In a positive move to extend banking services for the benefit of all, the government has announced three pioneering initiatives. These aim to boost financial inclusion via an index, map banking services geographically, and streamline online loans for Micro, Small, and Medium Enterprises (MSMEs). Finance Minister made this announcement in the context of reviewing annual performance of public sector banks.
Introduction to Financial Inclusion Index (FII)
As a measure of accessibility and utilization of a set of formal financial products and services—ranging from savings, remittances, credit, to insurance and pension—the annual Financial Inclusion Index (FII) will be introduced. Each state’s performance in providing last-mile banking services will be evaluated through this tool. The three dimensions of the index include (i) access to financial services; (ii) usage of financial services; and (iii) the quality of the product or service delivery. These are also recognized as G20 Financial Inclusion Indicators. The Department of Financial Services (DFS), Ministry of Finance, plans to unveil FII by January 2019.
The Significance of FII
The inception of FII carries manifold benefits. Firstly, it provides insight into the level of financial inclusion. Secondly, it allows internal policy making to be guided by measurable financial services. FII can also serve as a comprehensive development indicator. Moreover, it assists in achieving the G20 Financial Inclusion Indicators’ standards. Lastly, it offers researchers an opportunity to examine the effects of financial inclusion in relation to other macro-economic factors.
Online Loans for MSMEs
Announced as part of the new initiatives is the launch of a web portal – http://www.psbloansin59minutes.com, designed to approve MSME loans up to Rs. 1 crore within 59 minutes, through SIDBI and five Public Sector Banks. This portal slashes the loan processing timeframe down from 20-25 days to barely an hour, setting a new industry benchmark. Once in-principle approval is obtained, the loan will be disbursed in just 7-8 working days, with minimal human intervention required up to sanction or disbursement stage. The MSME applicant doesn’t need to submit physical documents for obtaining in-principle approval. With sophisticated algorithms at work, records like IT returns, GST data, bank statements, MCA21 etc., are analyzed within an hour, while also capturing the applicant’s basic details.
Jan Dhan Darshak – Bringing Banking to Every Citizen
Jan Dhan Darshak, a banking services locator application, has been introduced as part of these initiatives, targeting over 500,000 “banking touch points” to bring banking closer to every citizen. These touch points comprise of bank branches, banking correspondents, ATMs, common service centres and post offices. The GIS (Geographic Information System) mapping of banking services will empower citizens to locate nearest banking touch points conveniently. The app features a feedback mechanism and aligns with the government’s larger vision of offering banking services within five kilometres of every household.
