Page 1 of 6
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 04 Issue 04
April 2018
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 31
Financial Inclusion in India
Seema Gupta
Assistant Professor (Commerce) Govt. College for Women, Madlauda (Panipat)
aggarwalvineet1976@gmail.com
Abstract
As the majority of the rural population is still not included in the inclusive growth, the
concept of financial inclusion becomes a challenge for the Indian economy. Since 2005,
many concerted measures are initiated by the Reserve Bank of India and Government of
India in favour of financial inclusion but the impact of these did not yield satisfactory
results. The paper aims to focus on utilizing the existing resources such as Mobile
phones, Banking Technologies, India Post Office, Fair Price Shops and Business
Correspondents (BCs) thereby making it more efficient and user friendly for the interest
of the rural population as well as the formal sector.
Keywords: Financial inclusion, Business correspondents, Indian economy
Introduction
With the progress of the Indian economy,
especially when the focus is on the
achievement of sustainable development,
there must be an attempt to include
maximum number of participation from all
the sections of the society. But the lack of
awareness and financial literacy among the
rural population of the country is
hindering the growth of the economy as
majority of the population does not have
access to formal credit. This is a serious
issue for the economic progress of the
country. In order to overcome such
barriers, the banking sector emerged with
some technological innovations such as
automated teller machines (ATM), credit
and debit cards, internet banking, etc.
Though introduction of such banking
technologies brought a change in the urban
society, a majority of the rural population
is still unaware of these changes and is
excluded from formal banking. Financial
inclusion enables improved and better
sustainable economic and social
development of the country. It helps in the
empowerment of the underprivileged, poor
and women of the society with the mission
of making them self-sufficient and well
informed to take better financial decisions.
Financial inclusion takes into account the
participation of vulnerable groups such as
weaker sections of the society and low
income groups, based on the extent of
their access to financial services such as
savings and payment account, credit
insurance, pensions etc. Also the objective
of financial inclusion exercise is easy
availability of financial services which
allows maximum investment in business
opportunities, education, save for
retirement, insurance against risks, etc. by
the rural individuals and firms. The
penetration of financial services in the
rural areas of India is still very low. The
factors responsible for this condition can
be looked at from both supply side and
demand side and the major reason for low
penetration of financial services is,
probably, lack of supply. The reasons for
low demand for financial services could be
low income level, lack of financial
literacy, other bank accounts in the family,
etc. On the other hand, the supply side
factors include no bank branch in the
vicinity, lack of suitable products meeting
the needs of the poor people, complex
processes and language barriers. Since
2005, the Reserve Bank of India (RBI) and
the Government of India (GOI) have been
making efforts to increase financial
inclusion. Measures such as SHG-bank
Page 2 of 6
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 04 Issue 04
April 2018
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 32
linkage program, use of business
facilitators and correspondents, easing of
Know Your Customer (KYC) norms,
electronic benefit transfer, separate plan
for urban financial inclusion, use of
mobile technology, bank branches and
ATMs, opening and encouraging ‘no-frill- accounts’ and emphasis on financial
literacy have played a significant role for
increasing the use of formal sources for
availing loan/ credit. Measures initiated by
the government include, opening customer
service centers, credit counselling centers,
Kisan Credit Card, Mahatma Gandhi
National Rural Employment Guarantee
Scheme and Aadhar Scheme. These
renewed efforts are more focused than the
earlier measures which were more general
in nature having a much wider scope.
Though the measures were initiated
earlier, their impact on the rural population
needs to be analysed and reframed in order
to understand the present scenario in the
rural areas. Financial inclusion may be defined
as the process of ensuring access to
financialservices and timely and adequate credit
where needed by vulnerable groups suchas
weaker sections and low income groups at an
affordable cost
Objectives
The research aims to objective cover the
following:
How financial inclusion isthe need ofthe hour
for the sustainability and maintenance of the
growth process.
How itis one ofimportant factor for the
equitable growthoftheworldeconomy.
ThefutureoffinancialinclusionprocessinIndia
TheextentoffinancialinclusionIndia.
The perception of people regarding financial
inclusion services andits benefits.
How financialinclusion can improve the day- to-daymanagement offinances.
Benefits ofFinancialInclusion:
Financial inclusion has many benefits. Following
are some ofthebenefitssummedup.
It paves the way for establishment of an account
relationship which helps the poortoavail avarietyof
savings products and loan products for housing,
consumption, etc.
An inclusive financial system facilitates efficient
allocation of productive resources and thus can
potentiallyreduce the costof capital.
This also enables the customer to remit funds at
low cost. The government can utilize such bank
accountsforsocialsecurityserviceslike health and
calamity insurance under various schemes for
disadvantaged. From the bank’s point of view,
having such social security cover makes the
financing ofsuch personslessrisky. Reduced risk
meansmore flowoffunds atbetterrates.
Access to appropriate financial services can
significantly improve the day-to-daymanagement
of finances. For example, bills for daily utilities
(municipality, water, electricity, telephone) can be
more easily paid by using cheques or through
internet banking, rather than standing in the queue
in the officesofthe service.
Transferofmoneycanbedonemore safelyandeasilyby
using the cheque, demand draft or through internet
banking.
Abank account also provides a passportto a range
of other financial products and services such as
short term credit facilities, overdraft facilities and
credit card. Further, a number of other financial
products,such asinsurance and pension products,
necessarilyrequire the accessto a bank account
Lastly, the Employment Guarantee Scheme of
the Government which is being rolled out in 200
districtsinthecountrywouldbringinlargenumberofpeople
through their savings accounts into the banking
system.
Tools of Financial Inclusion and the
Methods to achieve them
1) A no-frills banking account for making and
receivingpayments,
2) A savings product suited to the pattern of
cash flows of apoorhousehold,
3) Moneytransferfacilities,
4) Small loans andoverdrafts for productive,
personal and other purposes,&
5) micro-insurance (life and non-life)
Page 3 of 6
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 04 Issue 04
April 2018
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 33
FinancialInclusion
Dimensions of Financial
Inclusion:
The level of financial inclusion in
India can be measured based on three
tangible and critical dimensions. These
dimensions can be broadly discussed
under the following heads:
Branch Penetration
Penetration of a bank branch is
measured as number of bank branches
per one lakh population. This refers to
the penetration of commercial bank
branches and ATMs for the provision
of maximum formal financial services
to the rural population.
Credit Penetration
Credit Penetration takes the average of
the three measures: number of loan
accounts per one lakh population,
number of small borrower loan
accounts per one lakh population and
number of agriculture advances per
one lakh population.
Deposit Penetration
Deposit penetration can be measured
as the number of saving deposit
accounts per one lakh population. With
the help of this measure, the extent of
the usage of formal credit system can
be analysed. The progress in the
development of financial inclusion in
India can be examined by
understanding the stages involved in it.
The concept of examining financial
access became important immediately
after the All-India Rural Credit Survey
that was completed in the 1950s. The
results of the survey revealed that
farmers relied heavily on money- lenders in the year 1951-52. Only the
urban areas had large number of bank
branches compared to rural areas. Such
a condition continued in the country
until RBI started financial inclusion
SAVINGS
BANK
ACCOUNTS
INSURANCE
FINANCIAL
ADVICE
PAYMENT &
REMITTANCE
AFFORDABLE
COST
FINANCIAL
INCLUSION
