Page 1 of 7
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 | 59
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
Page 2 of 7
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 | 60
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 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 accessto financialservices
and timely and adequate credit where needed
by vulnerable groups suchas weaker sections
and lowincome groups at anaffordable cost
Objectives
The research aims to objective cover the
following:
How financial inclusion is the need
of the hour for the sustainability and
maintenance ofthe growthprocess.
How itisone ofimportant factor for
the equitable growth of the world
economy.
The future of financial inclusion processin
India
TheextentoffinancialinclusionIndia.
The perception of people regarding
financial inclusion services and its
benefits.
How financialinclusion can improve
the day-to-day management of
finances.
Benefits of FinancialInclusion:
Financial inclusion has many benefits.
Followingare someofthe benefitssummedup.
It pavesthe way for establishment of
an account relationship which helps
the poortoavailavarietyofsavingsproducts
andloanproductsforhousing,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
Page 3 of 7
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 | 61
government can utilize such bank
accounts for social security services
like health and calamity insurance
under various schemes for
disadvantaged. From the bank‟s
point ofview, having such social
securitycovermakesthe financing of
such personslessrisky. Reduced risk
means more flow of funds at better
rates.
Access to appropriate financial
services can significantlyimprove the
day-to-day management 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 intheofficesofthe service.
Transferofmoneycanbedonemoresafely
and easily by using the cheque,
demand draft or through internet
banking.
A bank account also provides a
passport to 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 as insurance and pension
products, necessarily require the
accessto abank account
Lastly, the Employment Guarantee Scheme
of the Government which is being rolledoutin
200districtsinthecountrywouldbringinlargenumber
ofpeoplethrough theirsavings accountsinto the
bankingsystem.
Tools of Financial Inclusion and the Methods to achieve them
1) Ano-frillsbankingaccountformakingandreceivingpayments,
2) Asavingsproductsuitedtothe patternof cash flowsof apoor household,
3) Moneytransferfacilities,
4) Smallloans and overdraftsforproductive,personal andother purposes,&
5) micro-insurance (life and non-life)
FinancialInclusion
SAVINGS
BANK
ACCOUNTS
INSURANCE
FINANCIAL
ADVICE
PAYMENT &
REMITTANCE
AFFORDABLE
COST
FINANCIAL
INCLUSION
