Financial Literacy Centres (FLCs) Compiled By : Madhu Bhandari RSC Lucknow

Objective: The broad objective of the FLCs will be to provide free financial literacy/education and credit counselling. The specific objectives of the FLCs are given as under: To provide financial counselling services through face-to-face interaction as well as through other available media like e-mail, fax, mobile, etc. as per convenience of the interested persons, including education on responsible borrowing , proactive and early savings, and offering debt counselling to individuals who are indebted to formal and/or informal financial sectors To educate the people in rural and urban areas with regard to various financial products and services available from the formal financial sector To make the people aware of the advantages of being connected with the formal financial sector To formulate debt restructuring plans for borrowers in distress and recommend the same to formal financial institutions, including cooperatives, for consideration To take up any such activity that promotes financial literacy, awareness of the banking services, financial planning and amelioration of debt-related distress of an individual

Financial Literacy Centres – Conditionalities: FLCs should not, however, act as investment advice centres /marketing centres for products of any particular bank/banks. Counsellors are to refrain from marketing / providing advice regarding investment in insurance policies, investment in securities, value of securities, purchase/ sale of securities, etc., or promoting investments only in bank’s own products. The counselling centres are to maintain arm's length relationship with the parent bank and, preferably not be located in the bank's premises. This is to avoid any impression that such centres are a part of the bank itself. The centres are not to promote the products of their parent banks. RSC/LKO/MB/FLC

Initially, if the branch premises are used to minimize cost, the FLC should be kept completely separated with a separate entrance and different look and feel from that of the bank's branch so as to maintain a distinct identity from the parent bank. The banks' officers may make dummy calls or incognito visits to these Centres for effective supervision and monitoring of activities of such Trusts /Societies. These centres are not to be perceived as recovery or marketing agents of the bank concerned. The general public/banks’ constituents should feel comfortable in voluntarily approaching the centres. The independence of the counselling centres has to be ensured so that non-partisan and objective guidance to the customers. FLCs may not take up cases of wilful defaulters. The activities of the Rural Development and Self Employed Training Institutes (RUDSETI) / Rural Self Employment Training Institutes (RSETIs) towards skill development/capacity building could be dovetailed with FLCs initiatives, for increasing the earnings/debt repaying ability of the distressed borrowers’ families.

Coverage of FLCs: Credit counselling services may be provided in rural, semi urban, urban and metropolitan areas. The financial literacy counselling can be provided to farming community and those engaged in allied activities as well to those individuals with overdues in credit cards, personal loans housing loans, etc.

Charges: Counselling and debt management services may be provided free of charge to the customers so as to put no additional burden on them.

Infrastructure: Proper infrastructure with adequate communication and networking facilities like PC with Printer, email facilities, fax, telephone, etc has to be provided. There should be a toll free line also for easy contact. To maximize the outreach of the counselling centre, mobile units can also be set up to service all the blocks in the districts.Separate cubicles need to be set up to maintain the privacy/confidentiality of the discussions with the clients. RSC/LKO/MB/FLC

Functions /Activities to be undertaken by FLCs: Credit Counselling As a part of preventive counselling, the Centres are to provide awareness regarding cost of credit, availability of backward and forward linkages, etc. The clients can be counseled to avail credit as per their repaying capacity. A generic financial education module in vernacular language can be adopted. Broadly, mode content can include:       

Need for Savings Budgeting Advantages f banking with formal financial institutions Concept of risk and rewards and time value of money Various products offered by banks, insurance companies Aspects relating to deposits and various other financial products Method of calculation of interest on S.B. Account, Fixex Deposit, etc., and method of compounding.

Preventive counselling may be made mandatory for individual borrowers based on their income level or size of loan. Such mandatory credit counselling could be made a part of fair lending practice of banks. Preventive counselling can be through the media, workshops and seminars.

Debt Settlement: In the case of curative counselling, the clients may approach the counselling centres to work out individual debt management plans for resolving their unmanageable debt portfolio. The centres could work out effective debt restructuring plans that could include repayment of debt to informal sources, if necessary, in consultation with the bank branch.

Customers’ Rights: Since promoting awareness is one of the primary objectives, the FLCs should give due emphasis to customers’ right under fair practices code, benefits of nomination facilities, operation of accounts, etc.

RSC/LKO/MB/FLC

Mechanism for Credit Counselling and Debt Settlement: The Centres have to encourage all Banks’ customers to approach them. Information about such FLCs can be provided through the various for a available under the Lead Bank Scheme. Where there are early warning signals, borrowers may be advised by the banks to take the advice of FLCs before taking measures for recovery. Timely intervention will help to arrest any further financial deterioration of the borrowers. The counsellors are mandated to refer cases to banks and work out Debt Management Plans for distressed borrowers with a view to facilitating restructuring /rescheduling their debts. The FLCs are to conduct open-house seminars either at the centre or at various places in the district for group counselling. The help of other banks operating in the district can also be taken to sponsor, wholly or partly, such seminars in areas predominantly covered by them. For single-creditor-debts, the FLCs could assist the borrower in negotiating with the bank concerned. In case of multiple credits availed of by individuals, the FLCs may negotiate with the bank/s having the largest exposure to restructure the debt and the recoveries to be shared on a pro-rata basis. For the above purpose, and if deemed necessary, the FLCs may call for a joint meeting with the concerned bank/banks for putting forward their concerns / proposals for restructuring of debts. The bank/s, on review of the recommendations/proposal made by the FLC, may make their independent and informed decision to accept the proposal in its original form or in such other modified form as deemed fit. The choice of finally accepting or rejecting a debt restructuring proposal suggested by the FLCs may be left to the bank/ banks concerned. However, in case of non- acceptance or rejection of restructuring proposals forwarded by FLCs by banks, they may give the reasons in writing to FLCC in the interests of transparency. The FLCs would, however, not involve themselves in recovering and distributing money. This may be left to the bank concerned, or the bank having the largest exposure to act on behalf of all the banks.

Qualification and Training of Counsellors: As FLCs are expected to play a crucial role in assisting and guiding the distressed individual-borrowers, it is necessary that only well qualified / trained counsellors are selected to man the centre on a full time basis. The FLCs could consider appointing people with domain knowledge in agriculture for counselling related to agriculture and allied activities. RSC/LKO/MB/FLC

Individuals such as retired bank officers, ex-servicemen, etc. may be allowed to be appointed, among others, as credit counsellors. Credit counsellors should have sound knowledge of banking, law, finance, requisite communication and team building skills, etc. Proper training and skill up gradation is essential for the counsellors to keep themselves abreast of the latest developments in the banking industry. Training would be to be provided through RBI’s College of Agriculture Banking (CAB), Pune or Bankers’ Institute of Rural Development, Lucknow in coordination with PSLB Division, Head Office/Financial Inclusion Division, HO/Central Staff College, Delhi.

Procedure for Selection / appointment of FLC Counsellor: For appointing counselors a small advertisement may be given in local newspaper giving reference to bank's website for getting the details. Short listed candidates be called for interview by the Circle Head. Selection to be finalized by the Committee of three persons headed by Circle Head (DGM / AGM). LDM can be taken as second member and third member may be outsider (Principal of any reputed management / educational institute.

Eligibility: Preferably individual retired as Bank officer with experience of handling credit and having worked in rural / semi-urban area. He should have been honorably retired from the Bank. He should be able to work independently and should have computer knowledge, especially of programme like MS Word, Power Point, Excel and should be able to operate internet. His age on the date of engagement should not be more than 62 years. Initial engagement of the counselor shall be for three years subject to review on yearly basis with one year extension subject to production of medical certificate of good health from CMO. The extension will be subject to upper limit of 65 years.

TERMS AND CONDITIONS: Counsellor is to be paid fixed monthly remuneration which has been revised w.e.f 01.01.2015. The existing and revised remuneration of FLC Counsellor is given here under: RSC/LKO/MB/FLC

Location of FLC

Existing remuneration

Revised Remuneration w.e.f. 01.01.2015

Metro

20000

20000

Urban

15000

20000

Semi Urban

15000

15000

Rural

10000

15000

He will be entitled to only one day leave per month on non-cumulative basis. Any leave availed more than this, would be treated as leave on loss of pay. The counselor will be required to sign a consultancy contract on stamp paper valued as per local Stamp Act. The original and duplicate copy, after signature of Counsellor will be sent to Circle Office for signature of Chief Manager (P&D) in CO and the Agreement so signed be retained at CO and confirmation to the effect be sent to Trust (PNB CRDT HO). The contract period may be kept for three years, subject to renewal every year. However, Counsellor can be terminated by giving one months' notice from either side. Counsellor have to be present at the Centre for five days i.e. Monday to Saturday (Wednesday off) between 11 A.M. to 4 P.M. or as directed by Circle Head from time to time. Counsellor will be paid for on-location programmes, a sum of Rs.200/- per day subject to a maximum of Rs. 1,000/- per month. He will be entitled for diem allowance and hotel entitlement while sent to training/ seminar as applicable to MMG Scale III Officers. Counsellor will also be eligible for bus/ train (AC 2 tier) fare. Counselors are to refrain from marketing/providing advice regarding investment in insurance policies, investment in securities, value of securities, purchase/ sale of securities, promoting investment only in bank's own products. RSC/LKO/MB/FLC

Counselor is not to promote the products of the parent bank, he should maintain arms length relationship with the parent bank

Review/Renewal: Review and renewal will be finalized by Circle Head subject to production of Medical Certificate of good health, from CMO. The renewal will be subject to upper age limit of 65 years. Review/ Renewal be considered by the Circle Head on the basis of actual performance since inception duly recommended by Chief LDM as per Performa enclosed (Annexure-I).

Operational Guidelines of the Scheme All existing as well as the new FLCs of the Bank would work under the aegis of our PNB Centenary Rural Development Trust. The proposal for opening of new FLCs (approved in SLBCs) duly recommended by Circle Head, be approved from PNBCRDT. Counseling Centres may maintain arm’s length relationship with the parent bank and preferably not to be located in the bank’s premises. Wherever, the bank uses branch premises initially for minimizing cost, FLC may be kept completely separated with a separate entrance and different look and feel from that of the bank’s branch so as to maintain a distinct identity from the parent bank. The Circle Office is to fix up the premises with suitable space sufficient enough to accommodate the official manning the Centre and the visitors/clients’ seating arrangement. The premises should have glass cabin (transparent).Delhi and Chandigarh may have two such cabins for two counselors. Some of the FLCs are operating from LDM/Branch Offices which needs to be shifted to the preferably rent free Govt accommodation. If the same is not available, the Circle Head is permitted to take premises on rent for FLC, on the competitive rates up to Rs.5000/- per month, without seeking permission from PNBCRDT. Committee of three persons to hire the premises shall be IInd Man/AGM of Circle Office, LDM, and Chief Manager (CO). The proposal to hire the premises should be duly recommended by FLC Counsellor. Necessary infrastructure and connectivity be also provided to FLC by Circle Office. Infrastructure to be provided include PC with internet facility, Printer, fax, telephone, etc., the expenditure of which be borne by the respective Circle Offices. FLCs may not be managed by the staff of the bank. Hence, individuals such as retired bank officers, ex-servicemen, etc may be allowed to be appointed, among others, as credit counselors. RSC/LKO/MB/FLC

The appointment FLC counselors be made as per the procedure laid down for selection/appointment given in the circular. FLCs be fully funded by the bank. All overheads for establishment/maintenance and training cost including salary of FLC Counsellor be reimbursed by respective Circle Offices. The Financial Literacy Centres (FLCs) will impart financial literacy in the form of simple messages like Why Save, Why Save early in your Life. Why Save with banks, Why borrow from Banks, Why borrow as far as possible for income generating activities, Why repay in time, Why insure yourself, Why Save for your retirement etc. The FLCs and rural branches of the banks would also conduct outdoor Financial Literacy Camps with focus on financially excluded people at least once a month. For the purpose, the help of experienced NGOs may also be taken. As the focus of the FLCs is on simple messages of financial literacy, no risks of misspelling are expected. However, it will be rural branches of banks to ensure that misspelling of financial products and services does not take place. The officials working at FLCs should be provided training in behavior orientation so as to enable them to work as effective trainers along with periodic knowledge up gradation on various banking products and services. FLCs and rural branches of banks should maintain record in the form of a register containing details such as name, gender, age, profession, contact details, whether banked or unbanked, details of services availed etc. The Head / Controlling Offices of the concerned banks would monitor the financial literacy efforts undertaken by their FLCs / Branches through periodic reporting and also by resorting to random on-site visits. They would periodically (at least once in a year) undertake impact evaluation of their literacy efforts so as to make way for continuous improvement.

Types of interface: Counselling centres should be equipped to deal with requests received in person, by phone, e-mails, post, etc. They should have a toll free line, e-mail and fax facilities for easy contact. To maximize the outreach of the counselling centre, mobile units should also be set up to service all the blocks in the districts.

Monitoring Performance of FLCs: As per RBI’s Model Scheme, the functioning of the FLCs in each State may be monitored by a Committee headed by the Regional Director of the Reserve Bank of India and feedback provided to the banks on a regular basis. The Committee may comprise SLBC Convener Bank, other banks, NABARD, IBA, consumer organizations, NGOs working in the area etc. Lead District Managers (LDMs) are to monitor the progress of FLCs and submit to PNB RSC/LKO/MB/FLC

Centenary Rural Development Trust under copy to the respective Circle Office on monthly basis.The FLC Counsellor to submit monthly progress report on the prescribed Performa to PNBCRDT with copy to respective LDM/Circle Office by 5 thof succeeding month so that consolidated statement could be sent FI Division HO . The FLCs also to submit quarterly report to PNBCRDT, HO.PNBCRDT shall submit consolidated progress to Financial Inclusion Division, HO. Publicity of FLCs Publicity has to be provided through print and audio-visual media Pamphlets are to be distributed in branches of various banks/Government Offices/prominent centres in that district so as to give wide publicity to established FLC in that area. Kisan Goshties may be organized where the objective and functions of the FLC may be discussed. Branches can display list of main services provided by FLC along with place of functioning and contact details, on a separate Board at a conspicuous place. Similar boards may also be displayed at Panchayat Ghars, etc. In the long term, the bank may go for a short film on various credit counselling aspects for showing to the clients in the counselling aspects for showing to the clients in the counselling centres. Role of SLBCs: SLBCs may discuss and coordinate with banks both in public and private sectors, and arrive at a plan for setting up of FLCs at different levels in a phased manner. The FLCs should oversee the activities of FLCs and provide support and guidance, wherever required. SLBCs / UTLBCs would review the financial literacy efforts undertaken by banks under their jurisdiction as an agenda item in SLBC / UTLBC meetings and would submit a quarterly report on functioning of FLCs to the respective regional offices of RBI within 20 days after the end of each quarter. The field functionaries are requested to follow the consolidated guidelines on FLCs and utilize the services of FLC Counsellors for creating massive awareness about financial literacy among the masses with focus on financially excluded sections of the society. ************ RSC/LKO/MB/FLC