Financial Inclusion: What is Financial Inclusion?
“Financial Inclusion is defined as the process of ensuring access to financial services and timely and adequate credit where needed, by groups such as weaker sections and low income groups at an affordable cost.” Thus financial inclusion acts as an effective instrument to alleviate poverty.
India is the second largest populated country after China in the world. More than 60 per cent population makes its living in villages. India has recognized since fifties that for long term sustainability of economic prosperity and social development, growth to rural India is critical.
Government of India and Reserve Bank of India have taken series of measures to take financial services to masses, although, the term Financial Inclusion was not in vogue then.
The initiatives taken in this regard include:
- Building Institutional frame work of credit institutions with the focus on cooperative institutions.
- Nationalization of major domestic commercial banks.
- Introduction of Lead Bank scheme to expand the outreach of banking facilities in rural and semi-urban areas.
- Creation of Regional Rural Banks.
- Setting of targets for lending to agriculture, small scale industries and other weaker sections defining them as priority sector for the purpose of lending by banks.
- Introduction of Service Area Approach and Village Adoption Scheme to cover nearly 6 lakh villages of the Country by banking system through rural and semi-urban branches of commercial banks. (For more details click on Overview of Banking Development 1947-2007
The growth of banking sector has been rapid since 1969. The population per office of the commercial banks has came down from 65000 in June 1969 to 14000 in 2011 with network of over 89110 branches of commercial banks of which 33325 are in rural areas and 22419 are in semi urban areas. The Banks have installed over 74505 ATMs (Offsite: 33776 & Onsite: 40729) and providing ATM services 24 x 7.
However out of 203 million households in the country 147 million are in rural area. As per NSSO data out of 89.3 million farmer households 45.9 million (51.4 percent) do not access credit either from credit institutions or from non institutional sources (as per NSSO survey of farmer households for 2003). Financially excluded class comprise largely of small/marginal farmers, landless labourers, oral lessees, self employed in unorganized sector enterprises, urban slum dwellers, migrant ethnic minorities, socially excluded groups, senior citizens and women.
The Government of India has drawn up a National-rural Financial Inclusion Plan to provide comprehensive financial services to 50% (50.77Million) of the excluded rural cultivated and non cultivated households by 2012 through rural or semi urban branches of commercial Banks & RRBs. The remaining rural households are to be covered by 2015. The rural or semi urban branches of commercial Banks & RRBs have been the target for this purpose. In all the states, the SLBC and District level consultative committees have been given the task to identify unbanked villages of above 2000 population to open their branches or to provide banking services by opening their branches or through their Business correspondents. The Banks have identified 73000 unbanked centres having population of above 2000.
The Banks who have sizeable network of branches have been asked to setup financial literacy and credit counseling centres to make available free services on the basis of Model scheme prepared by RBI.
For more information click on Financial Inclusion and Micro Credit By Sri D.T. PAI