FINANCIAL INCLUSION; AN ASSESSMENT OF IMPACT

Financial Inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society, in contrast to financial exclusion where those services are not available or affordable. For the purpose of giving such financial services in easy and convenient way government has developed many financial plans in the rural areas. These plans are helpful for people who want to access financial services. The availability of banking and payment services to the entire population without discrimination is the prime objective of this public policy. Thus the term Financial Inclusion can be defined 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. The nations should takeover and remedy to reach the financial services to the weaker sections. So, this study has been undertaken to analyse the prospects of financial inclusion in rural areas.

Poverty is not merely insufficient income, but rather the absence of wide range of capabilities, including security and ability to participate in economic and political systems. Today the term 'bottom of the pyramid' refers to the global poor most of who live in the developing countries. These large numbers of poor are required to be provided with much needed financial assistance in order to sail them out of their conditions of poverty. This paper is an attempt to comprehend and distinguish the significance of Financial Inclusion in the context of a developing country like India wherein a large population is deprived of the financial services which are very much essential for overall economic growth of a country. Poor people save, borrow, and make payments throughout their lives. But to use these services to their full potential to protect their families and improve their lives they need well-suited products delivered responsibly. Bringing this about requires attention to human and institutional issues, such as quality of access, affordability of products, provider sustainability, and outreach to the most excluded populations. A definition and vision with clear and meaningful objectives in all these areas can inspire leaders to take a comprehensive path towards full financial inclusion. Financial inclusion is intended to connect people to banks with consequential benefits and it is a process of ensuring access to financial services, timely and adequate credit when needed by vulnerable sections of the society such as weaker sections and low income group at affordable costs.

2017

This paper provides an overview of concepts, issues and research on the relationship between financial inclusion and inclusive rural transformation. When considering how the growth of demand for financial services is related to the broader processes of structural and rural transformation, the evidence shows that agricultural credit provides positive returns, but still with small farm and gender biases. Liberalization of financial markets may not have had the desired spillover effects into rural credit, so there may be justification for public intervention. Effective microcredit programmes might also need to be coupled with outreach and technical assistance in order to achieve desired goals and objectives. In addressing how innovations in rural finance contribute to making access to financial services and rural transformation more inclusive, the report focuses on demand relationships. Farmers who use credit have moderately inelastic to elastic demands. Policies that curb interest rat...

Background: The first notable policy adopted since independence in India to address the credit needs of the rural masses was nationalization of commercial banks in 1969 with 'mass banking' replacing the then prevalent 'class banking'. With financial liberalization since 1991, there occurred a reversal from the social objectives of banking to financial viability, profitability and competitiveness. Recently, based on the concerns that banks have not been able to include vast segment of population in its services coverage, the Reserve Bank of India formulated a policy of financial inclusion with an intention to provide access to financial services to the poor. The public sector scheduled commercial banks (SCBs) were assigned a major role to provide financial inclusion due to their immense geographical spread and in this context the article examines the progress of financial inclusion of SCBs in India. Materials and Methods: The financial inclusion status of SCBs is examined with respect to spatial and sectoral outreach. The spatial aspect refers to the outreach of the SCBs in terms of areas which are generally considered as excluded from the formal sector like the rural and semi-urban areas. The sectoral aspect studies how far the SCBs have been successful in satisfying the needs of the credit thirsty sectors of the economy, like agriculture which is capable of eliminating poverty. Ratio of rural and semi urban offices, employees, credit account, credit amount, deposit account, deposit amount and agriculture account, agriculture amount etc. to their respective totals and annual average growth rate is used as indicators. Results: Despite the emphasis on financial inclusion in terms of policy, the actual attainments of SCBs in terms of financial inclusion are far from satisfactory. There is a glaring difference between the percentage share of rural and semi urban accounts and the share of credit or deposit from these areas implying that the measuring rod 'an account per household' of financial inclusion falls short and can be very misleading in terms of policy prescriptions. The share of deposits mobilized from rural and semi urban areas is considerably larger than the share of credit allocated to these areas, indicating a high level of inefficiency in the allocation of resources and a bias in favor of urban and metropolitan centers.

Access to safe, easy and affordable credit and other financial services by the poor and vulnerable groups, disadvantaged areas and lagging sectors is recognized as a pre-condition for accelerating growth and reducing income disparities and poverty. Access to a well-functioning financial system, by creating equal opportunities, enables economically and socially excluded people to integrate better into the economy and actively contribute to development and protects themselves against economic shocks. Despite the broad international consensus regarding the importance of access to finance as a crucial poverty alleviation tool, it is estimated that globally over two billion people are currently excluded from access to financial services (United Nations, 2006a). In most developing countries, a large segment of society, particularly low-income people, has very little access to financial services, both formal and semi-formal. As a consequence, many of them have to necessarily depend either on their own or informal sources of finance and generally at an unreasonably high cost. The situation is worse in most least developed countries (LDCs), where more than 90 per cent of the population is excluded from access to the formal financial system (United Nations, 2006a). Particularly in the Context of the feared global slowdown and negative impact of high inflation On the Indian economy. The paper has also suggested some policy choices for successful implementation of the policy of financial inclusion for sustainable growth of Indian economy. The paper is a significant attempt to understand and emphasize the importance of the topic.

Asian Social Science, 2014

The strategies of rural transformation in India focused on improving the standard of living of rural population has undergone several changes keeping in view the mammoth size of population, its changing dynamics and socio-cultural diversities of our country But the economic stagnation of vast chunk of rural population still suffers from social and financial exclusion resulting with high incidence of poverty, rising unemployment, growing inequality along with rich-poor divide widening. The high growth story of our country in the post reform era is not broad based, regionally imbalanced and socially inequitable Indian Banking industry in conformity with national policy objectives has reoriented from Class Banking to Mass Banking approach to enhance its outreach to bring the marginalized and excluded population into its fold for mainstream economic activity. The branch expansion was accelerated and institutional credit flow to poor rural households reached new heights to relieve them from the clutches of usurious informal money lenders. Modern banking in India has leveraged IT driven initiatives to bring the excluded population into the fold of mainstream banking, develop new products to suit their needs and more importantly educate them on financial products and services to enable them to take informed decisions. The Institutional mechanism, for enhancing access to institutional credit have been strengthened by establishing pro-poor institutions like Regional Rural Banks (RRBs) and National Agricultural Bank for Agricultural and Rural Development (NABARD) etc. The business delivery models like Self Help Groups (SHG)-Bank linkage programme, and Micro finance institutions have been encouraged to provide microfinance services at doorstep of marginalized households. The Agent/Correspondent Banking model of commercial Banks have been given a big boost to provide wide access of low income/marginalized people to Financial Markets. Financial inclusion being a gigantic task, it calls for an appropriate and well-coordinated/collaborative strategy by all the stake holders involved in its implementation. The government needs to increase investment in economic and social capital by increasing investment in basic rural infrastructure. Banking system is poised to provide efficient economic infrastructure like savings, access to easy credit and robust payment system. The community based organizations/NGOs should catalyze local participation to enhance efficiency and transparency in delivery of financial services to common man for making inclusive growth a reality.

Growth with equity is the main objective of Financial Inclusion. Poverty is not only inadequate income, but somewhat the absence of extensive range of capabilities, including security and competence to participate in economic and political systems. Financial Inclusion emphasizes on delivery of financial services at a reasonable cost to the huge vulnerable sections of society. Banks and other financial service players are largely expected to moderate the supply side constraints that prevent poor and underprivileged groups from gaining access to the financial system. This access is mainly affected by lack of awareness, high transaction costs, inconvenient and inflexible procedures, and standardized products which cannot be customized as per the customers' requirement. However, we must keep in mind that every coin has two aspects, apart from the supply side factors there are demand side factors as well, which includes lower income and financial literacy etc. This paper is based on ...

International Journal of Research -GRANTHAALAYAH, 2016

India is a country where a sizeable amount of population lives in rural areas. They are engaged in agriculture and allied activities. Most of the people living in rural areas are poor. They do not have any access to the banks. The awareness and access of the poor to the banking services is important for the alleviation of the poverty. Their access to the banking services will contribute a lot to the growth and development of our country’s economy. Financial inclusion is a great weapon to overcome the financial backwardness as well as the establishment of good governance.It broadens the resource base of the financial system by developing a culture of savings among large segment of rural population, disadvantaged group and plays an essential role in the process of economic development. The Government of India and the Reserve Bank of India (RBI) have been making concentrated efforts periodically to overcome such vicious problems by promoting Financial Inclusion, being one of the import...

Tij S Research Journal of Economics Business Studies Rjebs, 2014

Financial Inclusion has become a buzzword internationallyeven in developed financial markets there are concerns about those excluded from the banking system. The aim of financial inclusion is to expand the coverage of the formal financial system in the country, and over the past decade, this has also become a key objective for emerging economies.