According to The Reserve Bank of India (RBI) financial
inclusion is a process of delivering financial services at a reasonable cost to
the people especially from the most down sided sections in the society. The
financial services like timely credit facilities and accessing financial
products like small saving deposits reach the rural people easily by the formal
financial institutions such as banking industries. Due to the non-availability of banking
facilities, people from remote villages face several barriers to meet their
Financial Inclusion is aimed at providing
financial services to the un-banked and un-reached segments in the society.
Rural India plays a major role in our country’s economic growth through services,
agriculture, self-employment, construction1.The penetration and effectiveness
of banking services were implemented successfully in the region of semi-urban
and metropolitan areas. The awareness about financial services and access
towards financial services were still lacking in the region of rural areas.
Rural people and low income group people could not get timely credit to meet
their basic and emergency needs. The financial institution like banking
industries can only give a path for the rural as well as low income group
people to satisfy their credit needs. The Reserve Bank of India (RBI) has
stated that entry of more bank branches in the rural and semi-urban areas will
cultivate the saving habits of rural people and this indirectly helps to improve
the status of financial inclusion in the society.
The RBI has developed Business Correspondent
Model, which is the mediator between the poor people and commercial banks in
order to increase the saving habits and create awareness about the banking products
towards rural people in the society. This BC Model educates the rural people
about the banking credit facilities like agriculture loan to the farmers, small
borrowings and basic savings deposit account facilities to the rural people.
India is a country with huge amount of rural population and highly engaged in
rural activities financial services should be facilitated to the rural people
in a transparent and balanced manner by the formal financial institutions.
Since 1960’s Banking Institutions acts as a gateway in enhancing and promoting
the degree of financial inclusion in our country. Moreover banking industries
has adopted new technologies which allow banks to increase its potential to
satisfy the demand needs of its customers through the delivery of financial products
and services. Banks have designed a Mobile Banking Technologies to reach its
financial services and products to the customers in rural area at a very low
CRISIL Inclusix in June 2015 has published the report of financial
inclusion which covers the entire 625 districts of India. It has taken three
different parameters to measure the level of financial inclusion such as bank
penetration, deposit and credit penetration to measure the index of financial
inclusion at national level, State, Regional and District Levels for the fiscal
year 2013. As per the CRISIL Report, India has scored 50.1 IFI (Index of
Financial Inclusion). Demand and supply side factors have to be considered to
measure the level of financial inclusion.
The Reserve Bank is navigating the path to financial inclusion by means of
regulations and guidance. It has started several measures to help bank the
People in the financially excluded zone find it quite difficult to meet the requirements
of normal savings accounts. Recognizing this problem, the RBI has made it
mandatory for banks to provide no-frills savings accounts without a minimum
balance requirement. The transaction charges are reasonable and small
overdrafts are also
Large sections of the Indian population are not
conversant with English and Hindi, the languages mostly used in bank forms. Banks are therefore required to provide forms
account opening, disclosure etc. in the regional
language as well.
Simplification of KYC
Most rural inhabitants don’t have any of the
identity documents that are required for account opening and compliance with Know Your Customer
(KYC) norms. For that reason,
the account opening process has been simplified for people who intend to
keep balances not exceeding Rs.50,000 and
whose total credit
in all the accounts taken
together is not expected to exceed Rs. 100,000
in a year. Small
accounts can now be opened on
the basis of an introduction from another account holder who has satisfied all the KYC norms.
In January 2006, the RBI permitted banks to appoint
the following organizations as business intermediaries:
Non Governmental Organizations (NGOs/SHGs),
Institutions (MFI), and
can be employed as business facilitators or correspondents, the difference
between the two being that the former provide education regarding financial products
and collect documents on the bank’s behalf whereas the latter provide
restricted financial and banking services such as deposit collection and money
lending, again on behalf of the bank.
there is a general opinion that rural outreach programs depend excessively on
business correspondents (BCs) and that bank branches should play a greater role.
Communications Technology (ICT):
Reserve Bank has also encouraged banks to
harness the power of technology for maximizing reach and
enhancing viability. ICT has thus enabled even illiterate customers to operate
bank accounts using biometrics, rendering the signature redundant. Bank correspondents carry handheld ICT devices so that customers may transact at their doorstep. By ensuring security, technology-based banking
infuses confidence in the minds
of the customers.
banking also facilitates electronic transfer of social security benefits
directly to the beneficiaries. This reduces
dependence on cash, thereby
lowering transaction cost and minimizing chances of fraud by unscrupulous middlemen.
Banks have been advised
to introduce a general
purpose credit card facility, General Credit Cards (GCCs), to be precise, with
a Rs. 25,000 limit in their rural and semi-urban branches. For customers, this
translates to easy access to revolving credit sans
the need to furnish security or statement of purpose.
will go a long way in achieving financial inclusion.
Accordingly, the RBI has initiated
several financial education measures. For example, it publishes comic strips to explain
the concept of savings.
With the objective of facilitating uniform
branch growth, the RBI has permitted banks to freely open branches in
tier III to tier VI centers with population less than 50,000, subject to
reporting. On the other hand, banks can open branches in any center – rural, semi-urban or urban – in the Northeast without applying for
permission each time,
again subject to reporting.
It was felt that the use of BCs should be
supplemented by establishing branches in rural
areas to improve
banking access. A bank is therefore obliged to locate
one in four branches opened during
a year, in an unbanked region.
Three year plan for
were also advised to submit a three year Financial Inclusion Plan (FIP) beginning
April 2010. These board-approved plans had to set their own targets in terms of
rural branches to be opened, BCs
to be employed, banking services to be provided in unbanked
villages, number of Kisan and General Credit Cards to be issued and products to
be exclusively designed for the
financially excluded segments.
Inclusion is the roadmap to bring the rural people from the unbanked and
unreached segments in the society into the formal financial system. The
Government of India has extracted diverse step to improve the status of
financial inclusion in our society. But the rural areas of all the districts in
every states of our country have to be taken for in-depth consideration.