“The fortune at the bottom of pyramid”, the book written by C. K. Prahalad gives the notion for various growth strategies. The country has 1.2 bn of the population, but only 40% of which is having the access to the banking services, the statistics itself shows the need for financial inclusion in India for achieving the all around inclusive growth. RBI has already taken many initiatives from branchless banking to the use of technology to reach out at the grass-root level but constraints of adaptation, illiteracy and lack of interest of common man put the question mark. Indian economy has been growing at the rate of 7-8% for the past several years. The main contribution towards the growth has been from the Services industry. Statistics projects much more from others sectors as well, but the main hindrance is the access to affordable financial and banking facilities at the bottom of the pyramid; banking facilities increases the developmental opportunities for poorer section of the society. The World Bank had conducted a conference in March 2007 and in November 2007; the report titled “Finance for all”has been released. In India in the year 2004, RBI established “Khan Commission” to look at financial inclusion needs and the term financial inclusion1 was used by RBI for the first time in its annual policy statement of 2005-2006. Dr. C. Rangarajan committee (‘Report of the committee on financial inclusion in India”, 2008) defines it as: "Financial inclusion may be defined 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." In simplest means “reaching the unreached” which implies provide banking facilities to those people who have no access to financial product/service. Financial exclusion leads to serious societal problems. In the rural areas demand for financial and banking services is still untapped. This excluded section depends upon the informal sector (moneylender: sahukar and zamindars) to fulfill the banking needs; mainly credit facilities at exorbitant rates. It leads to a vicious cycle because to avail such finance cost is remarkably high and the person never come out of the debt since the major portion of the income goes to the moneylenders. Nonprice barriers also exclude them from mainstream banking such as the requirement of identity proofs for KYC norms.
RBI Initiatives For Financial Inclusion In India: (Policy Perspective) India lives in its villages, to reach out the huge rural population financial inclusion is the main task. Former UN Secretary – General Kofi Annan said: “The stark reality is that most poor people in the world still lack access to sustainable financial services, whether it is savings, credit or insurance. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. Together, we can and must build inclusive financial sectors that help people improve their lives.” The holistic financial inclusion could be achieved by financial literacy.
RBI’s initiatives in the past 60 years can be divided into 4 phases.
I. 1950-70: The consolidation of the banking sector and facilitation of industry and trade has been the main process in this regards.
II. 1970-90: The main focus now shifted on the channeling of credit to neglected sectors and weaker sections of the society.
III. 1990-2005: These phases focused on strengthening of the financial institutions as part of financial sector reforms.
IV. Post-2005: Financial inclusion became one of the main policy objectives.
The report of the committee on financial inclusion has put forward targets for access to financial services, including credit, to be raised In order to achieve such a mammoth target RBI has taken many initiatives, which has led some notable developments:
I. Lead bank scheme.
II. Microfinance and emergence of Self-help groups.
III. Overdraft in savings bank accounts.
IV. No-frills accounts.
V. Simpler KYC norms.
VI. Easier credit facility.
VII. Use of information technology.
VIII. Creation of special Funds.
IX. Electronic benefit transfer (EBT) through banks
X. Business correspondent (BC) model
XI. Bank branch and ATM expansion Liberalized
XII. Expansion of banks in the north-east
XIII. Project financial literacy
XIV. Financial literacy and credit counseling.
XV. Jan Dhan Yojana and APY
Financial inclusion has always been given vital importance. For the development of rural masses in India, the reach of banking services is a must at the grass root level. Bottom of the pyramid has enormous opportunities for the same once the technology reaches to the masses,and communication improves. Mass banking at low cost would be possible if rural people are financially educated to use such technology. The government of India’s ambitious program of issuance of multi-purpose unique identity cards by Aadhar should be of great help in achieving financial inclusion. The target of achieving 100% financial inclusion implies serving millions of underserved people. Involvement of education sector in this regard is required.
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