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Financial Inclusion

The document discusses financial inclusion in India. It notes that the Reserve Bank of India set up a commission in 2004 to increase financial inclusion and make basic banking accounts more available. It also discusses how India has focused on expanding access to financial services and credit for vulnerable and low-income groups through initiatives like relaxing KYC norms, issuing general credit cards, and allowing banks to use organizations like NGOs and MFIs to provide services. The RBI's vision is to open 600 million new customer accounts by 2020 through leveraging technology while continuing challenges like illiteracy and lack of infrastructure in rural areas.

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Neha Agarwal
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119 views3 pages

Financial Inclusion

The document discusses financial inclusion in India. It notes that the Reserve Bank of India set up a commission in 2004 to increase financial inclusion and make basic banking accounts more available. It also discusses how India has focused on expanding access to financial services and credit for vulnerable and low-income groups through initiatives like relaxing KYC norms, issuing general credit cards, and allowing banks to use organizations like NGOs and MFIs to provide services. The RBI's vision is to open 600 million new customer accounts by 2020 through leveraging technology while continuing challenges like illiteracy and lack of infrastructure in rural areas.

Uploaded by

Neha Agarwal
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Financial inclusion

Financial inclusion is the delivery of financial services at affordable costs to vast sections of
disadvantaged and low income groups. It is argued that as banking services are in the nature
of public good, it is essential that availability of banking and payment services to the entire
population without discrimination is the prime objective of public policy. The term "financial
inclusion" has gained importance since the early 2000s, and is a result of findings
about financial exclusion and its direct correlation to poverty. Financial inclusion is now a
common objective for many central banks among the developing nations.

To just sum up " the process of ensuring access to financail services and timely and adequate credit
where needed by vulnerable groups such as weaker section and low income groups at an affordable
cost given by Rangarajan who headed com.on Financial Inclusion

Financial inclusion in India


The Reserve Bank of India has set up a commission (Khan Commission) in 2004 to look into financial
inclusion. In the report RBI exhorted the banks with a view of achieving greater financial inclusion to
make available a basic "no-frills" banking account. In India, Financial Inclusion first featured in 2005,
Indian Bank was the first Bank to implement the Financial Inclusion Project on a pilot basis in UT of
Pondicherry where the Bank has lead responsibility. IB implemented the concept first in Mangalam
Village of Pondicherry on 30.12.05 which became Village the first village in India, where all the
households in the village were provided Banking facilities.
KYC (Know your Customer) norms were relaxed for people intending to open accounts with annual
deposits of less than Rs. 50,000. General Credit Cards (GCC) were issued to the poor and the
disadvantaged with a view to help them access easy credit. In January 2006, the Reserve Bank
permitted commercial banks to make use of the services of non-governmental organizations
(NGOs/SHGs), micro-finance institutions and other civil society organizations as intermediaries for
providing financial and banking services. Reserve Bank of India’s vision for 2020 is to open nearly
600 million new customers' accounts and service them through a variety of channels by leveraging
on IT. However, illiteracy and the low income savings and lack of bank branches in rural areas
continue to be a road block to financial inclusion in many states. India, being a mostly agrarian
economy, hardly has schemes which lend for agriculture. Along with microfinance we need to focus
on Microinsurance too.

'Major Three Aspects Of Financial Inclusion' Make people to

 Access financial markets


 Access credit markets
 Learn financial matters (financial education )

Financial Inclusion Includes Accessing Of Financial Products And Services Like,

 Savings facility
 Credit and debit cards access
 Electronic fund transfer
 All kinds of commercial loans
 Overdraft facility
 Cheque facility
 Payment and remittance services
 Low cost financial services
 Insurance (Medical insurance)
 Financial advice
 Pension for old age and investment schemes
 Access to financial markets
 Micro credit during emergency
 Entrepreneurial credit

 Losing opportunities to grow : In the absence of finance , people who are not connected
with formal financial system lack opportunities to grow.
 Country's growth will retard : Due to vast unutilized resources that is in the form of money
in the hands of people who lack financial inclusive services.

Other Consequences :

 Business loss to banks : Banks will loss business if this condition persists for ever due to lack
of opening of bank accounts.
 Exclusion from mainstream society : The people who lacks financial services , presumed
that they are excluded from mainstream society .
 All transactions cannot be made in cash : Some transactions can be made in cash . In this
technological world everybody wants to have electronic cash system like debit and credit cards
and also EFT .
 Loss of opportunities to thrift and borrow : Financially excluded people , may lose chances
to save their some part of livelihood earnings and also to borrow loans .

 Employment barriers : Nowadays all salary and other financial benefits from various sources
like Governments scholarships , any compensation , grants , reliefs , etc are paid through bank
accounts.
 Loss due to theft : Banks provide various schemes of safety locker facility . It mitigates the
risk due to thefts .
 Other allied financial services  : People who do not have bank accounts may not go to bank
as for as possible . So they lack basic financial auxiliary services like DD ,Insurance cover and
other emergency need loans Etc .

Benefits Of Inclusive Financial Growth

 Growth with equity : In the path of super power we the Indians will need to achieve the
growth of our country with equality . It is provided by inclusive finance.
 Get rid of poverty : To remove poverty from the Indian context all everybody will be given
access to formal financial services . Because if they borrow loans for business or education or
any other purpose they get the loan will pave way for their development .
 Financial Transactions Made Easy : Inclusive finance will provide banking related financial
transactions in an easy and speedy way .
 Safe savings along with financial services : People will have safe savings along with other
allied services like insurance cover , entrepreneurial loans , payment and settlement facility etc,
 Inflating National Income : Boosting up business opportunities will definitely increase GDP
and which will be reflected in our national income growth .
 Becoming Global Player : Financial access will attract global market players to our country
that will result in increasing employment and business opportunities .

Relationship between Financial Inclusion and Development Indicators

 Economic growth follows financial inclusion. In order to achieve the objective of growth with
equity, it is imperative that infrastructure is developed with financial inclusion.
 savings and credit accounts - indicators of financial inclusion.
 per capita income - indicator of economic development
 Electricity consumption

and road length -indicators of infrastructure development.

 All the above influence economic development which follows adequate financial and credit
facilities

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