FINANCIAL INCLUSION IN INDIA – AN OVER VIEW

-*Dr. S. Vijay Kumar

Financial inclusion is a buzzword now and has attracted the global attention in the
recent past. As the approach of 12th five year plan (2012-2017) is faster, sustainable and more
inclusive growth, the issue of financial inclusion is emerging as the new paradigm of economic
growth. Financial inclusion plays a major role in driving a way the poverty from the country. The
main focus of financial inclusion in India is to promote sustainable development and generating
employment in rural areas for the rural population. C. Rangarajan Committee (2008) defined
financial inclusion as, “The process of access to financial services, and timely and adequate
credit needed by vulnerable groups such as weaker sections and low income groups at an
affordable cost.” The purpose of financial inclusion is to provide equitable opportunities to
every individual to avail the facility of formal financial channels for better life, better living and
better income. It can be described as the provision of affordable financial services, viz., access to
payments and remittance facilities, savings, loans and insurance services by the formal financial
system to those who are excluded. Though there are few people who are enjoying all kinds of
services from savings to net banking, but still in our country around 40% of people lack access to
even basic financial services like savings, credit and insurance facilities. Financial inclusion is
the road that India needs to travel towards becoming a global player. This paper attempts to
study the overview of financial inclusion in India.
Financial Inclusion and Economic Development: The Indian growth story is being
increasingly felt and admired with each passing year. Poverty levels are declining and are bound
to decline further. Banks need to innovate and devise newer methods to absorb customers into
their fold as these new prospective customers will turn into commercially viable customers. That
is to say that the supply side should take the initiatives. MFI’s and the self help group
movements in India are gathering momentum, they still need support to spread to the length and
breadth of India and to penetrate to different parts of India. They will be able to successfully
replace moneylenders (who are more harmful). With increasing liberalization and higher
economic growth, the role of the banking sector is poised to attain greater heights in India. The
banks need to mobilize resources from a wider customer base and extend credit to business
activities not financed by banks till now. Increasing commercialization of agriculture and rural
activities is bound to result in to cycle of higher income, higher consumption, higher savings and
higher investment resulting into higher income. Growth is changing the face of rural as well as of
urban India. Financial inclusion will strengthen financial deepening and provide resources to the
banks to expand credit delivery. Thus, financial inclusion is cause as well as outcome of
economic development. In order to achieve inclusive development and growth, the expansion of
financial services to all sections of society is important as global trends have shown.

Financial exclusion: Currently, India ranks 2nd in the world in terms of financially
excluded households after China. Financial exclusion results in widespread inequality in
incomes and earning opportunities. There are a variety of reasons for financial exclusion.

*Head & Professor (Associate) of Economics (Retd.), Kakatiya Government (UG&PG) College
(NAAC “A” Grade), Hanamkonda, Warangal District (Telangana State). The author was
Member Board of Studies, Kakatiya University, Warangal – 506 009 (India).

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 They are:
1. Lack of banking facility in the locality (i.e. geographical exclusion including a rural urban
divide). 2. Financial illiteracy. 3. Nonchalant attitude of the staff. 4. Cumbersome documentation
and procedures. 5. Unsuitable products. 6. Language. 7. Feeling uncomfortable by a section of
population in visiting a bank branch. 8. Lack of awareness and initial inhibitions in approaching
a formal institution. 9. Low incomes/assets. 10. Distance from branch and branch timing. 11.
Fear of refusal.
Financially Excluded Sections: They are: 1. Marginal farmers; 2. Landless labourers; 3. Oral
lessees; 4. Urban slum dwellers; 5. Migrants; 6. Self-employed and unorganized sector
enterprises; 7. Ethnic minorities and socially excluded groups; 8. Senior citizens and women.

Need for Financial Inclusion: Financial inclusion broadens the resource base of the financial
system by developing a culture of savings among large segment of rural population and plays
prominent role in the process of economic development. Further, by bringing low income groups
within the perimeter of formal banking sector; financial inclusion protects their financial wealth
and other resources in exigent circumstances. Financial inclusion also mitigates the exploitation
of vulnerable sections by the usurious money lenders by facilitating easy access to formal credit.

Pradhan Mantri Jan Dhan Yojana Indian Prime Minister NarendraModi announced this
scheme for comprehensive financial inclusion on his first Independence Day speech on 15
August 2014. The scheme was formally launched on 28 August 2014 with a target to provide
'universal access to banking facilities' starting with Basic Banking Accounts with overdraft
facility of Rs.5000 after six months and Rupay Debit card with inbuilt accident insurance cover
of Rs. 1 lakh and RupayKisan Card & in next phase, micro insurance & pension etc. will also be
added. In a run up to the formal launch of this scheme, the Prime Minister personally mailed to
CEOs of all banks to gear up for the gigantic task of enrolling over 7.5 crore (75 million)
households and to open their accounts. In this email he categorically declared that a bank account
for each household was a "national priority".

Pradhan Mantri Jan - Dhan Yojana (Accounts Opened As on 22.07.2015)

Table: 1

S.No Type of Bank No Of Accounts No Of Rupay Debit Cards Balance In Accounts % of Zero Balance
Rural Urban Total Accounts
1 Public Sector Bank 7.31 6.03 13.34 12.32 15845.79 50.6
2 Rural Regional Bank 2.6 0.45 3.05 2.21 3543.14 49.51
3 Private Banks 0.41 0.28 0.69 0.61 1084.89 47.83
Total 10.32 6.76 17.08 15.15 20473.82 50.23
Source: http://www.pmjdy.gov.in/account-statistics-country.aspx

Table no.1expresses the quantum accounts have been opened by all the banking industry with the
account holders balances. The scheme has achieved the Guinness Record to achieve the
maximum no of bank account holders in the world level. The features of the scheme are:

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1. Your bank account of PMDJY will be open in 3 minutes only.
2. There is Rs.5000 loan or overdraft facility.
3. Rupay Debit card with inbuilt accident insurance cover of Rs. 1 lakh and RupayKisan Card
4. In next phase, micro insurance & pension etc. will also be added.
5. Insurance up to Rs.30, 000.

Why is financial inclusion needed in India?

Financial inclusion in India is needed: 1. To boost savings. 2. To reduce leak in subsidies and
welfare distribution. 3. Credit availability.

Current Status of Financial Inclusion in India: The Indian banking industry has been able to
penetrate to less than half of the population over the last few decades. The Reserve Bank of India
(the regulator) has taken a number of steps to further expedite the process of financial inclusion.
Its efforts in adapting to the changing needs of the economy and enabling greater access to
financial services to the un-banked and less penetrated segments are praiseworthy. Broad based
financial inclusion is a must, as there is hardly any instance where transition from an agrarian
system to a post industrial modern society has happened in any economy without the setting up
of a robust financial system. Despite the aggressive growth in most financial segments since
2001 coupled with the successfully absorbing of the global recession of 2008, under penetration
of banking facility and of most financial products/services is widespread in both rural and urban
areas of India. Even though Indian banking credit has enjoyed a significant growth since 2003,
credit penetration remains well below global benchmarks, which is suggestive of healthy growth
potential on one side and failure to achieve equitable distribution in society on the other. In India
too, the household sector generates more savings in comparison to the private corporate and
public sectors. A significant proportion of household financial savings is routed through the
banking system.

The statistics on financial exclusion in India provides a very depressing picture. Out of over
600,000 rural habitations in the country, only about 30,000 or just 5% have a commercial bank
branch. Just about 40 per cent of the population across the country has bank accounts and this
ratio is much lower in the north-eastern part of the country. The proportion of people having any
kind of life insurance cover is as low as 10 per cent, and the proportion having non-life insurance
is an abysmally low 0.6 per cent. People having debit cards comprise only 13 per cent and those
having credit cards a marginal 2 per cent. However staggering these figures may seem, they
still convey only part of the extent of financial exclusion in India. Out of the total number of
saving bank accounts the vast majority are dormant. Status of active ‘no frill accounts’ is
altogether alarming. All across India, less than 10% of the ‘no frill accounts’ are active. In the
absence of financial literacy, very few conduct banking transactions and even few receive credit
from formal financing channels. Millions of people across the country are thereby denied the
opportunity to increase their earning capacity and entrepreneurial talent and continue to struggle

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with their limited resources. Things are changing in the country. 15 years ago, nobody would
have thought that big corporates like ‘Novelis’, ‘Arcelor’, ‘Jaguar Land Rover’, and ‘Corus’ will
be taken over by Indian entrepreneurs. The world has also seen how the population explosion
became a blessing in disguise and has now been transformed into the great Indian domestic
consumption story.
Banking Services in Unbanked Villages: In the first phase, banks were advised to draw up a
roadmap for providing banking services in every village having a population of over 2,000 by
March 2010. Banks have successfully met this target and have covered 74398 unbanked villages.
In the second phase, Roadmap has been prepared for covering remaining unbanked villages i.e.
with population less than 2000 in a time bound manner. About 4, 90,000 unbanked villages with
less than 2000 population across the country have been identified and allotted to various banks.
The idea behind allocating villages to banks was to ensure availability of at least one banking
outlet in each village.
Table: 2 Total number of households, No. of households availing banking Services
and their percent in rural and urban compared as per 2001 and 2011 Census

As per Census 2001 As per Census 2011

Househol Total No. of Percent Total No. of Percent

ds number households number househo
of availing of lds
househol banking househol availing
ds Services ds banking
Services

Rural 138,271, 30.1 167,826, 91,369,8 54.4

559 41,639,949 730 0

Urban 49.5 53,444,9 67.8

53,692,3 26,590,693 78,865,9 8
76 37

Total 191,963, 35.5 246,692, 144,81 58.7

935 68,230,642 667 4,78

Source: http://financialservices.gov.in/banking/Overviewofefforts.pdf

As per the table no. 2, the accessing banking services in rural and urban has been increased from
30.1 percent, to 54.4 percent and 49.5 percent to 67.8 percent respectively in the years 2001 and
2011. It is observed from the table that rural as well as urban people are participating in the
financial services with the banking industry with increasing trend over the years.

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India compared on financial inclusion against other countries: India remains a vastly under-
banked country. Also, what matters most for households is not opening deposit accounts, but
access to credit. It is in this regard that India’s track record is abysmal. The below table: 3 show
that India’s household debt-to-GDP (gross domestic product) ratio is a mere 8%, the lowest
among its peer Asian peers.
Table: 3 House debt to GDP (in %)

Sl. No. Country House debt to GDP (in %)

1 USA 82.9

2 India 8.9

3 Indonesia 12.8

4 Taiwan 86.3

5 Korea 84.8

6 Singapore 75.6

7 Hongkong 64.2

8 China 36.8

9 Malaysia 86.8

10. Thailand 82.9

Data is for first quarter of 2014 (except US, India, Malaysia, which is for 2012-13) Source: Citi Research

It could be argued, though, that India’s low level of per capita income is the reason for the low
household debt. But then, as Table: 4 shows, India’s household debt to household disposable
income too is very low, at just 9%.
Table: 4 House debt to household disposable income (in %)
Sl. No. Country House debt to
household
disposable income
(in %)
1 USA 111
2 Taiwan 163
3 Japan 124
4 India 9
5 Singapore 210
6 China 48
7 Korea 161
8 Thailand 125
9 Malaysia 168

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Latest data is for 2012 except Korea, Malaysia, Taiwan (all up dated to 2013) and China (2011)

Source: Citi Research

Incidentally, the above tables also show that debt levels in US households are now lower than for
some Asian households. While households in some Asian countries have become over-
leveraged, the data suggests that banks still have plenty of scope to increase personal lending in
India.

The new Financial Inclusion Mission: It has two phases with Phase-I starting from 15th
August 2014 and extending up to 14th August 2015. Phase-II would then kick in and last until
14th August 2018. The bulk of the savings, credit and remittance services will be offered in
Phase-I and insurance and pension would be covered in Phase-II. The Finance Minister also
elaborated that India has very low levels of financial literacy, which was hampering the financial
inclusion drive and it was important for people to understand the importance of availing the
different financial services which will in-turn help them to participate in India’s growth story.

Digital Financial Inclusion in India: Technology has made rapid strides in the last few years
and therefore the Government is planning to use technology especially – Mobile based services
in a big way to fast track financial inclusion in the country. Till now the primary method for
branchless banking has been through business correspondents and the government has begun
work to make Business Correspondents a viable model in India. The Finance Minister also added
that in the past, the Know Your Customer (KYC) guidelines were hampering account opening
and this has now been simplified with the e-KYC facility introduced in banks.

Future of Financial Inclusion in India:

Commercially Unviable Urban Financial Inclusion: Financial inclusion schemes introduced

by the government and the regulator have a rural bias. And focusing on inclusion of
commercially unviable but financially excluded person makes no business sense to the banks.
Therefore this may become the next mission mode.

Last Mile Urban Inclusion: It is expected that because of the collective efforts of the various
stakeholders including the government, the regulator, the banks, the intermediaries, technology
providers coupled with financial awareness and education, formal financing channels in India
will cross the level of 95% inclusion by 2020 in urban areas . And financially excluded person
will be in single digit in percentage terms.

Reactivation Drive for Dormant Accounts: As per a public report released recently, more than
60 million no frill account have been opened till now. Out of these, active no frill account for just
2.5 million. The question is; how long banking industry can bear the burden of inactive

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accounts? Perhaps either the government or the regulator will spearhead a new mission in the
form of reactivation drive for dormant account. This will be to shake up the sleeping account
holders.

White Label ATM’s in India: Currently the banking industry is feeling the cost crunch in
expansion of not only branches but also of its ATM network. To cut down cost of ATMs, RBI
has given license / permission to non-bank entities to open ATMs. Such ATMs are known as
“White label ATMs”. White label ATM doesn’t have Bank logo, hence called White label
ATMs. Any non-bank entity with a minimum net worth of Rs.100 crore, can apply for white
label ATMs. (Not just NBFC, any non-bank entity can apply). Late 80s: first ATM in India;
2012: RBI issues guideline for White label; 2013: RBI gives license/permission. Examples of
white label ATM are Indicash, Muthoot Finance, Srei Infra., Vakrangee Software, Prizm
Payments, AGS (Advent Global Solutions).

CBS becoming CBS: Currently, all the banks have a core banking solutions and the branches
are connected to CBS. But this CBS (Core Banking Solution) serves only limited purpose.
Many services extended by the banks to their customers are beyond their CBS like gold coin
distribution, locker facility, etc., Perhaps a drive will be initiated where this CBS (core banking
solution) will become real CBS (Complete Banking Solution ). This new CBS will help the
banks to achieve cross selling (selling a different product or service to an existing customer) by
taking care of allied activities.

Conversion of ‘no frill account’ to ‘regular saving bank account’: As per report, more than
60 million ‘no frill accounts’ has been opened by the banking system. But only 2.5 millions are
active and 57.5 million out of total accounts opened have become inactive. This very high rate of
inactive ‘no frill account’ is alarming.

Limited purpose branch: Currently bank branches deliver all sorts of services from the same
premises. Corporate accounts, terms deposit accounts and saving bank accounts all are served
from same premises, e-stamping, sale of precious metal coins, sale of mutual funds, stock market
transaction, sale of insurance products and many more activities happen from these branches. It
seems that in the years to come, with more number of branches, some sort of segmentation will
take place and some bank branches in the city will provide limited number of services. Limited
purpose branches will be opened in a big way may be only for account opening purpose and
nurturing the account for initial one year.

Insurance inclusion: Inclusion data of 2010 reveals that life insurance touches only 10% people
in India, whereas non life insurance touches even less than 1%. Non life insurance takes care of
unplanned expenditure, whereas life insurance takes care of either old age or of the financial
needs of the left outs in case of any eventuality to the earning members of the family.
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Government and regulators will have to initiate a drive for insurance inclusion. Because micro-
insurance is un-viable, insurance companies are not interested in coming up with tailor made
micro-insurance schemes, but with the support of the government they might venture into this.

Pension inclusion: The joint family system works as buffer for old age persons, after attaining
old age people would expect members of their joint family to look after them but with nuclear
families on the rise they will have no one to take care of them in their old age and hence will
need to plan their savings and pensions beforehand. The government has made some new
provisions to increase the adoption of pension by the salaried class by introducing the National
Pension System-Lite (NPS-Lite).

Electronic pass book: In urban areas, account holder are using printed pass book and bank
statement at regular intervals, quarterly or monthly. Some of the banks have started electronic
statements and e mailers as an option for account holders. It seems that in the years to come, the
physical pass book in the urban centers will get replaced by electronic pass book in the form of
smart card or pen drive or some other electronic storage device.

Deregulation of banking license: Is it right time to even dream of this? Can this ever happen in
India even after 100 years? If one goes back 3 decades to the 1980′s one will find that many
industries were under a licensing regime and then the late 80′s and 90′s saw the License Raj
crumbling. Who knows when the License Raj for banks will crumble?

Strategies Adopted for Strengthening Financial Inclusion in India: In order to achieve

financial inclusion, government has introduced many schemes to all the sections of the society.
They are as follows:
Direct Benefit Transfer (DBT) - The objective of DBT Scheme is to ensure that money under
various developmental schemes reaches beneficiaries directly and without any delay. The
scheme has been launched in the country from January, 2013 and has been rolled out in a phased
manner, starting with 26 welfare schemes, in 43 districts. The scheme is now being extended to
additional 78 districts and additional 3 schemes from 1st July, 2013 and would be extended to
the entire country in a phased manner.

USSD (Unstructured Supplementary Service Data) Based Mobile Banking: This offers basic
Banking facilities like Money Transfer, Bill Payments, Balance Enquiries, Merchant payments
etc. on a simple GSM based Mobile phone, without the need to download application on a Phone
as required at present in the IMPS (Immediate Payment Service) based Mobile Banking.

Setting up of Ultra Small Branches (USBs): Considering the need for close supervision and
mentoring of the Business Correspondent Agents (BCAs) by the respective banks and to ensure
that a range of banking services are available to the residents of such villages, Ultra Small

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Branches (USBs) are being set up in all villages covered through BCAs under Financial
Inclusion.

Swabhimaan Campaign: Under “Swabhimaan” - the Financial Inclusion Campaign launched

in February 2011, Banks had provided banking facilities by March, 2012 to over 74,000
habitations having population in excess of 2000 using various models and technologies including
branchless banking through Business Correspondents Agents (BCAs).

Business Correspondent Model: With the objective of ensuring greater financial inclusion and
increasing the outreach of the banking sector, banks were permitted by RBI in 2006 to use the
services of Intermediaries in providing financial and banking services through the use of
Business Facilitators (BFs).

Bank – SHG Linkage Model: This is one of the most popular and successful model being
incorporated and followed by all public and private sector banks now-a-days. The banks may
perform the role of formation of SHGs in the case of the direct linkage model. The banks are also
responsible for granting credit to the SHG in a quantum proportional to their savings.

Bank – MFI linkage Model: MFIs are to be seen as the last mile—the connecting link to the
rest of the financial sector. They’ve developed technology that banks do not have. If banks get
into the business of organizing groups and all, they won’t be able to do it effectively.

MF-NBFC Model: MF-NBFC is new category of Non - banking Finance Company in providing
Microfinance services to the rural, semi-urban and urban poor. MF-NBFC should be defined as a
company that provides thrift, credit, micro-insurance, remittances and other financial services up
to a specified amount to the poor in rural, urban and semi-urban areas. MF-NBFCs are expected
to be larger, with a stronger capital base and more highly regulated than NGOs.

Bank - Post office Model: Apart from savings deposit, money transfer, parcel sending, etc. Post
offices are also engaged in new services like granting retail credits or selling insurance products
either directly or on behalf of commercial banks. Further financial services can also be offered
with public-private partnerships with distribution taken care of post offices.
Opening of no-frills accounts: Basic banking no-frills account is with nil or very low minimum
balance as well as charges that make such accounts accessible to vast sections of the population.
Banks have been advised to provide small overdrafts in such accounts.
Relaxation on know-your-customer (KYC) norms: KYC requirements for opening bank
accounts were relaxed for small accounts in August 2005; thereby simplifying procedures by
stipulating that introduction by an account holder who has been subjected to the full KYC drill
would suffice for opening such accounts. The banks were also permitted to take any evidence as
to the identity and address of the customer to their satisfaction. It has now been further relaxed to
include the letters issued by the Unique Identification Authority of India containing details of
name, address and Aadhaar number.

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Use of technology: Recognizing that technology has the potential to address the issues of
outreach and credit delivery in rural and remote areas in a viable manner, banks have been
advised to make effective use of information and communications technology (ICT), to provide
doorstep banking services through the Business Correspondent' Model, where the accounts can
be operated by even illiterate customers by using biometrics, thus ensuring the security of
transactions and enhancing confidence in the banking system.
Adoption of EBT: Banks have been advised to implement EBT (Electronic Benefit
Transfer) is an electronic system that allows state welfare departments to issue benefits via a
magnetically encoded payment card) by leveraging ICT-based banking through BCs to transfer
social benefits electronically to the bank account of the beneficiary and deliver government
benefits to the doorstep of the beneficiary, thus reducing dependence on cash and lowering
transaction costs.
GCC: With a view to helping the poor and the disadvantaged with access to easy credit, banks
have been asked to consider introduction of a general purpose credit card facility up to 25,000
at their rural and semi-urban branches. The objective of the scheme is to provide ‘hassle-free
credit’ (without problems or bother) to banks customers based on the assessment of cash flow
without insistence on security, purpose or end use of the credit. This is in the nature of revolving
credit entitling the holder to withdraw up to the limit sanctioned.
Simplified branch authorization: To address the issue of uneven spread of bank branches, in
December 2009, domestic scheduled commercial banks were permitted to freely open branches
in tier III to tier VI centres with a population of less than 50,000 under general permission,
subject to reporting. In the north-eastern states and Sikkim, domestic scheduled commercial
banks can now open branches in rural, semi-urban and urban centres without the need to take
permission from RBI in each case, subject to reporting.
Opening of branches in unbanked rural centers: To further step up the opening of branches in
rural areas so as to improve banking penetration and financial inclusion rapidly, the need for the
opening of more bricks and mortar branches, besides the use of BCs, was felt. Accordingly,
banks have been mandated in the April monetary policy statement to allocate at least 25% of the
total number of branches to be opened during a year to unbanked rural centers.
CRISIL (Credit Rating Information Services of India Limited) Financial Inclusion Index:
On June 25, 2015 CRISIL released updated scores. It measures financial inclusion up to the
level of each of the 652 districts in India. The index is based not only on the latest data provided
by the Reserve Bank of India (RBI), but also for the first time includes the contribution of
microfinance institutions (MFIs) with effect from fiscal 2013. Data on MFIs was provided by the
Micro Finance Institution Network (MFIN), the self-regulatory body recognized by the RBI.
Raman Uberoi, President, Corporate Affairs, CRISIL says: “With the incorporation of
MFI data, CRISIL Inclusix now better represents the ground-level picture of financial

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inclusion in India.” The index’s scalable and modular architecture facilitated the inclusion of
MFI data.

The highlights of India’s financial inclusion march in fiscal 2013 are:

1. Banking services continues to gain ground, with the number of savings accounts and bank
branches registering their fastest growth in 4 years.
2. Deposit penetration remains the key driver of financial inclusion.
3. MFIs have helped underpenetrated regions of east and north-east to play catch-up with north.
4. Among states, West Bengal benefited the most because of the presence of large MFIs, while
Jammu & Kashmir improved substantially as credit accounts surged. Tamil Nadu moved into the
top three for the first time driven by an increase in deposits.
5. In as many as nine districts, CRISIL Inclusix hit the maximum score of 100.
Overall, however, basic financial services remains underpenetrated. One-third Indians did not
have a bank savings account at the end of fiscal 2013, while only one in seven had access to
credit. “Going forward, we expect tailwinds to financial inclusion from policy steps taken
such as the Pradhan Mantri Jan Dhan Yojana and differentiated banking licenses. Under
Jan Dhan Yojana, more than 14 crore new savings accounts have been opened, which will
add to the Inclusix score for 2015,” said Uberoi.
Sovereign gold bond scheme: The government of India has approved the sovereign gold bond
scheme. Sovereign gold bonds are certificates issued by the government saying that investors
bought a certain amount of gold. In the first installment the government has proposed that it
would issue bonds to the tune of around 13,500 crore. This is almost equal to 50 tonnes of gold.
The scheme aims at reducing the import of gold. Out of the 1,000 tonnes of gold consumed every
year, most of it is imported. Gold is the second highest expense on the import bill after oil.

Challenges ahead for Financial Inclusion in India: It is quite clear that the task of covering a
population of 1.27 billion with banking services is extremely large. Both demand side factors
(customers) and supply side factors (banks and other financial institutions) are responsible for
financial inclusion. Banks and other financial institutions are largely expected to reduce the
supply side constraint. Demand side challenges are: low literacy levels, lack of awareness about
financial products, irregular income, lack of trust in formal banking institutions etc. Supply side
challenges are: non-availability of branches in rural area, more rules and regulations and high
bank charges, limited number and types of financial service providers. Even after taking all kinds
of measures to increase the financial literacy, still there is a vast section of people are excluded
from the main financial stream. This could be possible to achieve by overcoming the following
shortcomings:
1. Literacy awareness programs to be conducted for banking services.
2. Reaching the unreached people is the challenging task to RBI & government.
3. North-East area to be covered with the help of satellite oriented new technology.
4. All intermediaries (BC, MF, SHG, NGO, etc.) need to be given time bound task.
5. Assign responsibility to all Lead Bankers.

Suggestions:

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  Banking technology has progressed fast enough and more importantly the realization that
the poor is bankable has arrived. Various immediate measures which government of India
should implement or which are under implementations, should be executed in a more
effective manner.
 Strengthen agency banking micro finance institutions, business facilitators and business
correspondents. Our very old post offices will be an ideal channel to pursue the future
long term goals of agency banking especially in rural India.
 Achieve synergies (inter action) between the technology providers and banking channels
to expand each. Application developers will be required to synergize core banking with
micro financial applications.
 Have interest rate ceilings specified for NGO/MFI for they tend to charge higher rates of
interest in a sugar coated form. These legalities can be introduced once an NGO/MFI
enters into partnership with a bank.

Conclusion: The financial inclusion process has been highly activated through central
government programs. All banking sectors have been highly devoted to achieve FI by adopting
new technology for delivering financial services. Number of FI strategies too initiated by the
various bodies to achieve the goals. The role of RBI under the guidance of central government is
commendable for taking drastic steps to achieve the inclusive growth. Reaching out to the hither-
to unreached segment of population and providing basic financial services is the need of the
hour. To bring a large segment of the society under the umbrella of financial inclusion, banks
have set up their branches in remote corners of the country. The rules and regulations have been
simplified. It goes without saying that the banking industry has shown tremendous growth in
volume during the last few decades. India’s fastest growing economies have become possible
through financial inclusion. Despite, still there are large segments of the society outside the
financial system. Continuous concerted efforts should be made to bring them under financial
inclusion.
References:

12th FYP (2012-2017), GOI

Rangarajan C Committee (2008)
Pradhan Mantri Jan Dhan Yojana
http://financialservices.gov.in/banking/Overviewofefforts.pdf

http://www.pmjdy.gov.in/account-statistics-country.aspx
indiamicrofinance.com/financial-inclusion-india-2014-overview.html
City Research Institutional Client Group

www.indicash.co.in/our-white-label-atm-initiative

https://npscra.nsdl.co.in/scheme-information.php

CRISIL Financial Inclusion Index: June 25, 2015

Reserve Bank of India – “Annual Reports and ‘Report on Trend and Progress of Banking in India”.

Sarkar A.N. (2013), “Financial Inclusion: Fostering Sustainable Economic Growth in India”
http://www.cgap.org/blog/2015-set-be-big-year-digital-financial-inclusion-india
http://businesstoday.intoday.in/story/why-2015-will-be-important-for-financial-inclusion-inindia/1/214729.html

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“Skill Development: The Key to Economic Prosperity”. “Financial Inclusion and Strategies to Reach Inclusive Financial Growth in India”

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