Financial Inclusion- News and Views - June 2015


June 2015


For universal financial inclusion, the first step is to ensure that the unbanked have easy access to formal financial services. In India, the basic network has been largely achieved through the Pradhan Mantri Jan Dhan Yojana (PMJDY). The programme has now moved into the crucial second phase of pushing account usage; this is being done through the rollout of the Jan Suraksha plans of insurance and pension, as well as expansion and consolidation of the Direct Benefits Transfers (DBT) programme. The process of inclusion is a long one and while India has moved ahead on many fronts, there are areas of concern still - a roundup of the past year on financial inclusion initiatives in India can be seen in Sumita Kale's article, Achieving financial inclusion a key matrix (Financial Express, 29th May 2015). The government is acutely aware of the need to raise account usage and keeping the agent network viable and is working on cleaning up many vital operational details. Yet one critical issue that needs to be addressed is the inadequate commission being paid to banks for successful delivery of DBT payments in rural areas. 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.

A recent study by MicroSave, How a 1% DBT Commission Could Undermine India's Financial Inclusion Efforts makes the following points:

The success of the PMJDY and DBT hinge on one factor above all: the quality of the last-mile banking agent (Bank Mitr) networks that will disburse DBT payments and enable customers to access their bank accounts.

Bank Mitr networks in India have been weak, with a recent study showing an annual attrition rate of 25-35%. Many have stopped offering services because commission rates for processing government benefit and subsidy payments are too low.

The detailed costing analysis reveals that, at a minimum, it costs banks INR 2.63 to transact INR 100 using the agent network—2.63% of each transaction- the cost was about 0.96% for BCNMs, 0.85% for BCAs, and about 0.82% for banks.

With increased volumes due to the introduction of new schemes, the cost as a percentage of transaction value would decline substantially.

Therefore, the authors of the study, Pawan Bakhshi, Manoj Sharma and Graham A. N. Wright recommend that the government set an adequate rural DBT commission rate, a minimum of 3% for the first few years of PMJDY; this will make the Bank Mitr network more sustainable and will help ensure quality services. Over time, as payment volumes increase and the cost of processing DBT payments decreases, market forces and the bargaining capacity of banks will lead to lower commissions. They also recommend that the government undertake a more detailed costing exercise, making the geographic coverage more representative. Ensuring that the agents at the last mile remain engaged in their business of service delivery efficiently is key to ensuring universal financial inclusion for the country.


Section I: Policy – the latest from India's policymakers

Indian Payments System Kaleidoscope

Shri S. S. Mundra, Deputy Governor, Reserve Bank of India, May 22, 2015

Indian Banking Sector: Emerging Challenges and Way Forward

Shri. G Padmanabhan, Executive Director, RBI, April 3, 2015


Accounts Opened & Rupay Cards Issued Under PMJDY as on 29th April 2015

Rankings & Summary for Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana & Atal Pension Yojana as on 01-06-2015

Card Payments – Relaxation in requirement of Additional Factor of Authentication for small value card present transactions

MGNREGS- Direct Benefit Transfer: Payment of Business Correspondent Charges to the Banks

Section II: News and Views Digest – the latest from India and abroad


Financial inclusion will take time: industry experts

Inclusion and opportunity

Indian banks ignore rural market in spite of financial inclusion buzz

Financial inclusion, financial literacy & role of technology

Financial Inclusion: Infra issues dog Odisha banking drive

The Lifeline to Financial Inclusion

Inclusion begins at home

Rs 411 Cr Mobilised from 5.36 Million PMJDY Accounts

Interactive talk on financial inclusion and development

Post Bank of India: All You Need To Know

India's List of Financial Inclusion Efforts Grows

Can "Behavioural Science" Bell Scheme Design Cat? Insights from Exploratory Research on the Public Distribution System in India


Mobile insurance: How are commercial and distribution models shaping services?

Mobile savings and credit: Riding the rails of mobile money

New infographic on mobile money in Latin America & the Caribbean

Smartphones and Mobile Money: Is the Conventional Wisdom Wrong?

Cocoa Producers in Côte d'Ivoire: Cash vs. Digital

Savings Groups Fuel Digital Design for Smallholders in Rwanda

Four Ways Energy Access Can Propel Financial Inclusion

New Accounts in China Drive Global Financial Inclusion Figures

Five Things Any Youth Savings Program Needs

Mind the Gap: Women and Access to Finance

Which Markets are Ready for Digital Finance Plus?

Can Technology Push Microinsurance Further? 4 Reasons to Say Yes

10 Insights on Financial Inclusion from the 2014 Global Findex

The 'Ripple' Effect: Why an Open Payments Infrastructure Matters

Section III: Research – surveys and studies on expanding access to financial services

Lessons from the Costing Study on BC Networks

Jitendra Balani, Prabir Barooah, Sakshi Chadha, Raj Kumar, MicroSave, May 18, 2015

Mobile financial services in Latin America & the Caribbean: State of play, commercial models, and regulatory approaches

Mireya Almazán and Jennifer Frydrych, GSMA, May 2015



Digital Financial Inclusion: Agenda for India

Policy Brief March 2015

Global Lessons on Partnerships for Financial Inclusion

Policy Brief January 2015

Implementing the Pradhan Mantri Jan-Dhan Yojna

Policy Brief November, 2014

In the media

The last mile in direct benefits transfer

Mint, 01 June 2015

Achieving financial inclusion a key matrix

Financial Express, 29 May 2015

S V Divvaakar: Pay for financial inclusion

Business Standard , 29 April 2015


Direct Benefits Transfers - A short update

Including women- Lessons from Somaliland

Payments Banks and Partnerships


Editor: Sumita Kale can be contacted at

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.

© Indicus Centre for Financial Inclusion. All rights reserved. 31st May 2015


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