Financial Inclusion- News and Views - February 2016
February 2016
Direct Benefits Transfer (DBT) is the current focus, as the Union Budget for 2016-17 is to be presented to the Parliament at the end of this month. The latest Indicus Policy Brief “Digital Financial Inclusion – an update” highlighted the issue of transaction processing charges on DBT payments. While compiling the priorities in March 2015, one critical barrier had risen to the top - the inadequate commission government pays to banks for successful delivery of DBT payments in rural areas. Unfortunately, this remains the top call out as this issue remains unresolved. The 1% commission notified by the Finance Ministry in Jan 2015 barely covers the bank’s costs, making it difficult to pay Business Correspondents and their agents. Keeping the agent network viable should be the topmost priority, and there is merit in starting with higher commissions – the Report of the Task Force on an Aadhaar-Enabled Unified Payment Infrastructure had recommended 3.14% – and progressively reducing these over time as transactions, and thus agent viability, increase. More critically, even these commission charges have reportedly not reached the banks, calling for the need for clear budgetary allocation and transparent and timely payment flows.
It is hoped that the coming Budget addresses this urgent concern of banks and Business Correspondent agents.
Going forward, Dan Radcliffe and Pawan Bakhshi of BMGF set out Four Ways to Boost the Impact of India’s Direct Benefit Transfers that take the DBT programme beyond payouts into bank accounts. A graduation programme and behavioural nudges through the mobile to initiate long term savings will go a long way in making a meaningful impact on poverty.
The monthly newsletter from the Indicus Centre for Financial Inclusion documents the latest news and views in the financial inclusion space, to provide a knowledge base that will help build understanding around how to accelerate the poor’s access to high-quality financial services. Editor: Sumita Kale can be contacted at sumita@indicus.org. The Indicus Centre for Financial Inclusion was launched in 2011 to distil and disseminate information on accelerating the poor’s access to high-quality financial services. The Centre is supported by the Bill & Melinda Gates Foundation. http://www.indicus.net/icfi
Digital Financial Inclusion: Agenda For India 