Reaching Poor & Bridging Disparities by Connecting Unconnected Through Digitalisation

Introduction

This year we have celebrated 77^th years of independence; wherein on one hand our country’s all-around progress is a matter of applaud and on another hand countrymen are still suffering from poverty and disparities. Though state’s resources are continuously utilized in the name of poverty alleviation and disparity reduction program. A series of welfare schemes over the last many years failed to end the miseries of the bottom segments of population in the economic ladder.

Ultimately during last decade, it was realized that the effectiveness of welfare measures can only be visible by coming closure to the poor through various innovative channels where there is no leakages or embezzlement of resources. In this regard Financial inclusion has always been a key pillar of the Indian government’s economic policies. Initiatives such as Jan Dhan Aadhaar-Mobile (JAM) trinity are game-changers that have ensured equal and affordable access to financial services for India’s unbanked and underbanked population, thereby reducing income inequality.

There are different approaches of inclusive growth. Effective implementation of pro-poor program by using available digital path is the way forward for bridging the disparities of society. But results were still not that prominent, so we have to brainstorm that what is coming in the way of financial inclusion ……….? Let’s discuss:

Blockades in the way of Financial Inclusion programs

DEMAND SIDE BARRIERS

• Complexity: The excluded sections feel it difficult or are hesitant to go to bank for small transaction which is puzzling and time wasting.
• Place of living: The excluded villagers find it very difficult to reach the nearest bank due to transportation cost and wages loss in travelling to the bank.
• Limited literacy: Financial illiteracy and lack of basic education are prohibiting factors and creating hindrance in becoming part of mainstream. They have their own reservations.
• Empathy towards informal sector: They develop a like-mindedness with money lenders which always drives them to approach them for their credit needs.

SUPPLY SIDE BARRIERS

Legal identity: Inability to provide a legal identity such as voter ID, residence proof, birth certificates, etc. often exclude women and migrants from accessing financial services.

Cost effectiveness: Service & transaction are not cost effective.

To overcome the above and to reduce the disparity Government and non-Government agencies had already came forward in a positive manner; step by step; so that gradually this huge segment of downtrodden population will transform without realizing that they are actually transforming. Reason being they resist transformation. Thus, the reforms like Jan Dhan, aadhaar seeding etc. were injected in society slowly & steadily.  Though pandemic was the biggest curse but proved to be a catalyst for adopting the digitalization among all.

Approaches adopted to break the barriers

1. Government initiatives
2. Product led approach
3. Technology base approach
4. Knowledge base approach
5. Regulator led approach
6. Bank led initiatives

Government initiatives to reach the rural mass :

1. Transformation through pro-poor programme implementation
2. Transformation through cost effective digital technology

1. Transformation through pro-poor program implementation

1. Pradhan Mantri Jan-Dhan Yojana is India’s National Mission for Financial Inclusion to ensure access to financial services, namely Savings & Deposit Accounts, Remittance, Credit, Insurance, and Pension in an affordable manner. The scheme targets to provide Basic Banking Accounts with overdraft facility of ₹.5,000 after six months and RuPay Debit card with inbuilt accident insurance cover of ₹.1 lakh and RuPay Kisan Card, micro insurance & pension etc. are also added to it.

As many as 47.8 crore Jan Dhan accounts have been opened so far, a scheme which was launched in 2014 as a national mission for financial inclusion.

(16^th Aug, 2023 Economic Times).

2. Aadhaar: The Unique Identification Authority of India is a central government agency. Its objective is to collect the biometric and demographic data of residents, store them in a centralized database, and issue a 12-digit unique identity number called Aadhaar to each resident.

The Ministry of Consumer Affairs, Food & Public Distribution oversees the Aadhaar seeding process of ration cards. Notably 99.70% ration cards were Aadhaar seeded. As on 28.07.2023 as per department of Financial Services report dt.31.7.2023 out of 164.55 crores CACA accounts, 141.90 crores accounts were Aadhaar seeded which come to almost 86.20%

3. Mobile banking:

In layman’s language, mobile banking means banking services being offered with the help of mobile phones as medium.  Mobile banking service is mainly available in Toll Free numbers over SMS (Short Messaging Service) or through GPRS (General Packet Radio Service) or sometimes through USSD (Unstructured Supplementary Service Data) or some mobile Apps. Though during the pandemic penetration on mobile banking was exorbitantly increased during covid but now the people become use to of the same and they are in habit of using it.

4. JAM (Jan Dhan-Aadhaar-Mobile) trinity refers to the government of India initiative to link Jan Dhan accounts, Mobile numbers and Aadhaar number of Indians to plug the leakages of government subsidies. With the introduction of new technology introduced by National Payments Corporation of India (NPCI), a person can transfer funds, check balance through a normal phone which was earlier limited only to smart phones. Mobile banking for the poor would be available through National Unified USSD Platform (NUUP) for which all banks and mobile companies have come together.

With a view to further strengthening the financial inclusion penetration in the country, PMJDY has been extended beyond 14.8.2018 with the focus on opening of accounts shifting from “every household” to “every unbanked adult” and making the scheme more attractive with following modifications:

1. Existing Over Draft (OD) limit of Rs. 5,000 revised to Rs. 10,000;
2. There will not be any conditions attached for OD upto Rs. 2,000;

• Age limit for availing OD facility revised from 18-60 years to 18-65 years; and

28. The accidental insurance cover for new RuPay card holders raised from existing Rs.1 lakh to Rs. 2 lakh to new PMJDY accounts opened after 28.8.2018.

A digital pipeline has been laid for the implementation of PMJDY through linking of Jan-Dhan account with mobile and Aadhaar [Jan Dhan-Aadhaar-Mobile (JAM)]. This, infrastructure pipeline is providing the necessary backbone for DBT flows, adoption of social security/pension schemes, facilitating credit flows and promoting digital payments through use of Rupay Cards and thereby accelerating the pace of attaining the goal of a secured, insured, digitalized and a financially empowered society.

Promotion of Aadhaar-based biometric authentication and digital payment solutions:

A digital revolution is in making with more than 100 crore Indians having digital identity through Aadhaar & mobile seeding, enabling them to authenticate and carry out financial transactions. Using biometric ID, highly cost-effective payments solutions have been created both for banking services and for retail payments. There has been significant growth in digital transactions- UPI, AePS, RuPay Card.

1. Direct Benefit Transfer or DBT is an attempt to change the mechanism of transferring subsidies launched by Government of India. This program aims to transfer subsidies directly to the people through their bank accounts. It is hoped that crediting subsidies into bank accounts will reduce leakages, delays, etc. The primary aim of this Direct Benefit Transfer program is to bring transparency and terminate pilferage from distribution of funds sponsored by Central Government. Payment is made in the bank accounts of the beneficiary using the Aadhaar Payment Bridge of NPCI.
2. Pradhan Mantri Mudra Yojana (PMMY): Micro Units Development and Refinance Agency (MUDRA) Bank is a new institution being set up by Government of India for development and refinancing activities relating to micro units. The purpose of MUDRA is to provide funding to the non corporate small business sector. Loans worth about Rs 1 lakh crore have been sanctioned to small entrepreneurs under the Pradhan Mantri MUDRA Yojana benefiting 2.5 crore borrowers.
3. Pradhan Mantri Suraksha Bima Yojana is a government-backed accident insurance scheme. It was formally launched on 9 May 2015. 9.43 Crore people have taken policies of Pradhan Mantri Suraksha Bima Yojana. PMSBY is available to people between 18 and 70 years of age with bank accounts. It has an annual premium of ₹12. In case of accidental death or full disability, the payment to the nominee will be ₹.2 lakh and in case of partial Permanent disability ₹.1 lakh.
4. Pradhan Mantri Jeevan Jyoti Bima Yojana is a government-backed Life insurance scheme. It was formally launched on 9 May 2015. 3.07 Crore people have enrolled for Jivan Jyoti Bima Yojana. PMJJBY is available to people between 18 and 50 years of age with bank accounts. It has an annual premium of ₹.330/-. In case of death due to any cause, the payment to the nominee will be ₹.2 lakh
5. Atal pension Yojana: – Atal Pension Yojana formerly known as Swavalamban Yojana is a government backed pension scheme basically targeting at the unorganized sector to create a social security system in all over India. Under the scheme for every contribution made to the pension fund, Central Government would also co-contribute 50% of the total contribution or ₹.1,000 per annum, whichever is lower, to each eligible subscriber account, for a period of 5 years. The minimum age of joining APY is 18 years and maximum age is 40 years. The age of exit and start of pension would be 60 years. Therefore, minimum period of contribution by the subscriber under APY would be 20 years or more. Aadhaar would be the primary KYC document for identification of beneficiaries, spouse and nominees to avoid pension rights and entitlement related disputes in the long-term. This scheme will be linked to the bank accounts opened under the Pradhan Mantri Jan Dhan Yojana scheme and the contributions will be deducted automatically.

 

2. Transformation through cost effective digital technology

Digital India is a Government’s program with a vision to transform India into a digitally empowered society. The program is meant to enable digital delivery of services to citizen of India. Its main objective is to transform India in a several key vision area by improving technological infrastructure, increasing technological literacy and resources as well as creating an innovative digital eco system.

1. Digital Boost to MGNREGA: Digital boost to the flagship rural job scheme, MNREGA is a commendable initiative. Gram panchayats are covered to ensured better implementation through mobile monitoring system. This initiative will help the implementation agencies with live data from the worksites, an online and real-time updation of data base, real-time visibility of the data for complete transparency, and location of assets with geo-tagging for easy verification.

2. e-Money: The Department of Posts has planned to provide electronic money order service to 70% of its total post offices. This service will enable India Post to remit money next day to the doorstep that earlier took about a week. Also, it will make the whole process secure and fast. People can send maximum of 5,000 through e-money order.

3. Twitter Samvad: This will enable the citizens to know about new initiatives of Government and actions. It is a service that lets leaders and government agencies communicate with the people through tweets and SMS.

4. Digital Life Certificates:

One of the major requisites for the pensioners post their retirement from service, is to provide life certificates to the authorized pension disbursing agencies like Banks, Post offices etc., following which their pension is credited to their account. In order to get this life certificate the individual drawing the pension is required to either personally present oneself before the Pension Disbursing Agency or have the Life Certificate issued by authority where they have served earlier and have it delivered to the disbursing agency.

This very requirement of personally being present in front of the disbursing agency or getting a life certificate often becomes a major hurdle in the process of seamless transfer of pension amount to the pensioner.

It has been noted that it causes a lot of hardship and unnecessary inconvenience particularly for the aged and infirm pensioners who cannot always be in a position to present themselves in front of the particular authority to secure their life certificate.

“Digital Life Certificate for Pensioners Scheme” of the Government of India known as Jeevan Pramaan seeks to address this very problem by digitizing the whole process of securing the life certificate. It aims to streamline the process of getting this certificate and making it hassle free and much easier for the pensioners. The ‘Jeevan Pramaan’ scheme has given a sigh of relief to a million of retired government employees. With this, the pensioner will do away with the requirement of submitting a physical life certificate in November each year and can now digitally provide proof of their existence to authorities for continuity of pension every year.

5. Digital-locker-India

This initiative eliminates the need for people to carry the hard copies of the certificates issued by states, municipal agencies, and other bodies. Birth certificates, school and college leaving certificates, residence and marriage proof, and even PAN cards will be digitized. For this, the government has rolled out a national depository that will hold these records. Each private locker will store all the important documents of users, which are digitally verified by the government. Now rather than sending physical copies, the link of that cloud folder having digital copies of verified certificates can be shared.

6. Pragati: – It is an interactive platform launched for public grievances redressal. It is aimed at monitoring and reviewing programs and projects of the Government of India as well as State Government initiatives and also addressing common man’s grievances. This step is expected to make governance in India more efficient and responsive.

Hon’ble Prime Minister of India launched this ambitious multi-purpose and multi-modal platform – “Pro-Active Governance and Timely Implementation” (PRAGATI) on 25th March, 2015, as a part of Digital India program. It is also a robust system for bringing e-transparency and e-accountability with real-time presence and exchange among the key stakeholders.

This programme has proved effective in addressing and resolving issues by bringing down the inter-departmental communication gap and thus minimizing the time taken for implementation of projects and schemes.

7. Digi-dhan mela

Villagers will get an exposure to the use of electronic mode of payment for getting any government services to boost the cashless environment. This mela generates awareness among citizens and merchants about various digital payment channels including Unified Payments Interface (UPI), Aadhaar Enabled Payment System (AEPS), Unstructured Supplementary Service Data (USSD) and RuPay cards.

After demonetization in Nov’16, Government gave a lot of emphasis on promotion of digital payments and cashless economy. Digidhan dashboard (www.digipay.gov.in) is designed and developed by NIC (National Informatics Centre) for accurate reporting, monitoring and analysis of all type of digital payments transactions occurring in the country and enablement of infrastructure through deployment of Physical/Mobile/BHIM Aadhaar PoS devices.  The “Digital Payments Utsav,” a comprehensive campaign aiming at encouraging digital payments throughout India, was launched by Govt. of India, Ministry of Electronics and Telecommunication.

8. BHIM App for e-transactions, Aadhaar seeding etc.

Through this App, the customer can access his bank account and then make payment or send a request to collect payment by directly approaching the settlement system.

In BHIM no need of writing account number. All an individual need is just a virtual financial address of the receiver such as his mobile number or Aadhaar number or a virtual name. His real financial address is discovered by the National Payment Corporation of India. Now the sender doesn’t need to know

the account details to send money but he can now use BHIM app and use recipient’s mobile number, Aadhaar number or Virtual Payment Address to send money. This means you have to have a smart phone, and everyone should be an account holder.

9. DigiGAON:-Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA) is extended to rural households for imparting knowledge on basic education and health services

10. Jan Dhan Darshak: a Geographic Information System (GIS) mobile application, has also been launched to provide a citizen centric platform for locating financial service touch points across all providers such as banks, post office, ATMs, CSC, etc. These services could be availed as per the needs and convenience of the common people. The web version of this application is “Findmybank” (findmybank.gov.in). This application can be used for various administrative purposes like business strategies for banks. Over 6 lakh FI touch points have been mapped on GIS which includes 1.5 lakh bank branches, 2 lakh ATMs, 1.5 lakh Post Offices and 1.3 lakh BCs

The Jan Dhan Darshak application provides an interface for Citizen to view the Banking infrastructure in India consisting of Bank Branches, ATMs, Bank Mitra, Post office and CSC locations. The data is collated by Department of Financial Services from Scheduled Commercial Banks both in Public and Private Sector.

Conclusion

Through experience we accept that one of the major reasons for slow progress in financial inclusion was absence of reach/coverage and hurdles in dissemination of the benefits of Government and financial system to the person at the end. This gap has now been bridged through all the above modes of information and communication technology. Further through various upcoming Government initiatives future prosperity of the country is ensured.