Financial Inclusion in India: An Evaluation of the Coverage, Progress and TrendsUNDER THE GUIDANCE OF : PRESENTED BY :PROF. NANDITA MISHRA VINEET KUMAR DUBEY(Faculty Finance) BM-010165
INTRODUCTIONFinancial inclusion has indeed far reaching positive consequences,which can facilitate many people to come out of the abject povertyconditions.OBJECTIVES OF THE STUDY•To appreciate the significance of financial inclusion in terms of inclusive growth for sustainable economic development;•To appreciate the trends of financial inclusion in other select countries.•To evaluate the extent of financial exclusion in India in terms of:oSpatial distribution of banking services;oNumber of deposit and credit accounts in scheduled commercial banks;oPopulation coverage per office region-wise;oRatio of direct agricultural credit to agricultural GDP, total GDP and totalcredit;oCoverage of farmer households as per social groups; andoNon-indebted farmer households as per different land holdings.
METHODOLOGYThe study attempts to realize the objectives by employing a well-structured and more appropriate methodology. The approach anddata collection methods are explained below.THE APPROACHBased on the well-accepted approaches for evaluation of thecoverage of financial inclusion, the study employs the followingcriteria for understanding the extent of financial inclusion:4. Analysis of the spatial distribution of banking services;5. Analysis on the basis of the performance of rural credit;6. Analysis on the basis of coverage of farmer households; and7. Analysis on the basis of coverage of farmer households based onland holdings.
Further, on the basis of the above-mentioned criteria the study hasendeavored to analyze the following:3. Spatial distribution of banking services;4. Number of bank accounts (deposit and credit accounts) ofhouseholds;5. Regional distribution of banking services;6. Contribution of agriculture to GDP;7. Coverage of farmer households; and8. Coverage of small and marginal farmers.
DATA COLLECTIONThe study is based on the secondary data available from the varioussources at the international and national level.INTERNATIONAL SOURCES :World Bank, DFID, Commonwealth institutes .NATIONAL SOURCES :RBI, NABARD, reports of various committees, National SampleSurvey Organization (NSSO), National Accounts Statistics of CentralStatistical Organization (CSO) and other apex level organizations.
FINANCIAL INCLUSION – PRESENT SCENARIO ININDIA: AN ANALYSIS MEASURES OF THE EXTENT OFFINANCIAL INCLUSIONFTable 2: illustrates that rural and semi-urban offices constitute amajority of the commercial bank offices in India. Rural bank officesas a percent of total have increased from 22 in 1969 to 45 in 2005.
TABLE 4: ILLUSTRATES THE LEVEL OF FINANCIALINCLUSION IN INDIA THROUGH REGION-WISESTATISTICS.S
S Further, the rise in the number of credit accounts per population has not been significant despite the fact that there has been increase in the number of bank branches right across all the regions of the country.
ANALYSIS BASED ON THE PERFORMANCE OF RURALCREDITC
CEven though the share of agriculture in overall GDP has declinedfrom around 33.1% in 1980s to 20.8% during 2000-06, the fall inthe proportion of population dependent on this sector has beenrestricted.
ANALYSIS BASED ON THE COVERAGE OF FARMERHOUSEHOLDSr
ANALYSIS ON THE BASIS OF COVERAGE OF FARMERHHOUSEHOLDS BASED ON LAND HOLDINGS
HWhile the extent of non-indebtedness is highest in the case ofmarginal farmers (70.6%), it is lowest in the case of large farmers(0.6%). In the case of medium farmers it is 3.2% and 8.5% in thecase of semi-medium farmers. However, in the case of small farmersit is 17.1% .
FINDINGS OF THE STUDY• Distribution of Banking Services• Number of Bank Accounts (Deposit and Credit) of Households• Distribution of Banking Services• Ratio of Direct Agricultural Credit to Agricultural GDP, Total GDP and Total Credit• Contribution of Agriculture in GDP• Coverage of Farmer Households• Coverage of Small and Marginal Farmers
RECOMMENDATIONS• Financial Inclusion as a Policy Priority• Strategize the Provision of Bank Credit• Cover the Poor• Extensive Use of Cooperatives• Procedural/Documentation Changes• Proactive Role of Government• Role for Rural Post Offices• Effective Use of IT Solutions• Adequate Publicity for the Project of Financial Inclusion• Financial Inclusion: Latest Developments in India
CONCLUSION• The importance of financial inclusion arises from the problem of financial exclusion of nearly 3 billion people from the formal financial services across the world. India, with only 34% of population engaged in formal banking and 135 million financially excluded households, is in the second highest after China. Further, the real rate of financial inclusion in India is also very low and about 40% of the bank account holders use their accounts not even once a month.• Financial inclusion has, in reality, far reaching positive consequences, which can help resource poor people to access the formal financial services in order to pull themselves out of abject poverty. The focus on the common man is particularly imperative in India as he is the more often ignored one in the process of economic development. Indeed, with the process of financial inclusion, the attempt should be to lift the resource poor from poverty through coordinated action amongst the banks, the government and other related institutions in order to facilitate access to bank accounts and other related services.