Credit inclusion widening and deepening.pptx

Credit Widening and Deepening explores how access to financial services can be expanded effectively across different sections of society. This presentation explains the concepts of widening credit inclusion—reaching underserved and unbanked populations—and deepening inclusion—enhancing the quality, diversity, and sustainability of credit services for existing users.

1. Department of Agricultural Economics 1 FINANCIAL INCLUSION; CREDIT DEEPENING AND CREDIT WIDENING Arpith M Johny 2024-11-162 Agricultural Finance and Project Management (AEC 507)

2. Process whereby people encounter difficulties accessing or using financial services and products in the mainstream market that are appropriate to their needs and enable them to lead a normal social life in the society in which they belong Financial Exclusion Leyshon and Thrift, 1993 Department of Agricultural Economics 2

3. Department of Agricultural Economics 3 National Strategy for Financial Inclusion, RBI (2019) Causes of Financial Exclusion

4. The process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as the weaker sections and low-income groups at an affordable cost Committee on Financial Inclusion Chairman: Dr. C. Rangarajan Financial Inclusion Department of Agricultural Economics 4 Addresses the ‘involuntarily excluded’ as they are the ones who, despite demanding financial services, do not have access to them.

5. Sl. No. Category (i) Small and Marginal Farmers (SMFs) (ii) Artisans, village and cottage industries where individual credit limits < ₹2 lakh (iii) Beneficiaries under Government Sponsored Schemes such as National Rural Livelihood Mission (NRLM), National Urban Livelihood Mission (NULM) and Self Employment Scheme for Rehabilitation of Manual Scavengers (SRMS) (iv) Scheduled Castes and Scheduled Tribes (SC & ST) (v) Beneficiaries of Differential Rate of Interest (DRI) scheme (vi) Self Help Groups/Joint Liability Groups (vii) Individuals and individual members of SHGs/JLGs (viii) Individual women beneficiaries up to ₹2 lakh per borrower (ix) Distressed farmers indebted to non-institutional lenders (x) Distressed persons other than farmers, with loan amount not exceeding ₹1 lakh per borrower to prepay their debt to non-institutional lenders (xi) Persons with disabilities (xii) Transgenders (xiii) Minority communities as may be notified by Government of India from time to time Weaker Sections Department of Agricultural Economics 5

6. 1966 1975 1969 1989 1998 Kisan Credit Card (KCC) Self-help group-bank linkage programme (SHG-BLP) Regional rural banks (RRBs) Nationalisation of banks Lead bank scheme Priority sector lending Timeline

7. 2006 2014 2013 2015 2018 Aspirational Districts Programme Pradhan Mantri Mudra Yojana (PMMY) Pradhan Mantri Jan Dhan Yojana (PMJDY) Direct benefit transfer (DBT) Business Correspondent model Timeline

8. Priority Sectors 1 Agriculture 2 Micro, Small and Medium Enterprises 6 Renewable Energy 7 Others 5 Social Infrastructure 3 Export Credit 4 Housing Department of Agricultural Economics 8 RBI, 2025

9. Ensuring adequate flow of credit from the banking system to the sectors of the economy which are crucial for their contribution to socio-economic development, with focus on specific segments whose credit needs remain underserved despite being credit worthy. Commercial Bank [including Regional Rural Bank (RRB) Small Finance Bank (SFB) Local Area Bank (LAB)] Primary (Urban) Co-operative Bank (UCB) Applicability Purpose Department of Agricultural Economics 9 Priority Sectors RBI, 2025

10. Department of Agricultural Economics 10

11. Department of Agricultural Economics 11 Pradhan Mantri Jan Dhan Yojana (PMJDY) National Mission of Financial Inclusion To unbanked persons a basic bank account without any minimum balance requirement, called a Basic Savings Bank Deposit (BSBD) account; Free RuPay debit card, with in-built accident insurance cover of Rs. 2 lakh; Access to overdraft facility of upto Rs. 10,000, subject to eligibility conditions; Easy access to banking services in rural areas, through Bank Mitras; Awareness about financial products through financial literacy programs. Department of Financial Services, GoI (2025)

12. Department of Agricultural Economics 12 Pradhan Mantri Suraksha Bima Yojana (PMSBY) Annual premium is Rs 20 per year; Risk Cover period: 1st June to 31st May; Benefit of Rs. 2 Lakh payable on death or permanent total disability and Rs. 1 Lakh on partial disability. Simple claim settlement procedure / process involving minimum documentation has been put in place; Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)   •Annual premium is Rs.436 per year; •Risk Cover period: 1st June to 31st May; •It involves convenient bank account linked enrolment and premium payment through auto-debit from the bank account of the subscriber; Department of Financial Services, GoI (2025)

13. Department of Agricultural Economics 13  Atal Pension Yojana (APY) E ncourage the workers in unorganized sector to voluntarily save for their retirement. Provides a defined pension, depending on the contribution and its period Under APY, the subscribers would receive the fixed minimum pension of Rs. 1000 per month Pradhan Mantri MUDRA Yojana (PMMY) Purposes: Non-agricultural, including activities allied to agriculture such as poultry, dairy, beekeeping etc. Term loan and working capital requirements can both be met; Collateral not required. Department of Financial Services, GoI (2025)

14. Department of Agricultural Economics 14 Stand Up India Scheme (SUPI) •    Composite Loan between Rs.10 lakh and Rs.1 crore to entrepreneurs above 18 years of age, through Scheduled Commercial Banks (SCBs); •    For setting up greenfield projects in manufacturing, services or trading sector and activities allied to agriculture; Department of Financial Services, GoI (2025)

15. Extend need-based and timely credit support to the farmers for their cultivation needs. It aims at providing adequate credit support from the banking system under a single window with flexible and simplified procedure to the farmers to meet their needs Short-term credit requirements for cultivation of crops; Consumption requirements of farmer household; Working capital for maintenance of farm assets and activities allied to agriculture; Investment credit requirement for agriculture and allied activities. Department of Agricultural Economics 15 Kisan Credit Card

16. Microfinance and community-based institutions Microfinance groups including Self Help Groups (SHGs), Joint Liability Groups (JLGs), or any other livelihood collectives. 28% of the households were associated with one or more of the microfinance groups. Department of Agricultural Economics 16 NAFIS 2019, NABARD

17. Department of Agricultural Economics 17 Benefits offered by SHG to their members NAFIS 2019, NABARD

18. Department of Agricultural Economics 18 Benefits offered by FPOs to their members NAFIS 2019, NABARD

19. Results 2014- 53 % adults had a bank account 2021 -77.5 % Also increase in the penetration of low-cost insurance schemes and other pension schemes. 2016 - 1 % population using mobile money. After demonetization and the launch of the BHIM platform, penetration of mobile payments has become near universal, added by new initiatives such as Aadhaar-enabled payment services and payment banks. Department of Agricultural Economics 19 NAFIS 2019, NABARD

20. Department of Agricultural Economics 20 Measurement of financial inclusion National Strategy for Financial Inclusion, RBI (2019)

21. Capture the extent of financial inclusion across the country. Comprehensive index incorporating details of banking, investments, insurance, postal as well as the pension sector Financial Inclusion Index (FI Index) Range = 0 – 100 where 0 represents complete financial exclusion and 100 indicates full financial inclusion. Three broad parameters (weights indicated in brackets) Access (35%) Usage (45%) Quality (20%) Department of Agricultural Economics 21 100 Mar 2017 43.4 Mar 2021 53.9 67.0  Mar 2025 RBI, 2025

22. Department of Agricultural Economics 22 Statewise FI Index High FI Medium FI Low FI RBI, 2025

23. Department of Agricultural Economics 23 Credit deepening Increasing the  usage and range  of credit services among those already within the banking or formal credit fold. Focused on the  depth— i.e., higher average loan sizes, more diverse and complex financial products, repeat borrowing, long-term and investment-oriented loans. E.g. - A farmer who already has a bank account but now receives a larger loan for mechanisation , uses crop insurance, and accesses investment credit. Indicators: Increase in average loan outstanding per account, diversity of credit products, share of long-term loans, or the ratio of credit to GDP in the sector.

24. Department of Agricultural Economics 24 Credit widening Credit widening refers to expanding access to credit to new groups, regions, or individuals who previously did not have institutional credit. The focus is on  breadth —increasing the number of people or communities served. E.g. - Extending bank accounts to more rural villages, or bringing self-help groups, tenant farmers, or new districts into the formal credit system. Indicators: Number of loan accounts, geographical coverage, share of excluded populations reached.

25. Department of Agricultural Economics 25 Credit Widening Credit Deepening Credit Widening Focus Number of people/areas covered Usage/intensity, range of products Objective Reach the excluded Enhance current customers Key Metric Number of accounts, outreach Avg. loan size, diversity, loan/GDP Typical Policies New branch opening, outreach Product innovation, larger & longer-term loans Credit deepening Vs. Credit widening

26. Department of Agricultural Economics 26 Challenges for financial inclusion National Strategy for Financial Inclusion, RBI (2019)

27. Department of Agricultural Economics 27 Recommendations Universal Access to Financial Services Providing a Basic Bouquet of Financial Services Access to Livelihood and Skill Development Strengthening Infrastructure and Last Mile Delivery Periodic Monitoring and Evaluation Focus on outreach (widening) and utilization (deepening) together. Empower citizens with financial literacy and customized, technology-enabled services. Create a customer-centric ecosystem that ensures safety, trust, and grievance redress. Foster ongoing coordination across all stakeholders to achieve truly inclusive and sustainable financial sector growth.

28. Department of Agricultural Economics 28 Schemes Overview | Department of Financial Services | Ministry of Finance | Government of India Leveraging the Power of JAM: Jan Dhan, Aadhar and Mobile | Prime Minister of India National Strategy for Financial Inclusion 2019-2024 NABARD All India Rural Financial Inclusion Survey (NAFIS 2.0) RBI-PSL-MASTER-DIRECTIONS-24-03-25.pdf credit-planning-credit-delivery-and-financial-inclusion-eng.pdf References