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Inclusive Finance in India - Initiatives & Interventions ofRBI
Dr. K. Bhanu Prakash1
Dr. J. Chandra Prasad2
B ! " R C "
Globally, 1 in 2 adults around 2.5 billion people does not have a formal bank
account. About 80 per cent of the poor living under $2 per day has no bank accounts and 200
million microtomedium enterprises in developing economies lack access to affordable
financial services and credit as per !orld "ank #eport. n ndia, only 1 in 2 ndians has a
savings account, only 1 in % ndians has access to banking credit and 11 per cent of bank
branches are limited to its & largest cities as per '#() nclusi*. +he reasons and strategies
for inclusion may vary from country to country and true inclusion can truly lift the standard
of life of the poor and the disadvantaged.
nclusive inancial (ystem is asine-qua-nonfor the socioeconomic development of
any nation. -nsuing and ensuring access to appropriate financial products and services
needed by vulnerable groups such as eaker sections and lo income groups at an affordable
cost in a fair and transparent manner by mainstream nstitutional players is the spirit of
inancial nclusion. /eposit penetration /, 'redit penetration ', "ranch enetration
" and ide access to financial services are emerged as key drivers of financial inclusion.
+he ambit of financial inclusion includes insurance, money transfer remittances, social
security, etc.
1
. /r. 3. "4A6 #A3A(4, Associate rofessor, 7-(+A) nstitutions, -luru.
2. /r. . '4A/#A #A(A/, /irector, (3(/ !omens9 'ollege, +A636.
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+he paper deals ith the initiatives and interventions embarked by #eserve "ank of
ndia in changing the face of nclusive inancial (ystem and also suggesting the measures to
gear up the process of inclusive financing in ndian conte*t.
Fore#ord
n the ords of ormer 6 (ecretary:eneral 3ofi Annan, The stark reality is that
most poor people in the world still lack access to sustainable financial services, whether it is
savings, credit or insurance. The great challenge before the world is to address the
constraints that exclude people from full participation in the financial sector. Together, we
can build inclusive financial sectors that help people improve their lives.
:lobally, 1 in 2 adults around 2.5 billion people does not have a formal bank account.
About 80 per cent of the poor living under $2 per day has no bank accounts and 200 million
microtomedium enterprises in developing economies lack access to affordable financial
services and credit as per !orld "ank #eport, 201;.
;;< of youth orldide have an account at a formal financial institution.
1.= billion omen orldide remain outside the formal financial system
15< of adults in fragile and conflictaffected states have a formal account
2=< of adults living on less than $2 per day have a formal account.=
Financial inclusion, or broad access to financial services, is defined as an absence of
price or non- price barriers in the use of financial services. t is a process by which financial
products and services are made available to all classes of the population at a reasonable
price. !overnments the world around are concerned to unrestrained access to public goods
and services is the sine-qua-non of an open and efficient society as per !orld "ank 'riterion.
As per the "r. #. $angara%an #ommittee $eport & on inancial nclusion, 2008, defined
=
. +he :lobal inancial nclusion :lobal inde* /atabase, !orld "ank, 201;.
;. /r. '. #angara>an 'ommittee #eport on inancial nclusion, 2008.
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inancial nclusion as ?the process of ensuring access to financial services and timely and
adequate credit where needed by vulnerable groups such as weaker sections and low income
groups at an affordable cost'.
inancial inclusion can be broadly defined as an economic state here individuals and
firms are not denied access to basic financial services based on motivations other than
efficiency criteria.
Financial Inclusion in India - n $vervie#
inancial nclusion can be defined as ?a ay of liberating the poor from dependence
on indifferently delivered public services and from venal politicians. urther, in order to dra
in the poor, the products should address their needs a safe place to save, a reliable ay to
send and receive money, a @uick ay to borro in times of need or to escape the clutches of
the money lender, easy to understand life and health insurance and an avenue to engage in
savings for the old age. t is not a panacea for all 5As outlined by #a>an, the e Bodel of
inancial nclusion cater the needs of households in a folloing phased manner.
5. "asic (uite of roducts "y "anks, 3ey +o inancial nclusionC #a>an +he 4indu, 11thAug, 201;, p.1.
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%e# odel of Financial Inclusion - 'ousehold ccess "o
Financial !ervices
!ource( 'undred !)all !te*s - Ra+huRa) Ra,an Co))ittee
Re*ort on Financial Inclusion
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Financial Inclusion in India - Kaleidosco*e
!ource( Financial Inclusion a/ 201.
Df the 2;.&% crore households in the country, 10.1E crore do not have access to
banking services. n rural areas, ;; per cent households and in urban areas == per cent still do
not have a bank account.& 4ence, the ambit of financial inclusion includes opening up no
frills accounts, improving financial literacy, secured banking, technology enablement,
capacity building and outreach mechanism. +he nclusive /evelopment Bodel of inancial
nclusion also considers the idea of inclusive economics and inclusive governance. +he #"
ill accordingly nudge banks to offer a basic suite of services.
&. +he 'hallenge of inancial nclusion, +he 4indu, 25thAug, 201;, p.1.
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Financial Inclusion in India - "he Intervention and
Inter)ediation of RBI
#" has adopted a "ank)ed Bodel for achieving financial inclusion and removed all
regulatory bottlenecks in achieving greater financial inclusion. (ome of the key initiatives
includeC i Dpen "asic (avings "ank /eposit "("/ AccountF ii #ela*ation and
(implification of 3G' ormsF iii (implification of "ranch Authorisation olicyF
iv 'ompulsory #e@uirement of Dpening "ank "ranches in 6nbanked 7illages
+ier 5 and &F v Dpening of ntermediate "rick and Bortar (tructureF and vi :rant of
'redit through 3''s and 3('s etc.,
Financial Inclusion Initiatives(
i Branches of !cheduled Co))ercial Banks
Durin+ 200-03 "o 2012-14.
!ource( RBI Re*ort on Basic !tatistical Returns/ 201.
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/ue to the relentless efforts of #", the number of branches of 5!CBs6 spread across
the length and breadth of the country and the braches increased manifold from &8,&81 in
Barch, 200& to 1,02,=;= in Barch, 201=. +he number of branches in 5Rural reas6
increased from =0,5%2 to =%,E5= during Barch, 200& to 201=.
ii %u)er of Bankin+ $utlets in 7illa+es Durin+
2008-10 "o 2012-14.
!ource( RBI nnual Re*ort/ 2011-12.
+he number of branch outlets in ?7illages9 are also increased from &%,&E; in Barch,
2010 to 2,&8,;5; in Barch, 201=.
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9iii: %u)er of B!BD ccounts Durin+ 2008-10 "o
2012-14.
!ource( RBI nnual Re*ort/ 2012-14.
+he number of "("/ Accounts opened increased from %=.;5 million in Barch, 2010
to 182.0& million in Barch, 201=.
9iv: %u)er of KCCs Durin+ 2008-10 "o 2012-14.
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!ource( RBI nnual Re*ort/ 2012-14.+o meet credit re@uirements of small farmers, banks are advised to issue 3isan 'redit
'ards. 6pto =1stBarch, 201=, the total number of 3''s issued remained at ==.%E million
ith a total outstanding credit of 2,&22.E8 billion.
9v: %u)er of ;CCs Durin+ 2008-10 "o 2012-14.
!ource( RBI nnual Re*ort/ 2012-14."anks have been advised to introduce :eneral 'redit 'ard facility upto #s. 25,000 at
their #ural and (emi6rban "ranches. As on =1stBarch, 201=, banks had provided credit
aggregating #s.%&.=; billion in =.&= million :'' Accounts.
9vi: IC" Based ccounts - BCs
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!ource( RBI nnual Re*ort/ 2012-14.n order to provide efficient and costeffective services in unbanked and remote
corners of the country #" directed commercial banks to provide '+ based banking services
through "'s. +he number of '+ transactions through "'s increased from #s. 2&.52 million
in Barch, 2010 to #s. 250.;& million in Barch, 201=. !hile transactions amount increased
steadily from #s. &.E2 billion to #s.2==.88 billion during the period.
9vii:
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!ource( RBI onthl> Bulletin/ Jan/ 201/ *. 42.!hile inancial nclusion orks from supply side of providing access to various
financial services, financial education feeds the demand side by promotion aareness among
the people regarding the needs and benefits of financial services offered by banks and other
institutions. +hese to promote greater financial stability.
inancial (tability /evelopment 'ouncil (/' has e*plicit mandate to focus on
financial inclusion and financial literacy simultaneously. #" had issued revised guidelines
on the inancial )iteracy 'entres for promoting financial literacy as a vehicle to speed up the
process of financial inclusion.
"he Road head
3eeping in vie the importance of inclusive groth, the :overnment of ndia
announced a ?)atest Action lan9 as envisaged in the ' or (ampoorn 7ittiya (amaveshan,
hopes to e*tend coverage of basic financial services to all e*cluded households.
n the first phase, the ' ill endeavour to provide universal access to all the
beneficiaries through subservice areas ((As. -ach ((A ill consist of 1001,500 families
in a cluster of villages and each ((A ill be serviced by a "' Agent "'A hose task it
ill be to facilitate account opening and smooth banking operation. A (mart 'ard #uay
card ill be issued to enable customers to operate their accounts even ithout "'s.
(imultaneously suitable aareness ill be created among the financially e*cluded.
n the second phase, there is a proposal to make available a pension scheme for
identified individuals in the unorganised sector and offer microfinance products through
governmentoned insurance companies. "y far the biggest challenge is one of altering the
mindset of banks, policy makers and bank customers, both potential and e*isting.
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Think Digitally - Act Locally. +he 5 Is9 viH., Involvement of all stakeholders in
the process of inclusive groth, Introspect various means to achieve this and Innovate ne
and specific locost solutions, Intervention and Intermediation of #" as a regulator to fillip
the inclusive groth paves the ay to scale ndia as +op among comity of nations.
Bilio+ra*h>Books
1. #obert 'ull, #obert . 'ull, AslI /emirgJK3unt, onathan Borduch 201;., "anking the
!orldC -mpirical oundations of inancial nclusion, B+, 6(A.
2. Amit "asak 201;., inancial nclusionC 6rban 'ooperative "anks L 'redit (ocieties,
)ambert ublishing, :ermany.
=. ndian "ank #eport 201; on nitiatives of ndian "ank in 6rban inancial nclusion.
;. adma>a Bishra, Alok #an>an "ehera, 4imanshu (ekhar #out 201;., inancial
nclusion, nclusive :roth and the oor, e 'entury ublications, e /elhi.
5. /ara agesara #ao 201;., 'urrent (tatus of inancial nclusion Among #ural
4ouseholds in A..C /oes 'urrent (tatus is a Batter for inancial nclusionM, )ambert
ublishing, :ermany.
&. Author Bamatamayee :uru 201=., inancial nclusion in ndia ith (pecial
#eference to Ddisha, )A )ambert Academic ublishing, :ermany.
rticles1. /iego AnHoategui, Asli /emirgJK3unt, BarNa (oledad BartNneH erNa201;.,
#emittances and inancial nclusionC -vidence from -l (alvador, !orld /evelopment,
7ol.5;, eb, p.p. ==8=;E.
2. )ouis de 3oker and icola entHsch 201;., inancial nclusion and inancial ntegrityC
Aligned ncentivesM , !orld /evelopment, 7ol. ;;, April, p.p. 2&%280.
=. Asli /emirgJK3unt and )eora 3lapper 201=., Beasuring inancial nclusionC
-*plaining 7ariation in 6se of inancial (ervices across and ithin 'ountries, "rookings
apers on -conomic Activity, (pring, p.p. 2%E1;0.
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;. (hirantha 4eenkkenda 201;., ne@ualities in the inancial nclusion in (ri )ankaC An
Assessment of the unctional inancial )iteracy, Bunich ress.
5. . 7i>aya "haskar 201;., inancial nclusion in ndia An Assessment, #" Bonthly
"ulletin, an, p.p. 25=8.
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