Executive Summary: There are many products in the personal financial space. Most of these cater to the middle and higher income groups. There are not too many products for the lower income groups in the rural and urban areas. But that population also needs financial planning. They need to have cash in hand, investments, insurance and estate planning. Let us look at what is available in the market today –
Cash in hand – People below the poverty line are many times uneducated and illiterate. They are not aware of how to open bank accounts etc.
Central Bank of India has a No-Frills Savings Deposit Account – The main features are – Initial Deposit of Rs. 50 and minimum balance of Rs. 50 though there are no charges for non-maintenance of minimum balance. 50 withdrawals are free of charge and 1 cheque book is given to the customer. Simplified KYC procedure for opening an account and an existing customer who has fulfilled KYC norms can introduce another customer.
Another product that Central Bank of India offers is the CENT Smart Variable Recurring Deposit. The investor can open this account through Business Correspondents and need not visit a branch. The account can be opened with a minimum deposit of Rs. 10. Deposits can be made on a weekly basis as well which is good for daily wage earners. The scheme is available for tenures of 12 months, 24 months and 36 months. There is also an option to close the account prematurely which is helpful in case of emergency withdrawal.
Investment – UTI Retirement Benefit Pension Fund (UTI RBPF) is a government pension fund which takes small contributions of Rs.50 to Rs. 200 per month and payments are flexible. The scheme invests in listed equities, government and corporate debt. It also allows withdrawals. It is distributed through third parties working at the grassroots levels like SEWA and other such groups which increase its reach.
Insurance – Rashtriya Swasthya Bima Yojana (RSBY), or “National Health Insurance Programme” has expanded health-care access among the poor. RSBY has provided about 110 million people with heavily subsidized health insurance. It targets the poor, illiterate and highly mobile population. It provides the insured a smart card that uses biometrics to identify patients and is able to make seamless and paperless payment from the insurer to the insured. It is issued on the spot to people who pay Rs. 30 as an enrolment fee. The remainder of the total premium which is about Rs.500-Rs.600 is paid by the government which provides a financial cover greater than Rs. 3,00,000 . This gives them the facility to go to any hospital. Organizations like Gram Vikas in Orissa help to distribute these cards.
Chola MS General Insurance provides insurance products for the rural sector like health insurance by being involved in RSBY. They provide other products like Cattle Insurance, Tractor/Farm Inputs Insurance, Critical Illness Insurance, Micro Insurance and Weather Insurance.
Retirement Planning – Invest India Micro Pension Services (IIMPS) promotes micro savings among the poor for their old age. They offer a range of products to the poor for financial security –
1. NPS Lite/ Swavalambam – This is a long term retirement savings plan. Those who save Rs. 1000 per year get a matching contribution from the government which is a big incentive for saving.
2. They also promote UTI (UTI RBPF) and Insurance products of LIC that caters to the poor.
Estate Planning – The lower income group also need to plan what happens to their assets after their death. A person with sound mind can draft a will with two witnesses signing it. The witnesses should be people who will not inherit anything. Though it is recommended, it is not necessary to register it or even notarize it for it to be valid. All pages have to be signed by the person drafting the will.
Social Service Organizations – There are organizations that help the lower income group in getting financial products. IFMR Rural Channels is an organization in Chennai that is devoted to the cause of financial inclusion. They offer products for financial planning, insurance and growth and diversification of investments to the poor by acting as an agent for bigger financial institutions. They claim to provide Crop loan, Salary Loan, Emergency Loan, Term Life Insurance, Livestock Insurance, National Pension Scheme (Lite), FD, and Savings Account. They are currently present only in Tamil Nadu.
The author can be reached at [email protected]
Central Bank of India has a No-Frills Savings Deposit Account – The main features are – Initial Deposit of Rs. 50 and minimum balance of Rs. 50 though there are no charges for non-maintenance of minimum balance. 50 withdrawals are free of charge and 1 cheque book is given to the customer. Simplified KYC procedure for opening an account and an existing customer who has fulfilled KYC norms can introduce another customer.
Another product that Central Bank of India offers is the CENT Smart Variable Recurring Deposit. The investor can open this account through Business Correspondents and need not visit a branch. The account can be opened with a minimum deposit of Rs. 10. Deposits can be made on a weekly basis as well which is good for daily wage earners. The scheme is available for tenures of 12 months, 24 months and 36 months. There is also an option to close the account prematurely which is helpful in case of emergency withdrawal.
Investment – UTI Retirement Benefit Pension Fund (UTI RBPF) is a government pension fund which takes small contributions of Rs.50 to Rs. 200 per month and payments are flexible. The scheme invests in listed equities, government and corporate debt. It also allows withdrawals. It is distributed through third parties working at the grassroots levels like SEWA and other such groups which increase its reach.
Insurance – Rashtriya Swasthya Bima Yojana (RSBY), or “National Health Insurance Programme” has expanded health-care access among the poor. RSBY has provided about 110 million people with heavily subsidized health insurance. It targets the poor, illiterate and highly mobile population. It provides the insured a smart card that uses biometrics to identify patients and is able to make seamless and paperless payment from the insurer to the insured. It is issued on the spot to people who pay Rs. 30 as an enrolment fee. The remainder of the total premium which is about Rs.500-Rs.600 is paid by the government which provides a financial cover greater than Rs. 3,00,000 . This gives them the facility to go to any hospital. Organizations like Gram Vikas in Orissa help to distribute these cards.
Chola MS General Insurance provides insurance products for the rural sector like health insurance by being involved in RSBY. They provide other products like Cattle Insurance, Tractor/Farm Inputs Insurance, Critical Illness Insurance, Micro Insurance and Weather Insurance.
Retirement Planning – Invest India Micro Pension Services (IIMPS) promotes micro savings among the poor for their old age. They offer a range of products to the poor for financial security –
1. NPS Lite/ Swavalambam – This is a long term retirement savings plan. Those who save Rs. 1000 per year get a matching contribution from the government which is a big incentive for saving.
2. They also promote UTI (UTI RBPF) and Insurance products of LIC that caters to the poor.
Estate Planning – The lower income group also need to plan what happens to their assets after their death. A person with sound mind can draft a will with two witnesses signing it. The witnesses should be people who will not inherit anything. Though it is recommended, it is not necessary to register it or even notarize it for it to be valid. All pages have to be signed by the person drafting the will.
Social Service Organizations – There are organizations that help the lower income group in getting financial products. IFMR Rural Channels is an organization in Chennai that is devoted to the cause of financial inclusion. They offer products for financial planning, insurance and growth and diversification of investments to the poor by acting as an agent for bigger financial institutions. They claim to provide Crop loan, Salary Loan, Emergency Loan, Term Life Insurance, Livestock Insurance, National Pension Scheme (Lite), FD, and Savings Account. They are currently present only in Tamil Nadu.
The author can be reached at [email protected]
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