FINANCIAL INCLUSION BASIC INFORMATION BY JOYCEE WILSON

1. STUDY ON FINANCIAL
INCLUSION
By
Miss Joycee Wilson Dolare
Professor Brindavan College,
Bangalore.

2. Introduction
Banking in India in the modern sense originated in the last decades of the 18th century. Generally banking
in India was fairly mature in terms of supply, product range and reach, even though reach in rural India
and to the poor still remains a challenge.[] The government has developed initiatives to address this
through the State Bank of India expanding its branch network and through the National Bank for
Agriculture and Rural Development with concepts like microfinance.
The Indian society has almost graduated from the stage of basic requirements of literacy and longevity of
life to that of concern for affordable universal healthcare and financial inclusion. The latter refers to
delivery of financial services at affordable cost to vast sections, particularly of disadvantaged and low
income groups. This is expected to help in equitable distribution of wealth and economic fairness and
provide savings opportunities for all sections of our heterogeneous society. In fact, the UNO has observed
that “most poor people in the world still lack access to sustainable financial services, whether it is savings,
credit or insurance”, particularly in developing countries like India.

3. An overview
Financial inclusion is considered to be a global issue.
Availability of financial assistance to the rural households is
expected to not only reduce vulnerability but also economic
growth to elevate quality of life. Financial inclusion or
inclusive financing is the delivery of financial services at
affordable costs to the sections of disadvantaged and low-
income segments of society. In fact, the RBI has been urging the
banks to review their existing practices in order to align them
with objective of financial inclusion. It has identified certain
banks as lead banks for each state; for example, Syndicate Bank
is a lead bank for the state of Karnataka. Also a few financial
literacy programs have been developed for low-income, low
educated urban populations in India, mainly through non-
governmental organizations. These programs concern saving
habits and debt management.

4. WHAT IS FINANCIAL INCLUSION
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. An
estimated 2.5 billion working-age
adults globally have no access to
the types of formal financial
services delivered by regulated
financial institutions.

5. DEFINITION OF FINANCIAL
INCLUSION
Financial Inclusion is the process of ensuring access to appropriate financial
products and services needed by all sections of the society in general and
vulnerable groups such as weaker sections and low income groups in
particular at an affordable cost in a fair and transparent manner by
mainstream institutional players.

6. Twin Aspects of Financial Inclusion
Financial Literacy & Financial Inclusion
Demand Side
Financial Literacy & Credit
Counseling Centres
Credit Absorption Capacity
Knowledge of products
Need for total products
& services
Supply Side
Financial Markets , Banks
& Services
Appropriate Design of
products & services
Financial Inclusion and Financial Literacy are twin pillars. While Financial Inclusion acts from supply side
providing the financial market/services what people demand, Financial Literacy stimulates the demand
side – making people aware of what they can demand.

7. Major causes for financial exclusion
a) Lack of awareness among people.
b) Lack of banking facility
c) Distance and branch timing.
d) Financial illiteracy.
e) Fear of refusal.
f) Cumbersome procedures and documentation.
g) Language of people.
h) Uncomfortable feeling of people to visit banks.

8.  It is estimated that more than
560 million are deprived of
financial inclusion in our
country. This has prompted
vigorous efforts at government
and non-government levels to
bring all households under the
fold of banking habits.
Accordingly, policy makers have
been emphasizing on this
aspect in order to
 Create a platform for
inculcating the habit to save
money.
 Provide formal credit avenues

9. • The benefits of financial inclusion and the need for
promoting the same in the Indian society are well accepted
in academic circles as well as by the policy makers.
• In this setting, the governments (state and central) have
initiated two types of programs:
• Educative programs to enhance the awareness and
knowledge of the existing schemes by convincing people
about the need and the benefits.
• Promotional programs through institutions like the banks
to allow greater outreach and effectiveness.
• The Reserve Bank of India (RBI), the apex financial
regulatory body in the country, has been proactively
campaigning for financial inclusion through its policies and
guidelines. It has been promoting an array of programs
aimed at this goal.
Three good examples are:
1. Initiation of ‘no frills’ account.
2. Banking service at the doorsteps through business
correspondents.
3. Electronic Benefit Transfer (EBT)

10. Need for financial inclusion
Financial exclusion is a serious concern among the low income
households as well as small business, mainly located in semi
urban and rural areas. Basically, it is unavailability of any
banking services to the people living in poverty. Financial
exclusion is the lack of access by certain consumers to
appropriate, low cost fair and safe financial products and
services from mainstream providers. Financial exclusion include
the following people:
1. People who have limited access to banks and financial
services.
2. People who have no access to regulated financial system.

11. Discussion and Conclusion:
The efforts by banks, Financial Institutions, Regulator, Government and others are not
yielding the expected result. Hence the regulator has to create a suitable regulatory
environment that would keep the interest of all the concerned. The banks concern of
profitability needs to be addressed by the regulator as financial inclusion is a kind of
national priority and social responsibility. The concerns of the government about the reach,
feasibility and implementation of government policies to every person needs to be
addressed. The easy availability of financial services to the last mile user needs to be
addressed.
The banks’ concerns can be solved by leveraging ICT, designing of innovative products. A
structured expansion and appropriate regulatory norms addressing the banks’ concern and
inclusion of NBFCs, MFI and SHG in the last mile connectivity of people to financial services
could resolve the peoples’ concern. Also bank use intensive mobile banking services to
deliver banking and financial services to the people.

12. achieve the targets of financial inclusion, it is needed to empower MSMEs
through adequate and timely finance as MSMEs are the best medium for
achieving inclusive growth which generate local demand and
consumption, and provide employment to majority of people. Thus,
Innovative products, out of the box service models, effective regulatory
norms and leveraging technology together could change the landscape of
the current progress of the much needed and wanted, Financial Inclusion
Program
The improved financial inclusion could be either positive or negative for
financial stability. Positive effects include diversification of bank assets,
increased stability of deposits and reducing liquidity risks. Negative
effects include the erosion of credit standards and bank reputational risk
of banks.