Banks, Nabard, insurance companies - District Inclusion Plans

Credit cards are set to become an integral part of a new countrywide financial inclusion drive that will pitch gram panchayats as the basic planning unit for delivery of financial services.
The finance ministry has drawn up a comprehensive plan that requires banks to provide a kisan credit card to every farmer and a general purpose card to other households.
The plan, sent earlier this week to the heads of all public and private banks and regional rural banks, envisages a bottom-up financial inclusion drive starting at the district level.
The directive makes it clear that every household must have a bank account, credit card (kisan credit card for farmers and general credit card for others), micro-insurance and micro-pension scheme.
The country has nearly 140 million rural households, most of which do not have credit cards. If all these households were to be issued a card, it will substantially add to the credit card numbers, currently pegged at 17 million.
"It is a dangerous idea as credit cards are unsecured loans and are at times used for usurious consumption," said a senior banker, requesting anonymity.
Most banks are in the process of tightening their credit card operations, which have resulted in the total number of cards declining sharply from the peak of 28 million in 2007-08.
The emphasis of the financial inclusion drive will now change from the village to gram panchayat level, as that has become the basic planning unit for the various government schemes.
"As gram panchayats are at the centre of various developmental and welfare schemes and will play an important role in the electronic benefit transfer, service area of the banks needs to be defined in terms of the gram panchayats," the directive says.
Each gram panchayat will have a designated bank that will be responsible for the coordination and delivery of the various financial services in that area.
District-level officials of banks, insurance companies and Nabard will prepare a comprehensive financial inclusion plan for each district.
All underbanked districts will have, at least, one branch for areas with population exceeding 5,000 by September 2012. These branches will have only two officials and an ATM to begin with.
At least one branch should be available at a radial distance of 5 km in the underbanked districts.
In habitations without branches, banking correspondents will have to provide financial services with each correspondent dealing with 1,000-1,500 households for them to be viable.
The plan also mandates that government benefits must be transferred electronically into the accounts of the beneficiaries in the areas covered under the financial inclusion drive.
The lead banks have to work out a road map for Electronic Benefit Transfer in respect of each of the 32 government schemes, including the flagship Mahatma Gandhi National Rural Employment Guarantee Act, which involve some sort of financial transfer.
The Reserve Bank of India has already issued guidelines on Electronic Benefit Transfer and its convergence with the financial inclusion plan.
(Source - Economic Times)

Citigroup 74% jump in Q3 profits

Citigroup Inc on Monday reported its seventh straight quarterly profit, with a 74 % jump in Q3 earnings to $ 3.77 billion, as the financial services giant recorded lower losses from bad loans.
The entity had a net income of $ 2.17 billion in the July-September period of 2010, the US-based Citigroup said in a statement.
Citigroup's robust earnings lifted as the bank recorded lower losses from loans and made accounting gains related to its credit holdings.
Third quarter revenues of $ 20.8 billion were up slightly from $ 20.73 billion registered in the year-ago period.
Citigroup posted its seventh profitable quarter in a row after losing a total of $ 29.3 billion for 2008 and 2009 during the global financial crisis.
"Citi continues to navigate a challenging economic environment and delivered another quarter of solid operating results. We continue to manage our risk prudently while growing the businesses that are core to our strategy.
"We have reduced the size of Citi Holdings to 15 % of our balance sheet and further improved our financial strength. We are very well positioned as we help our clients navigate the world's current trends and key opportunities," Citi CEO Vikram Pandit said.
The bank's losses from bad loans fell by 41 % during the quarter to $ 4.5 billion as defaults fell from its credit card loans for Citibank credit cards.
As far as its India operation were concerned, the non-performing asset of the bank stood close to one % of the total loans at the end of September quarter.
NCL (net credit loss) of the Indian operation stood at 0.9 % in the July-September quarter against 0.8 % in the previous quarter.
Citicorp, the company's retail banking and commercial and investment-banking business, saw its net income jump by 32 %, from the prior year period to $ 4.6 billion, while revenues shot up by 9 % to $ 17.7 billion. In Asia, Citicorp's net income grew by 42 % to $ 1.41 billion and net revenues surged by 21 % to $ 4.28 billion.
Citi Holdings's net loss stood at $ 802 million compared to $ 1.14 billion in the year-ago period. The unit's revenues decreased 27 % from the prior year period to $ 2.8 billion as assets declined.
The bank said its regional consumer banking operations have witnessed a growth of 2 % to $ 8.26 billion and net income accelerated by 31 % to $ 1.61 billion.
Its international regional consumer banking revenue grew across all regions versus the prior year period, with Asia revenues growing 13 %, Latin America 9 % and Europe, the Middle East and Africa by 5 %.

Debit card swipes hit credit card usage

July 2011 marks a tipping point in the payments space. For the first time, debit cards have been used in more transactions than credit cards. While credit cards are still more significant in value terms, the gap between the two has shrunk.
As compared to 2.56 crore credit card transactions in July 2011, debit cards were used 2.66 crore times. This has continued in August when credit cards were used 2.76 crore times, while debit was used on 2.77 crore occasions. In the past, credit card swipes always outstripped that of debit. In the whole of 2010-11, credit cards were used for 26.51 crore payments, while debit cards were used 23.7 crore times.
In value terms credit card payments accounted for Rs 37,678 crore worth of payments up to August 2011, while for debit cards it was Rs 20,483 crore. Total value of debit card transaction is lower than that of credit cards is because on an average an individual spends Rs 2,989 every time the card is used as compared to Rs 1,632 which is the average for a debit card payment. Click to know more and apply for SME Loan
Bankers say that it is only a matter of time before debit cards completely dominate the payment space. The reason for this is the sheer numbers. Debit cards have been growing by leaps and bounds. From 4.97 crore cards in 2005-06, their number has risen to 25.14 crore as on August 2011, according to data released by the Reserve Bank of India in its latest monthly bulletin. Credit cards, on the other hand, have been shrinking since the global crisis. From a peak of 2.8 crore in 2008, the number shrunk to 1.8 crore in March 2011. This has come down further to 1.75 crore in October 2011.
The decline has been largely because of the foreign banks and banks like ICICI which have been shrinking their portfolio. According to industry sources, ICICI Bank's card portfolio has continued to shrink during the current year as well. While other lenders such as HDFC Bank and Axis Bank have started issuing cards at a much higher pace, the issuances are not enough to bring up the overall industry numbers.
While debit cards have seen growth in issuances, cardholders have not been using them for transactions. In 2010-11, the average transaction per card has been 14. As compared to this, the average debit card has been used only once in a year. While the number of debit cards has gone up more than five times in five years the average number of transactions has not.
Even five years back the debit card usage was on an average just once in a year.
Credit cards, on the other hand, are seeing an increase in usage. At the time of the global financial crisis, the average usage of cards had dipped to eight times in a year. At the end of March 2011, this had improved to 14. Bankers say that this is because issuers have become choosy on issuing cards. Second, multiple card holdings have come down as even cardholders are realizing that it makes more sense to consolidate purchases in one card in terms of rewards.