Financial Inclusion: Civil Services Mentor Magazine - December - 2014

Financial Inclusion

India has grown substantially since liberalization and GDP of India has seen a multifold increase over the last two decades. But this growth has not been inclusive enough and since the turn of the century government has turned their attention towards inclusive growth. Financial inclusion is an important tool for the growth to be inclusive. Financial inclusion defined by the Rangarajan committee as “The process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost”. This statement says financial inclusion means financial services should be accessible to everyone especially to the low income section and these financial services should be available at a cost that is affordable to everyone. Different countries are in different stages of financial inclusion and in India it is to provide banking solution for everyone. In India only few are included with in the financial ambit.

In India after independence at various stages government has tried to increase the people with in the ambit of organized financial services. In the initial phase of financial inclusion government nationalised the banks. Nationalisation of banks gave government the opportunity to decide about the rates and also it provides better control over the overall functioning of the banks. During this phase government provided bank licenses with focus on uncovered area and also they provided for priority sector lending. In the second phase which started in 1990’s RBI provided guidelines to open no frill accounts and various other initiatives like easier KYC, use of IT in banking, better customer services and reduction in amount which banks needs to keep with RBI. This provided the banks the adequate flexibility and credit to lend to those who need the money. There has been a commendable progress achieved by India in financial inclusion. India has greatly increased the total number of bank branches and also the total number of branches in rural area. Now banks lend more than their assigned limit to priority sector. In spite of all the progress, this has not been sufficient. A lot more needs to be done in order to make the financial inclusion successful.

With above objective in mind government has launched “Pradhan Mantri Jan Dhan Yojana”. PM announced the scheme on his maiden Independence Day speech. Various objectives of this scheme includes:-

1. Enrolling 7.5 crore bank accounts and bring them in organised financial sector.
2. Provide Universal access to banking facilities starting with Basic Banking Accounts with overdraft facility of Rs 5000 after six months.
3. Rupay debit card to every account holder.
4. This card will have accidental insurance cover of Rs. 1 lakh as well.
5. An additional 30000 Rs life insurance cover will also be provided to those who will open the account.
6. Final aim is to link bank accounts with Aadhaar card, so that it reduces the leakages in the transfers from government.

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