As India’s economy and society has changed rapidly over the past decade, one straightforward source of competitive advantage – in business, in investing, in politics and generally in Indian life – has accrued to those who have made the effort to understand the new India. Govindraj Ethiraj is amongst those who has made strenuous efforts to understand the change and communicate that to the world at large. Not one to write vainglorious pieces about those in power, this insightful interview with the G.R. Chintala, the chairman of the National Bank for Agriculture and Rural Development, highlights several intriguing aspects of the changes rippling across India.
Firstly, the sustained rise of digital transactions: “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%.”
Secondly, the link between financial inclusion and the use of low cost modern tech: “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 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.”
Thirdly, the creation of a verifiable credit history/track record for everyone: “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.”
Finally, the rise of Indian women who are using tech and the financial system to challenge the patriarchy: “….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.”
Firstly, the sustained rise of digital transactions: “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%.”
Secondly, the link between financial inclusion and the use of low cost modern tech: “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 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.”
Thirdly, the creation of a verifiable credit history/track record for everyone: “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.”
Finally, the rise of Indian women who are using tech and the financial system to challenge the patriarchy: “….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.”
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