Financial Inclusion in India

Why Financial Inclusion?

Financial inclusion (FI) means delivery of banking services at an affordable cost. Banking services = public good. So availability of banking and payment services to the entire population needs to be given without discrimination. It includes getting cheaper loans, Insurance (life, med, non-life, crop etc), Investment (Equity, MF, Pension plans etc).


Inculcate habit of saving in poor. Capital formation will get a boost.

Adequate, transparent & cheaper credits/ loans - will raise entrepreneurial spirit in poor people & result in prosperity.

Plug gaps & leaks in public subsidies & welfare progs. A study by McKinsey estimated that Rs. 1 lac crore could be saved each year in terms of manpower/time/ paperwork/ leaks if all govt subsidy/ benefit payments are done via e-payments.

Inequality falls more rapidly in areas that have more developed financial intermediaries = Empowerment.

Economic well being = social harmony. Bring Govt closer to poor people. It'll help inclusive growth efforts, and reduce poverty. No brainwashing by extremist/ Maoist/ Sucessionist elements.

What is being done by RBI/ Govt.

Access to banking network

1. Post office has vast network. They open Savings, RD, FD accounts. Also  Insurance, investments in Mutual funds, Payment & remittance services is being provided.

2. RRBs, cooperative banks, primary agricultural societies established for delivers.

3. Lead bank schemes (1969): RBI assigns a district to a bank which is responsible for promoting banking services and financial literacy there.

4. Business Correspondents (BC) system: Banks extend their services to villagers with help of agents, where opening brick-mortar branch is not profitable.

5. Bhartiya mahila bank setup for women empowerment.

6. White label ATMs: 2/3rd of these ATMs to be opened in semi urban and rural areas.

7. Banks to open at least 25% of their new branches in unbanked rural centres.

8. No Frills accounts for poor people. Later renamed to Basic Savings Bank Deposit Account (BSBDA): with relaxed KYC norms.

Giving Access to Credit (Loans)

Priority sector lending targets to banks.
Microfinance, various schemes for Self-help groups by NABARD
Interest Subvention scheme for farmers.
General Purpose Credit Card (GCC) and Kisan Credit Card (KCC) to help people get loans easily.

Giving More Access to Investment

National Savings certificates
Public Provident Funds
New Pension Scheme (NPS), Swavalamban (for people in unorganised sector).
Rajiv Gandhi equity savings scheme (Investing in equity Market: for First timers, upto 50K).
Inflation indexed bonds

Giving Access to Insurance
1. By Post office: tie-up with LIC & its own - offering various schemes.
2. Rashtriya Swasthya Bima Yojana (for BPL families, biometric smart-card based - cashless insurance for hospitalisation in public as well private hospitals, avail inpatient medical care of up to Rs 30K).

3. Rajiv Gandhi Shilpi Swasthya Bima Yojana: by Union Ministry of Textiles, in association with ICICI Lombard (for Craft persons, total medical cover of Rs.15K, death and permanent/partial disability by accident Rs.1.00 lakh).

4. Aam Aadmi Bima Yojana: for landless agricultural families, those involved in 46 other trades including beedi workers, carpenters, cobblers, fishermen etc. Life cover of Rs. 30K for natural death, Rs. 75K for death due to accidents. Scholarship of Rs 100/- per month for 2 children.

A recent committee by RBI named "Nachiket Mor committee" had outlined an ambitious plan of achieving total Financial inclusion by 1/1/2016. It recommended NBFCs to play major role in FI. But its report are being put on back burner as RBI & Finance ministry are not comfortable with the idea of NBFCs getting status of banks (via Payment banks- to open SB a/c & Wholesale banks - to give loans) without obligation of CRR, SLR.