Speakers for Valedictory Session
Ashish Kumar Chauhan
Bihar is lagging behind in terms of investments in the stock markets. “Bihar has 2.63 lakh investors who have opened dematerialised accounts, as against two crore accounts in India. It captures 1.3 percent of total accounts opened with depositaries while the population of Bihar is eight percent of India,” said Ashish Kumar Chauhan, chief executive officer, Bombay Stock Exchange. Around two percent of Indians invest in stock market.
Chauhan said investment in stock market serves as hedge against inflation because it gives more returns than the fixed income schemes. In the last few years, the BSE has been working with state governments, including Bihar, to make people aware of transacting in the markets.
He stressed on the importance of financial literacy in the state. “For a young population, which can invest in stock market in shares, mutual and pension funds will give them long term returns than other fixed income,” the CEO added. India’s fifty percent of population is below the age of twenty-five. “They are getting urbanised. They need to invest in long-term asset creations, for which stock markets are a good option,” the CEO said.
Clearing the air about the mistrust regarding investing in stock markets, he said that we are the market for trust. The BSE and SEBI are there to take care of the investments of their hard-earned money, he said. “If you invest in stock markets and keep shares for more than a year, the capital gain tax is exempted, that is zero capital gain. Investment in stock market not only helps in getting higher returns but it is also good for the country as a whole because that money is invested in new greenfield projects that help in creating jobs. We need to create 1.5 crore jobs for every year in next 20 years.”
Bihar for the last five years is on the path of inclusion but still has a long way to go. “Bihar got included in the mainstream India, world economics and politics in last few years. e-Governance has started at village-level scale in the state. In four years, we have invested Rs 60 crore on e-governance in the state. We haven’t got returns from our investment but have not lost hope from the state. This is the state for tomorrow as there is a huge potential here. However, in the path of inclusion there is a long way to go.” said Hemant Kanoria, chairman, SREI Group, which has an asset of 50,000 crore in infrastructure.
However, Kanoria was happy that Bihar finally got included in the mindset of policymakers. When SREI Group got opportunity to work here, it started from villages, not from the cities. He sees huge potential in people here. “Bihar has a dream and it can dare to dream too,” he said.
He said that the state needs to focus in three areas – agriculture, infrastructure and electricity generation. “There is huge scope in the state which is dependent on agriculture. It can truly become inclusive…Bihar can become leader in organic farming. The state can create a model for other states.” “Electricity is very important for growth to happen. The large population is boon for the state not the bane,” said Kanoria.
He also said that through e-connectivity, several facilities can be created for the rural areas. Four thousand common service centres have been established in the rural areas. “Now the convergence is needed where a lot of information in terms of banking, insurance and mutual funds can be brought to the doorsteps of the rural population that hasn’t got such facilities in the past,” he told the gathering.
He said that Bihar started late in terms of development works and embracing technology, but it can learn from mistakes made by other states. “We can create a trajectory which we want to and which is not forced upon us.”
Governance-related problems can be solved in the state only by the expansion of the common service centres, said UK Sinha, chairman, securities and exchange board of India (SEBI). “Delivery of services through common service centres is a great step by the government. You need to channelise the energy to make dreams of financial inclusion in the state,” said Sinha.
Elaborating on how the state is lagging in terms of capital market, Sinha said, “8,700 companies are registered in Bihar, only two of them are listed. When coal India public issue came, only 12,700 applicants came from the state. It is just half percent of the total state. Bihar still lags in terms of capital market and it is necessary that the state gets connected with the capital market,” Sinha added. Bihar’s contribution to the mutual fund market is just Rs 1509 crore assets under management. Only four states are lower than Bihar’s figure. It comes around 0.42 percent in the mutual fund.
“They have just 24 offices of mutual funds in Bihar. There is no office of any depository participant in the state. There is just one registered broker in the state. Just one thousand broker terminals exist in the state. It is just below one percent of the whole country,” he pointed out.
Sinha said that private participation – private equity and venture capital – is very important in developing the state. “Small and medium industry has to play an important role in the development of the state. They should not only be dependent on the banks. Venture capital has played a big role in development of industries. Only through loans, one can’t do business,” he said.
He also encouraged such companies to list at the stock markets. The chairman said, “For small and medium enterprise, there is a separate trading opened for them. Those companies can list their shares on those platforms. In Bombay stock exchange, three such companies have been listed. The companies from Bihar should utilise the platform. Financial literacy and education is necessary in states like Bihar.”
He praised the role of improvement in law and order and growth at a higher rate. Per capita income increased to 60 percent in the last five years in the state while country’s average is 48 percent. “The situation of Bihar is in a take-off stage. There is an objective criteria. There are two ways looking at the issue – from the point of view of common people and other from the investor’s angle,” he said, adding that the state needs to utilise the platform created by the SEBI in financial inclusion.
“SEBI has taken a decision that if the companies decide to sell its product outside 15 main districts, then it will give extra commission (0.30 percent). The main purpose is sell mutual funds in the small cities and in Bihar too. In the small districts, people who want to invest in mutual funds can deposit up to Rs 20,000 in cash without a bank account or the PAN card,” said SEBI chairman.
SEBI plans to set up a new local office in Patna to cater to investors, market entities and the companies for the state of Bihar. The market regulator’s board in March 2012 approved opening of new local offices in Chandigarh, Indore, Bangalore, Kochi, Patna, Bhubaneswar and Jaipur to help it decentralise operations and more effectively reach out to the investors in smaller cities.
Chairman and Managing Director, Central Bank of India
Beyond initials in the financial inclusion, a lot still needs to be done in the state, said MV Tanksale, chairman, Central Bank of India. “I don’t think that the business correspondent (BC) agent models are able to deliver what they are expected to deliver,” he said. The BC agent is the last mile connectivity in the rural areas where banks have not reached. They are known as representatives of the banks.
Recounting his own experience, Tanksale said that role of BC is still very limited. “I visited Sikiria village near Bihta in Patna. The MNREGS payments are made by the Central Bank of India through business correspondent agent. But his activity is confined only to the payment of MNREGS workers through e-Shakti cards,” he said. Tanksale was instrumental in introducing many innovations in the banking field, especially in the area of e-banking products (he pioneered the `Transaction Banking Division` a technology-based platform for a wide range of products and services to customers).
“The BC model is also the biggest employment opportunity. But unless they accept it as permanent commitment as a livelihood, I don’t think the purpose is going to get served. Passion, interest and his earning must be good to move his passion,” he said, stressing on the need of changing the BC model in the state and the country where banks have entered villages with population of 2,000. “The good thing is that smart card has been given and in 20 percent cases, accounts are operating regularly,” he said. According to him, these are the small steps in the financial inclusion direction.
But, he was appreciative of the fact that the state has created a passion for financial inclusion. Banks have opened common service centres (CSCs) with the help of SREI Sahaj, which is India’s largest CSCs network.
The CSCs have started in the state. But, Tanksale added, CSCs must provide multiple services. “Convergence between CSC and financial inclusion is needed. But multiple services are important so that the business correspondent agent can generate sufficient income. The client servicing is very important. We should now shift focus towards client servicing,” the chairman said.
As bankers are facing flak for not committing to the financial inclusion prorgamme, he gave a note of advice to the bankers to play active role in financial inclusion. He said, “Bankers should think that by merely making payments to the technology partners or business correspondents, financial inclusion cannot be achieved. The bankers will have to own it up.” Tanksale also accepted the fact that banks have also deficit of manpower in branches.
“We have evolved the ultra small-branch to cater to the needs of villagers. The branch officials are required to go to villages at least once in a week to build confidence among villagers and make them aware of BC agents. It is also to let them know that these BC agents are extension of bank and the villagers’ money is in safe hands,” he said.
Harsha Vardhana Singh
Deputy Director General, World Trade Organisation
Bihar’s low financial inclusion should not come as a surprise; globally there are over 2 billion persons and millions of micro, small and medium enterprises not covered by financial inclusion, said Harsha Vardhana Singh, deputy director general, World Trade Organisation.
Singh said such a trend is disturbing. “The situation is especially worrisome after the recent sharp economic and financial decline, increasing the number of vulnerable population, thus showing a greater need for safety nets and access to finance,” he said.
Stressing the need for more cooperation on this front, the deputy director general said, “The G20 leaders have established inter alia, the global partnership for financial inclusion, whose efforts include helping countries put into practice the principles for innovative financial inclusion, strengthening data for measuring financial inclusion, and developing methodologies for countries wishing to set targets.”
Emphasising that India is one of the few active countries encouraging financial inclusion schemes, Singh said, “Financial inclusion can cover a range of relevant products and supplementary activities, and diverse skills and resources needed to make progress. The problems are large and diverse, they need multiple options and solutions and a framework of regulatory principles to give stability and confidence.”
He also added that financial inclusion can only be possible with active cooperation among member nations. “Moreover, nations have realised that they need to work together, multilaterally as in the WTO, to make effective progress. Therefore, today efforts to improve financial inclusion are being made not only at the individual country level but also at regional or global level.”