Mumbai: "Women are the best borrowers, and this is proven," G.R. Chintala, the chairman of India's National Bank for Agriculture and Rural Development (NABARD), told IndiaSpend. Collectively, 20 million women who are part of self-help groups have non-performing assets (NPAs) or bad loans of only 4%, he said.

Across India, more people, including women, are now part of the financial system, as accounts under the Pradhan Mantri Jan-Dhan Yojna (PMJDY) have risen from about 125 million in January 2015 to about 440 million in December 2021. At the same time, digital transactions have increased, also because of the adoption of the Unified Payments Interface (UPI) in retail transfers. These retail credit transfers, including those made through BHIM, GPay, WhatsApp and others, accounted for about Rs 8.7 lakh crore of Rs 260 lakh crore, or 3% of all credit transfers in 2018-19. Today, it has increased to almost 12%.

Organisations like NABARD, whose vision is to foster rural prosperity, are trying to financially include people, and work with financially included communities to increase the spread of credit. NABARD was set up in 1982 by transferring to it the agricultural credit functions of the Reserve Bank of India and the re-finance functions of the then Agriculture, Refinance and Development Corporation.

Its chairman, Chintala, talks to IndiaSpend about the changes because of digital transactions, inclusion of women in finance and the path ahead.


Edited excerpts from the interview:

The pandemic hit us last year and we had a second wave early this year. We are now trying to live with the virus. In this context, tell us about where we stand today in terms of financial inclusion in rural areas, and where we are headed.

It's very appropriate now to debate on how the new developments in the economy are affecting everyone in the country. Now, financial inclusion, I'd say that maybe even the word itself was coined in 1985-86, when NABARD first started SHG as a concept. That was the first financial inclusion concept. At that time, close to 95-96% of women did not have bank accounts. And bankers used to keep them away. And they used to ask them to bring somebody--a father, mother, brother or somebody--to just prove that they are so and so.

Likewise, the poor people did not have accounts. The statistics of the World Bank of that time show that around 53% of the people were financially excluded; they didn't have a bank account. We started reaching the unreached with self-help groups, giving them the banking ethics and creating a bank account for them and subsequently making them mainstream banking beneficiaries. So this was the first attempt for financial inclusion. Subsequently, with liberalisation, there were changes and the microfinance industry also came. Slowly, this entire thing has caught on and the people who were otherwise totally left out from banking, are all being brought into this. And now, this Jan Dhan Yojana, which was announced by the Prime Minister, I can say was the real harbinger of dynamism into this entire system.

So now, by this time, a few other developments have also taken place and have done wonders for financial inclusion. When we started the SHGs and subsequently financing was attempted, mobile phones were absolutely unknown. By 2000, they were in a primitive stage, most of them were analogue phones. By 2013-14, when this government started their term, already the normal mobile or smartphones were within the reach of everyone. By the time, Aadhaar was maybe taken for granted as a kind of an identity for every citizen of the country. And Jan Dhan. These three things came together in what we call the JAM [Jan Dhan, Aadhar and Mobile] trinity. These really brought the entire change in financial inclusion. Before that, financial inclusion was happening but it was not at this pace and scale. But today, in the last six-seven years, from 2014 onwards, once this entire movement has started…it started with a trickle and today, we have 440 million Jan Dhan accounts. And almost every citizen of the country right now has an account.

The other major thing that happened is that, slowly, people started using technology, even rural people started using the technologies. So whether it is [during] demonetisation time, and subsequently this pandemic, maybe the disruption has been brought by these two events, that people were forced to look into the alternatives of dealing with this kind of a financial transaction. So now, when I go around, whether it's a postcard vendor, or maybe a small fellow who's selling something, he will immediately bring out his QR code or something, and say that, why can't you just scan it and send me the money. If I looked into their educational status, I think they may be just able to read numbers, and a little bit of alphabets, but not beyond that. But they are the ones who got the highest and the biggest benefit of this entire financial inclusion drive, which has gone into a kind of a mobile-driven financial inclusion.

And what you asked was very right about how technology is being used. Technology has brought a kind of democracy into financial inclusion. Earlier, banking was for the rich or the people who are educated. The remaining people were in the hands of either moneylenders or informal transfer of funds would happen. But today the entire scenario has changed. Before Jan Dhan, there used to be so many transferring agents who would collect money from slums like Dharavi, or Delhi or some other place. And they used to transfer these funds to their [the client's] native places by charging a commission. Today, particularly post pandemic or during the pandemic, technology has evolved so fast that we use UPI and associated apps, whether it is Phone Pay, Google Pay, Samsung Pay or any of that kind of thing. All these players have made life so comfortable for people. Simply download that app and link it with your bank and your work is done. And cyber security was also not a big threat as there are usually small transactions, not the mega level ones where problems usually happen. No one has complained. A robust mechanism has been put in.

We have to give utmost credit to the Government of India for making a big dream come into reality. Then the regulatory work done by the Reserve Bank of India, then the other private players, featuring all the technology developers and the phone carriers and subsequently, the vendors and maybe retailers, wholesalers, everybody who tried to latch on to this kind of technology. I feel that 440 million Jan Dhan accounts with deposits of close to Rs 1 trillion itself is a very big thing, because most of the Jan Dhan accounts were for the very poor segment of the population.

The next great thing that had happened with this entire financial inclusion drive is that it led to the seamless and the corruption-free transfer of benefits. Now, if Rs 500 is the entitlement a state government has given to a particular person, he is getting full Rs 500 without any cut. In this we have come a long way, when the then Prime Minister in 1985-86, had said that only some 16 or 17 paise of 100 paise got transferred to the pool in benefit schemes. Life has become so easy, and it has become corruption-free, it has become very pilferage-free. It has compressed the time [which it took to transfer money and receive government benefits] from the earlier months and days to seconds or even nanoseconds. I feel that we are maybe one of the best financially included nations in the world. And whenever I see the things that are happening abroad, I think many of the advanced countries are not into this in such a great way.

These are the building blocks for financial inclusion, for better financial access. As you look ahead, to what extent is this going to be a multiplier for the economy itself? We've definitely accelerated transfers, but that itself may or may not lead to economic growth or sustained economic growth. We may need other factors. Could you comment on that?

We are avid readers of so many things that are happening all over the world and also in the economy. Now this pandemic, anyhow, was a dampener in the last few years. The country's economy, which was growing at a reasonably very strong pace, had taken a beating, but some sectors have fared well, like agriculture. But with regard to the financial inclusion, even with this pandemic, barring those months when the lockdowns were very strict, the institutions–whether it is a microfinance institution or a bank–started working in delivering the needed finances to the poor and the needy. After having achieved this building block, I feel that if nothing [bad, like the pandemic] happens in the next one decade, I am foreseeing this country is going to witness a tremendous and phenomenal growth with regard to the economy and with regard to the inclusion that is going to happen, even if we achieve $5 trillion [size of the total economy], in 2025-26 or even in 2027. In the next five-six years, if we go to 3x of the present, the poor and the unreached also have to grow [as do] the people in the informal sector. GST [Goods and Services Tax] has brought a lot of informal people into the formal sector.

This financial inclusion has enabled one more wonderful thing. Everybody's credit history is being made, which was absolutely not there even a few years back. Today, even the poorest of the poor woman or a man, when he or she transacts business on the mobile, everything is getting recorded. Most companies have linked it to the CICs [Credit Information Companies]. And the CICs are creating the credit history. There are also account aggregators. These–account aggregators and CIC-related reports–are going to be a big mileage to the lady or man who otherwise was not considered as bankable a few years back. Today, the moment the credit history is made accessible, I can say in the next two or three years, even these people will be changed by the mainstream banks and others who are into digital transactions.

And would you say that you're seeing more rural Indians, whether it's farmers or non farmers, gain access to the banking system and actually be able to either start new ventures or get better loans or better credit, because of the fact that they are now in the rating system?

Now, it is not only rural, actually, most of the rural people are coming to the urban area. Today, banks give, the first time people are financially included, a small sum. Whether it is the MFI [microfinance institution] or the bank, they said that this lady or a man will be given some Rs 15,000 or Rs 10,000 to start with, and they will make them work, repay and the history is done afterwards. Progressively, they will give higher amounts. But now, with this technology just tracking everyone seamlessly and tirelessly, everybody's credit history can be seen even within six months of entering into this kind of a net. The Rs 15,000 or Rs 19,000 which we're witnessing right now as the general microfinance loans, whether it is urban or rural, are ready to get to a much higher quantum because the banks now have a solid database to analyse each and everyone.

Online applications for programmes, such as the Kisan [farmer] credit card etc., are being devised in a very big way. The KYC is verified in a very easy way, in a few seconds. The entire verification is done by a machine, the concerned financial institution, bank or NBFC, can take a decision to give a loan much faster. The credit decision can be taken without bias [by the machine] and the human who is at the top can use his rationale and make the final decision. People have to migrate because this $5 trillion economy requires everyone to be part of the economy in a big way. And they need credit support. So now, the present financial inclusion is when we are mostly talking about subsidy-driven and enabling schemes, but the thing is, tomorrow, we require institutional credit to push the entire micro and small enterprises in a very big one.

Microfinance lending is targeted considerably at women borrowers. The exclusive women self-help groups, as of March 21, were, according to the Inclusive Finance India report 2021, 9.7 million, out of 11 million bank-linked self-help groups. Similarly, and you refer to this as well, 56% of Jan Dhan accounts are in the name of women beneficiaries. So, it's a fact that we have been able to improve the quality of targeting women, both at the self-help group level as well as in financial inclusion. How do we build on this and what are you seeing that allows greater gender participation, not just in inclusion, but also in driving economic activity and entrepreneurship?

50% of the nation's population was neglected, not for one or two years, they were negated for centuries. They are a part of the economic activity of the family, and their opinions are never considered one part of it. Today, after this entire movement started in the last 30-35 years, democratic kind of decision-making has come in the household itself. So, how did all these things happen? Because we started mainstreaming women. If I look into the SHG philosophy, subsequently adopted by everyone, it says that women are the best borrowers, and this is proven. Why? Because women have the ability to save even from the meager amount they got from their husband or son. Saving it for a rainy day or for some productive work or for children, for their nutrition, health or for sending them to school. This philosophy we had adopted from day one and subsequently the same thing has been adopted by everyone.

Out of almost close to around 11 to 12 million self-help groups in the country, close to 9.5 million groups are exclusively women. If you look into their transaction data, all these women, even after getting two-three times or five doses of the micro finance from the banks, they still maintain the recovery level close to around 95-96%. If you look into NPAs in microfinance with such a big group of people, who are borrowing, close to around Rs 100 to Rs 120 million, collectively, these 20 million women are having an NPA of only 4%. So that is a marvelous sight. And the same thing is now translated into microfinance institutions.

If you look into the MFIs, their target is mostly women, because women are the best borrowers and the best repayers also. And many times, we have seen that the woman has a kind of concern–if the repayment is next Monday, they think of arranging the funds from this Monday itself. You cannot see the same thing in the menfolk, because they were taking it for granted that nothing is going to fall on them. But today, it is not the case. So now the woman is the driving force in the family. And she's the decision maker.

And you can see the benefits in making the entire movement woman-centric. Most of the poor women also, who are members of SHGs, their family sizes have come down substantially. They are able to send their children to school and give them better health and education.

Somebody had recently written about Bangladesh, the country in Asia that has the largest number of women in the economy, both in the formal and informal sector. That is how, despite everything, Bangladesh is progressing very well. So now everybody has to take a cue from that. Can we make at least 50% of our women folk do some kind of productive work compared to 20% to 24% right now [in the workforce]? Once a girl sees a mother working, probably that girl would never like to sit at home. The nation has got a tremendous kind of scope once the women are mainstreamed in a big way, and they are brought into both the formal and informal sector. That is the day we can say that we have done so much further financial inclusion.

As you look at 2022, what are your broad thrust areas, in the context of inclusion, or in terms of overall credit, growth and access?

For 2022-23, we are very upbeat now, because despite the pandemic, I'd say that some of the institutions, like NABARD, and also the sectors, like agriculture, have posted tremendous growth. And the effect of the second wave, which was lethal, has already ebbed quite fast, and the economy has gone into the fourth gear. Now, though the third wave, whether it is happening or not, we don't know, but people have reasonably discounted this Omicron threat and they're doing their own routine work without any kind of hindrance. So now, I feel that, in 2022-23, which we are going to enter very shortly, the entire Covid threat will be almost forgotten.

The export markets are booming, both the formal and informal sectors are going to have a very great day. The moment that is done, all the engines will be on fire and we are going to do quite a lot of growth. So now we are projecting quite a lot of things for agricultural credit. Last year, of a target Rs 15 lakh crore [of agricultural credit target for the banking industry], we had achieved Rs 15.7 lakh crore, despite the pandemic. This year, the target is Rs 16.5 lakh crore and we are already on the right trajectory. By November we had gotten substantial mileage. Next year, it is going to maybe be another five or 10% more.

With regard to micro finance, every year, the sector is growing at almost 10-15% or sometimes even more. So now, the moment the economy gets revved up, it's going to be a fantastic kind of run in the year. God forbid a calamitous thing happens…I think the microfinance inclusion and the normal credit operations are going to get a big leg up in the year to come. And all institutions, and particularly institutions like NABARD, are geared up for that kind of a great growth that we are to witness.

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