Financial Inclusion

Financial inclusion denotes delivery of financial services at an affordable cost to the vast sections of the disadvantaged and low-income groups. The various financial services include credit, savings, insurance and payments and remittance facilities. The objective of financial inclusion is to extend the scope of activities of the organized financial system to include within its ambit people with low incomes. Through graduated credit, the attempt must be to lift the poor from one level to another so that they come out of poverty.

Benefits of Financial inclusion
• It paves the way for establishment of an account relationship which helps the poor to avail a variety of savings products and loan products for housing, consumption, etc.

• An inclusive financial system facilitates efficient allocation of productive resources and thus can potentially reduce the cost of capital.

• This also enables the customer to remit funds at low cost. The government can utilize such bank accounts for social security services like health and calamity insurance under various schemes for disadvantaged. From the bank’s point of view, having such social security cover makes the financing of such persons less risky. Reduced risk means more flow of funds at better rates.

• Access to appropriate financial services can significantly improve the day-today management of finances. For example, bills for daily utilities (municipality, water, electricity, telephone) can be more easily paid by using cheques or through internet banking, rather than standing in the queue in the offices of the service.

• Transfer of money can be done more safely and easily by using the cheque, demand draft or through internet banking.

• A bank account also provides a passport to a range of other financial products and services such as short term credit facilities, overdraft facilities and credit card. Further, a number of other financial products, such as insurance and pension products, necessarily require the access to a bank account.

• Lastly, the Employment Guarantee Scheme of the Government which is being rolled out in200 districts in the country would bring in large number of people through their savings accounts into the banking system.

Steps taken by GOI for increasing financial inclusion
Government has taken number of steps to expand the reach of organized financial services to the door steps of the common man. Particular attention has been paid to the rural areas where a large segment of the society was not having access to organized banking. Some of the steps taken for financial inclusion are as below:-

• Micro-Finance: Self Help Group-Bank Linkage Programme
The Self-Help Group (SHG)-Bank Linkage Programme has emerged as the major micro-finance programme in the country. It is being implemented by commercial banks, regional rural banks(RRBs), and cooperative banks. Under the SHG-Bank Linkage Programme, as on 31 March 2012, 79.60 lakh SHG-held savings bank accounts with total savings of Rs. 6,551 crore were in operation. By November 2012 another 2.14 lakh SHGs had come under the ambit of the programme, taking the cumulative number of savings-linked groups to 81.74 Lakh.

• Roll out of Direct Benefit Transfer
The Government of India has decided to introduce a Direct Benefit Transfer (DBT) scheme with effect from 1 January, 2013. To begin with, benefits under 26 schemes will directly be transferred into the bank accounts of beneficiaries in 43 identified districts across respective states and union territories (UT).

• Kisan Credit Card Scheme
The Kisan Credit Card(KCC) has been an important initiative for universal access of farmers to institutional credit. The number of operative KCCs issued by the cooperative banks and RRBs as on 31 August, 2012 was 406 Lakhs against which outstanding loan amount was Rs.1,12,334 crores.

• ICT Based Accounts – through BCs
In order to provide efficient and cost-effective banking services in the un-banked and remote corners of the country, RBI directed commercial banks to provide ICT based banking services – through BCs. These ICT enabled banking services have CBS connectivity to provide all banking services including deposit and withdrawal of money in the financially excluded regions. The number of ICT-based transactions through BCs increased from 26.52 million in March 2010 to 250.46 million in March 2013, while transactions amount increased steadily from Rs.6.92 billion to Rs.233.88 billion during the same period.