Wednesday, July 23, 2014

PM Modi set to revamp financial inclusion; new scheme to be unveiled on August 15

PM Modi set to revamp financial inclusion; new scheme to be unveiled on August 15




Prime Minister Narendra Modi is set to give a big boost to the ongoing financial inclusion drive by unveiling a comprehensive programme at the Red Fort in his address to the nation on the Independence Day.

The proposed comprehensive financial inclusion programme envisaging insurance and pension cover, apart from a default cover for lenders, is likely to envisage opening 15 crore more bank accounts, 12 crore of which will be in rural areas over next four years, according to a note sent to the Indian Banks Association (IBA) by Financial Services Secretary G S Sandhu.

According to the note, Mr Modi’s new comprehensive financial inclusion programme has three major shifts from the one pursued by the previous government.

First, the earlier efforts at financial inclusion had villages as the unit for coverage while the current plan focuses on coverage of households.

Secondly, only rural areas have been the focus so far while both rural and urban areas have been included now, says the ministry note.

Thirdly, the current plan is proposed to be implemented as a ‘mission mode’ project. It envisages a comprehensive coverage of all excluded households by a six-pillar approach in two phases, according to the note.

The first phase of the programme, which begins from August 15 this year and ends on August 14, 2015, will provide basic banking accounts with overdraft facility of Rs. 5,000 and RuPay debit card with inbuilt accident insurance cover of Rs. 1 lakh and creation of credit guarantee fund for coverage of defaults in overdraft accounts, according to the ministry.

The second phase, which will begin on August 13, 2015 and conclude by August 14, 2018, will cover micro-insurance and unorganised sector pension schemes like Swavlamban.

When contacted, IBA said already state-owned banks, insurers and regulators are working overtime to ensure a smooth kick-start.

“We are currently busy chalking out the modalities of implementation of the project, which will be implemented in the entire country after it is declared by the Prime Minister on August 15,” IBA chairman K R Kamath, who is also the chairman of Punjab National Bank, told PTI.

It is a good scheme as it envisages going beyond the geographical boundaries and promises of connecting each and every household, he said, adding that more than being commercially viable, it is important to link every household with the banking system.

“Through this programme, we are looking at providing two savings bank account facility-one each for the husband and the wife-to all those households which not served by the banking system so far,” MR Kamath said.

“Of course, these basic banking accounts will come with some in-built overdraft facility and RuPay debit cards with an inbuilt accident cover of Rs. 1 lakh. We are awaiting the final announcement of the scheme by the Prime Minister.”

Inclusive pension is also one of the pillars of the proposed comprehensive financial inclusion programme.

“Pension under ‘the mission mode’ will lay emphasis on this facility for the lower income segment and the unorganized workers,” said R V Verma, acting chairman of the Pension Fund Regulatory and Development Authority (PFRDA).

“We will seek to achieve and expand the scope of the National Pension Scheme (NPS) to serve the disadvantaged sections of the population through active involvement and participation of all categories of intermediary institutions like banks, NBFCs, MFIs, NGOs, corporates and annuity service providers,” Mr Verma added.

Though micro-insurance will come in the second phase of the programme, insurers have already started working on it.

“While the already existing 4,000 micro offices of the four PSU general insurers would be strengthened, over 2 lakh existing business correspondents will be asked to sell micro insurance products to ensure the last mile connectivity,” New India Assurance chairman and managing director G Srinivasan said.

“Though micro-insurance will come in the second phase only, we have already started working on it,” he added.

The premium for the low-cost insurance products, which is to be paid by the beneficiaries or from subsidy under the Rashtriya Swasthya Bima Yojana scheme, will range between Rs. 100 and Rs. 300 per annum, New India Assurance general manager K Sanath Kumar said.

Nabard will provide the initial Rs. 1,000 crore to create a credit guarantee fund to cover possible defaults on overdraft accounts under the scheme, a Nabard official said.

Several rounds of meetings have already been held by the Department of Financial Services with all the stakeholders of the programme, including state-owned banks, insurance companies and pension regulator PFRDA.

The banking sector would be expanding itself to hire an additional 50,000 business correspondents (BCs), launch over 7,000 branches and more than 20,000 new ATMs in the first phase, Sandhu told the IBA, adding that around 50,000 BCs are likely to be appointed in rural areas for the programme alone.
 

Tuesday, July 22, 2014

Popularising RuPay Card - State Bank of India Initiative



The State Bank of India, the largest public sector bank started issuing RuPay cards  three months back and has realised the benefits of it.

In India, 90 per cent of credit card transactions are domestic; however, the cost of transactions is high due to monopoly of foreign gateways like Visa and Master cards.

If this process of transactions is made India-centric, cost can come down drastically. In the last 3-4 decades, the usage of credit and debit cards -- what we call the plastic money -- has increased manifold.

Their usage has actually multiplied in the past one decade due to emergence of e-commerce. We can not only make purchases of our needs from a big store by swapping our credit or debit card, we can even purchase air, train, bus ticket; or any commodity from e-commerce websites using this plastic money.

Though banking is no new business in India and credit and debit cards have been issued since long ago; however, these credit and debit cards had essentially been issued in partnership with international gateways like Visa and Master card. It is notable that Visa and Master cards make huge bucks from this business.

According to world Line India, a leading agency providing services in the field of electronic transactions, there are nearly 20 million credit cards in the country; and HDFC Bank, State Bank of India, ICICI Bank and Axis Bank are the main banks issuing most of the credit cards. Apart from this, there were 389 million debit cards in the country in March 2014.

During the last one year (2013-14) 58 million new debit cards were issued. It is notable that after the ATM machines were started being used, all banks have been issuing debit cum ATM cards to their customers, which can be used not only for withdrawing money, but also for making transactions at stores and e-commerce websites.

Foreign gateways like Master and Visa cards charge fee in lieu of their services and huge sum of foreign exchange gets transferred abroad by these companies. Due to monopoly of Master and Visa cards, a hefty fee is charged by them.

Their business in India has been increasing leaps and bounds in the last 10 years. According to RBI, credit cards transactions were Rs 1.56 lakh crore and debit cards transactions Rs 20.22 lakh crore during the year 2013-14.

Foreseeing the importance of an Indian Card, Reserve Bank of India, desired to start an Indian card and National Payment Corporation of India (NPCI), realised this desire and an Indian card in the name of RuPay was started on March 26, 2012.

Today in­­­creasingly the transactions of a majority of Indian banks and financial institutions are being facilitated by RuPay and it is giving a  tough competition to Visa and Master card. NPCI has also tied up with Discover Financial to give RuPay an international acceptance.

International acceptance 


RuPay global card is now accepted at ‘Discover Global Payment Network’ internationally. RuPay was dedicated to the nation on May 8, 2014 by the President of India, Pranab Mukherjee.

RuPay card is accepted on all ATM machines under national financial switch of NPCI. According to the NPCI data there are 1,45,270 ATMs and 8,75,00 points of sale which come under RuPay platform. In addition to this RuPay is accepted on nearly 10,000 e-commerce websites.

Banks recognised by NPCI for this purpose can issue RuPay credit and debit cards which are accepted in ATMs, Points of Sale (PoS) and e-commerce websites. As of now about 240 banks have been issuing RuPay cards. Along with this 200 cooperative and rural banks are also issuing RuPay cards, giving a boost to financial inclusion.

Kotak Mahindra Bank has started a new initiative on financial inclusion; whereby farmers of 75 cooperative societies can get payment for their milk directly to their bank account.

This model is destined to be implemented in Gujarat, where 3 lakh farmers of 1,200 societies will benefit.

It is notable for domestic sector that RuPay fee is merely one third of Master and Visa cards. Though RuPay is cost effective private banks are still not cooperating in adopting RuPay.

Around 150 lakh RuPay cards in circulation now have so far been mostly issued by public sector banks. Argument of private banks is that since they have long period tie-ups with Master and Visa Cards, they cannot adopt RuPay till these agreements expire.

Though private Indian and foreign banks know that in the long run RuPay would prove to be beneficial, they are not ready to adopt new card looking at their short term interests.

The State Bank of India, the largest public sector bank has started issuing RuPay card only three months back and has realised the benefits of the same. According to SBI officials, though it has long term agreement with Master and Visa cards, still it would be good for the bank to pay money to them and switch over completely to RuPay.

Experts believe that if only SBI adopts RuPay fully, the scheme would be a success. Although for international operations, fee of RuPay is yet to be decided, the NPCI says that it would be better to keep it low to maintain it attractiveness in international business also.

In the first week of July 2014, the secretary, department of financial services of the Union ministry of finance has written to CEOs of all the public sector banks urging them to issue RuPay cards to all new customers and the existing customers who have not been issued debit cards so far.

Banks have also been asked to install RuPay card terminals in commercial establishments. So far there is a system of issuing only one type of debit card; however if one desires to get Master and Visa card, he/she can be issued the same along with RuPay card.

Those who are used to Master or Visa card need to be lured gradually towards using RuPay as it will prove to be a win-win situation for all, as it would not only reduce cost of transactions significantly, but also increase the card penetration in the country, especially rural areas.

Monday, July 14, 2014

National Bank for Agriculture and Rural Development launches RuPay Kisan cards



National Bank for Agriculture and Rural Development (Nabard) today rolled out RuPay Kisan Card and RuPay Debit Card here today.

"This is the first time that RuPay Card, which is in the nature of ATM cum Debit Card, is being issued by any cooperative bank in the state of Haryana," said Nabard Chief General Manager (Haryana) D V Deshpande.

He said the issue of RuPay cards by cooperative banks will enable them to improve their customer service and bring it on par with any other bank to farmers and other customers.

Meanwhile, Haryana Chief Minister Bhupinder Singh Hooda asked Nabard to increase the refinance given to cooperative banks from 50 per cent to 75 per cent.

Speaking on the occasion of its 33rd Foundation Day here today, Hooda said reducing groundwater level and shrinkage of fertile land posed big challenges which could be met by promoting piped and drip irrigation, constructing green houses, promoting dairy and techniques of vertical farming.
Hooda asked Nabard to work at the micro level for the expansion of these techniques and said it should provide finance for setting up water bodies in the state.

He said while Kisan Clubs have been set up in all sub-divisions of the state, there is a need to set up Kisan Clubs in all villages.

"Nabard should extend a helping hand in doing so. These clubs would act as a bridge between NGOs, self-help groups, farmer groups," he added.

Monday, July 7, 2014

Govt Asks Banks To Issue Rupay Cards, Mastercard-Visa Feeling The Heat

In the month of May, President Pranab Mukherjee inaugurated RuPay, which is India’s first national payment gateway. Created by National Payments Corporation of India, RuPay has several advantages compared to private payment gateways such as low processing fees, data security and more.

While reporting this exciting news, to be very honest, we were quite skeptical regarding it’s adaptability and wide scale usage. Considering that it is a government owned and supported payment gateway, we assumed that it will take some time to spread and adapt.
But we were very wrong!

In a latest development, government is actively encouraging the usage of RuPay across everywhere, as they want it’s adoption to grow quickly. Such is the intensity of it’s promotion that for the first time in their 30 years of existence, global payment gateway biggies such as MasterCard and Visa are facing the heat.

As per reports coming in, Gurdial Singh Sandhu, secretary at the finance ministry’s department of financial services has asked all nationalized banks to issue debit cards which are RuPay enabled!

Rupay Mastercard visa

Normally, only one debit card is issued per account, but this time, bank officials have been categorically asked to tweak their rules, and issue one more RuPay enabled debit card which can use this new payment gateway.

Not only this, merchant establishments and traders have been specifically requested and encouraged to install sale terminals especially for RuPay enabled debit cards so that a wide scale adaption of India’s new payment gateway is made possible.

Industry experts are fearing that such official diktat from the government to nationalized banks can defer some customers to private banks as they are still using MasterCard or Visa payment gateways.
But AP Hota, MD & CEO of National Payments Corporation of India has rubbished such
apprehensions as he said, “Such fears are unfounded. RuPay is a fully functional card payment system. We are also launching Platinum cards for HNI customers.”

Nationalized banks have now been given 6 months to issue a new RuPay enabled debit card to all it’s existing customers, inform and educate all bank employees in thousands of branches all over India and send an updated report to the government regarding the adaptation and usage.

Just for information, around 2 crore RuPay enabled debit cards have been issued so far.
Last year, Indians spend Rs 80,000 crore using debit cards, and its usage is increasing at an impressive rate of 35% every year. It seems that Indian Government has donned the cap of a startup this time, and is doing everything possible to increase RuPay’s usage. If the same momentum is maintained for another year or so, RuPay can easily capture more than 80% of the market in India, and this is a bad news for private payment gateways.

What is your opinion on the increased effort of Indian government to spread the usage of RuPay? Will it backfire or will it work?

Government asks PSU banks to issue RuPay debit cards to customers, install POS terminals



For the first time in their 30-year existence, Visa and MasterCard, the world's largest payment companies, are facing the heat in India. Lending its weight behind the local card scheme, RuPay, the government has asked state-owned banks to issue RuPay debit cards to customers.

In a communique to banks last week, Gurdial Singh Sandhu, secretary at the finance ministry's department of financial services, "urged" CEOs of public sector banks to issue RuPay cards to all existing customers who do not have debit cards as well as to new clients. Banks have also been told to "encourage" merchant establishments to install point of sale terminals for RuPay cards, two banking sources told ET.

While banks have not been instructed to refrain from issuing cards where transactions are processed by Visa or MasterCard, there is a clear direction to promote RuPay. Customers are typically issued a single debit card per account and banks will have to pursue the unconventional practice and possibly tweak systems to issue two debit cards to a client who insists on a Visa or MasterCard that currently have greater acceptance than RuPay.

RuPay was launched by National Payments Corp of India (NPCI), set up to function as a cost-effective payment services entity. Responding to ET's query on whether PSU banks could lose rich and more brand-conscious customers to private banks (which have not received a similar direction from the finance ministry), AP Hota, MD & CEO of NPCI, said, "Such fears are unfounded. RuPay is a fully functional card payment system. We are also launching Platinum cards for HNI customers."



 "I'm not aware of the ministry's communication to banks. But as I understand, the government's focus is to promote financial inclusion," said Hota of NPCI.

For banks, it's a mandate they will have to fulfil. Within the next six months they will have to offer the new debit card to existing customers, inform thousands of branches and submit progress report to the ministry every quarter.

It's not unusual for countries and governments to support local retail payment networks that offer the software backbone and process card transactions. Countries such as Singapore and Brazil have their local payment companies while China disallows foreign payment firms to process domestic card transactions. But industry sources said an absence of a level playing field may worry global players such as Visa and MasterCard.

For MNC payment firms, the stakes are high. Every year around Rs 80,000 crore worth of debit card spends happen in India, of which 5% are cross-border transactions. It's a market that's growing at close to 35% annually. Credit card transactions, growing at over 25%, are more than two times debit card spends.

Asked whether RuPay would be accepted for transactions such as buying books and music on international e-commerce sites, Hota said NPCI was tying up with the US firm Discover Financial Services to promote co-branded cards to facilitate international transactions.


The fledging card scheme is trying to spread its footprint. So far,A 20 million cards have been issued. "It has full acceptance in ATMs, and of the 10.35 lakh POS (point of sale) terminals in the country, RuPay can be accepted in 9.87 lakh terminals. About 95% of debit card transactions are domestic in nature," said SK Gupta, chief project officer, RuPay. But not all merchant establishments are familiar with RuPay and few display RuPay stickers (along with Visa and MasterCard) on their counters. Till now, POS transactions worth Rs 40 crore have happened through RuPay.

Friday, June 20, 2014

Rupay Kisan Credit Card Scheme to start from July 12


 REPRESENTATIVE IMAGE: As per the RBI guidelines, farmers across the country are to be issued credit cards to boost paperless cash credit system by March 2015. 


CHANDIGARH: Farmers across the states for the first time will get facility of credit cards by the end of financial year in the country. The RBI mandated scheme is targeted to provide ease of transaction through credit cards to farmers instead of prevailing cheque based Kisan Credit Cards.

The NABARD funded program is being undertaken by National Payment Corporation of India. As per the RBI guidelines, farmers across the country are to be issued credit cards to boost paperless cash credit system by March 2015. The initiative is part of the modernization bid of cooperative banks to aid them tackle competition from the commercial banks.

"Axis Bank will be sponsor bank to issue credit cards to farmers in Haryana covered by the Central Cooperative Banks," managing director, HARCO State Cooperative Apex Bank, Naresh Chaudhry said.

In Haryana the new scheme known as 'Rupay KCC Card' will be launched from Ambala on July 12 on the occasion of foundation day of National Bank for Agriculture and Rural Development (NABARD). This State wide scheme will be launched from Cooperative Bank of Ambala

As per the scheme, farmers covered under Primary Agriculture Co-operative Societies will get facility of credit cards for paperless loans for crops and other needs. Under the scheme, the loans will incur interest of 7 per cent up to the limit fixed under the Kisan Credit Card scheme. At present crop loans up to 3 three lakh are provided to farmers under Kisan Credit Card Scheme. "In Haryana farmers are provided interest subvention of three per cent in case of timely payment," CEO, Amabala Central Cooperative Bank Gurpreet Kaur said.

"It will reduce transaction cost of banks and also provide ease of credit transactions to farmers," says CEO, Gurgaon Central Cooperative Bank, Ved Parkash Yadav.

Cooperative banks in the country are burdened by rising Non Performing Assets and credit cards are suspected to further deteriorate the asset quality of the banks. " Ease of credit will encourage farmers to pay back loans on time," says Yadav.The scheme could provide new lease of life to cooperative banks that are losing ground to commercial banks. "Crop loans is mainstay of business of cooperative banks unlike commercial banks," says Yadav.

Haryana Co-Op banks to provide credit cards to farmers



For the first time, now the Cooperative Banks in Haryana would also provide credit cards to farmers.

Chief Minister Bhupinder Singh Hooda would launch a new scheme known as 'Rupay KCC Card' on July 12, on the occasion of foundation day of National Bank for Agriculture and Rural Development (NABARD).

This state-wide scheme will be launched from Cooperative Bank of Ambala in Ambala by issuing such cards to five farmers.

On the same day, Hooda would also introduce a new scheme 'Dairy Area Development Scheme' for dairy owners.

It aims at developing dairy through ultramodern scientific methods so as to make dairy business more profitable.

The 'Rupay KCC Card;' would be similar to ATM card which farmers can use at any ATM, an official release said here.

The banks would also provide finance to dairy owners adopting ultramodern scientific methods.

In a meeting held here today, the Chief Minister discussed both the schemes with Chief General Manager, NABARD, D V Deshpande.

Hooda said the state government has taken a number of decisions for the welfare of farmers and dairy owners.

These decisions have benefitted farmers and dairy owners and enhanced their economic status.

He said that the state government would continue to take such decisions.

Highlighting 'Rupay KCC Card' scheme and 'Dairy Area Development Scheme', Deshpande said dairies with up to 10 cattle would be provided funds under the 'Dairy Area Development Scheme'.

He said the 'Rupay KCC Card' scheme is being introduced by Cooperative Banks in the State for the first time.

Deshpande informed the Chief Minister that today NABARD released Rs 20 crore to Irrigation Department for strengthening the irrigation canals in the State and has sent a new project costing Rs 200 crore for approval to headquarters.

Hooda also asked Deshpande to get a project approved for four water bodies to be set up in the State to minimise threat of flood in various districts.

Deshpande said progressive farmers and bankers with commendable performance would also be honoured in the function to be held on July 12.