, save as well as access credit via a paperless, card-driven process, all in real-time. This is especially true given the fact that many more people these days are environmentally aware and conduct their banking activities online.

About The Author:

Capitec Bank is a retail bank offering unique banking solutions in the form of quick, easy and paperless transacting. They provide a wide range of personal banking options in a single facility – the Global One Gold Card.

http://www.capitecbank.co.za

Article Source:http://www.articlesbase.com/banking-articles/understanding-the-role-of-a-retail-bank-1501909.html

Financial Markets

Financial Market in India primarily consists of -

a) Money Market

b) Debt Market

C) Forex Market

D) Capital Market

Money Market- Meets the short term requirement of borrower and also provides liquidity or cash to lenders.

Major Players in Indian Money market are-

• Reserve Bank of India (RBI)
• SBI DFHI Ltd (Amalgamation of Discount & Finance House in India and SBI Gilts in 2004)
• Commercial Banks, Co-operative Banks and Primary Dealers are allowed to borrow and lend.
• Specified All-India Financial Institutions, Mutual Funds, and certain specified entities are allowed to access to Call/Notice money market only as lenders
• Individuals, firms, companies, corporate bodies, trusts and institutions can purchase the treasury bills, CPs and CDs.

Some of the major products in money markets are-

1) Certificate of Deposits
2) Commercial Paper
3) Tresury Bills
4) Bills of exchange
5) Money Market mutual fund
6) Promissory notes

Certificate of Deposit

• CDs are negotiable money market instrument issued in demat form or as a Usance Promissory Notes.
• CDs issued by banks should not have the maturity less than seven days and not more than one year. Financial Institutions are allowed to issue CDs for a period between 1 year and up to 3 years.
• CDs are like bank term deposits but unlike traditional time deposits these are freely negotiable and are often referred to as Negotiable Certificates of Deposit.
• CDs normally give a higher return than Bank term deposit.
• CDs are rated by approved rating agencies (e.g. CARE, ICRA, CRISIL, and FITCH) which considerably enhance their tradability in the secondary market, depending upon demand. SBI DFHI is an active player in secondary market of CDs.
  Features of CD
• All scheduled banks (except RRBs and Co-operative banks) are eligible to issue CDs.
• They can be issued to individuals, corporations, trusts, funds and associations.
• NRIs can also subscribe to CDs, but on non-repatriable basis only. In secondary market such CDs cannot be endorsed to another NRI.
• They are issued at a discount rate freely determined by the issuer and the market/investors.
• CDs issued in physical form are freely transferable by endorsement and delivery. Procedure of transfer of dematted CDs is similar to that of any other demat securities.
• For CDs there is no lock-in period
• CDs are issued in denominations of Rs.1 Lac and in the multiples of Rs. 1 Lac thereafter.
• Discount/Coupon rate of CD is determined by the issuing bank/FI
• Loans cannot be granted against CDs and Banks/FIs cannot buy back their own CDs before maturity
• SBI DFHI Limited, participates in both the Primary and Secondary Market for CDs.
• Investors can buy CDs through SBI DFHI Invest Plus scheme of SBI DFHI Ltd.

 

Gajanan Bochare is a Production Engineer and Management Graduate. He is currently working as a Management Consultant with Mott MacDonald in India and based at Hyderabad. He is associated with various management institutes as a Guest lecturer & has keen interest in research for Industry.

Article Source:http://www.articlesbase.com/banking-articles/financial-markets-1502303.html

Savings Tips to Save You Time and Money

So why is there such a lack of a savings culture in South Africa? Firstly, it can be attributed to the high administration costs of having a savings account as well as very low savings returns. Those who want to establish a secure savings plan should consider a bank that offers the highest interest rates and the lowest fees. Those two factors are the cornerstones when considering which bank you choose to open a bank savings account.

A bank savings account is perfect for those who want to put aside a small sum of money monthly. Generally, one has to have kept a stipulated amount of money at all times in the savings account (this is in order to earn interest and keep your account open). Savings accounts are flexible in that while you do need to maintain a certain amount, you still have access to your funds at all times to draw money from it should the need arise.

Here are a few tips to help you get started on making the most of your savings options by way of a beneficial savings plan to start building a foundation for your future:

• Keep in mind that it is always cheaper to conduct any banking business by card rather than in cash. It is also a lot better for your personal safety not to walk around with large (and even small) sums of cash.
• Try to plan your withdrawals and avoid making lots of smaller ATM transactions (every withdrawal made comes hand-in-hand with a fee). You could also use your debit cards at retailers to withdraw cash rather than go to the ATM.
• Categorise your expenses into “nice-to-haves” and “need-to-haves” and avoid compulsive purchases that you may regret at a later stage.
• Keep a budget (and stick to it!) where you are aware of all your monthly spending. This will make you more aware of where your money is being spent and areas in which you could potentially cut down.
• Always go over your bank statements and stay aware of the bank charges you are paying to ensure that your account is the suited to your needs.

About The Author:

Capitec Bank is a retail bank offering savings options in the form of Global One, a daily savings and transaction account in one. This solution affords a high interest rate and low fees – allowing you the opportunity to make the most of your savings options.

http://www.capitecbank.co.za

Article Source:http://www.articlesbase.com/banking-articles/savings-tips-to-save-you-time-and-money-1507458.html

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