India, a developing country is a land of inequities. Vast disparities exist between the income and wealth levels of the haves and the have-nots of the country. With a rapidly increasing population, it is Financial Inclusion that represents a bridge that can connect different strata of society and ensure that all citizens of the Country enjoy the basic minimum means of living.
So what exactly is Financial Inclusion?
Financial Inclusion, according to ex-RBI Governor, Dr. C. Rangarajan, (Chairman Committee on Financial Inclusion) is 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 affordable cost.
Need for Financial Inclusion:
Financial inclusion broadens the resource base of the financial system by developing the resource base of the financial system and by developing a culture of savings among the large segment of the rural population and plays its own role in the process of economic development. Further, by bringing the low income groups within the access of formal banking credit, financial inclusion protects their limited wealth and other resources in exigent circumstances. It also mitigates the exploitation of vulnerable sections by usurious money lenders by facilitating easy access to formal credit.
Subsequent to the Rangarajan Committee Report, several policy initiatives have been taken by Ministry of Finance, Government of India in conjunction with the Reserve Bank of India for helping achieve the objective of financial inclusion. Some of the measure taken recently are described as below
PMJDY: Pradhan Mantri Jan Dhan Yojna:
By far the most ambitious, PMJDY is a national Mission on Financial Inclusion is an integrated approach to bring about comprehensive financial inclusion of all households in the country. The plan envisages universal access to banking facilities with at least one basic banking account for every household, financial literacy, access to credit, insurance and pension facility. In addition, the beneficiaries would get RuPay Debit card having inbuilt accident insurance cover of Rs. 1 lakh. The plan also envisages channeling all Government benefits (from Centre / State / Local Body) to the beneficiaries accounts and pushing the Direct Benefits Transfer (DBT) scheme of the Union Government. The technological issues like poor connectivity, on-line transactions will be addressed.
Financial Literacy Centres:
Financial Literacy Centers are the building blocks that initiate basic financial literacy activities at the ground level. Such Financial Literacy Centers are set up in a lead Bank Office or a Rural branch and comprises of Rural Literacy Counselors / Directors who regularly conduct in-house and outdoor financial literacy camps on a regular basis targeting the various segments which include Farmers, Self Help Groups, Micro and Small Entrepreneurs, Senior Citizens, School Children, and others. Adequate publicity is given to such camps with efforts to involve as many stake holders as possible at the district/panchayat and village level to ensure the success of the Camps. Such financial literacy camps enable the regional/rural people understand the benefits of modern financial services and products offered by Banks and enables them to avoid the traps of private and unorganized financial middlemen/money lenders.
Relaxed and Simplified KYC Norms:
For simplified account opening, the RBI allowed relaxation of opening of accounts with balances not exceeding Rs. 50,000/- . Such account holders were allowed to open accounts without introduction, simply with the help of Adhar Card as proof of Identity and Address.
Simplified Branch Authorization Policy:
For dealing with the problem of uneven branch network, Schedule Commercial Banks have been empowered to freely open branches in areas with a population of less than 1 lacs.
Compulsory Requirement of Opening Branches in Unbanked Villages:
Banks have also been directed to open branches in Tier 5 & Tier 6 areas which mainly comprise villages that do not have any Bank Branches.
Banks to submit Financial Inclusion Plan:
Banks are now directed to submit their own three-year financial inclusion plans that cover the above mentioned areas for ensuring greater outreach of financial services in unreached and unbanked areas.
The Mudra Yojna is a refinance scheme by the Mudra Bank for the development and refinancing of small units. In financial year 2016-17 39.7 lac loans totally worth Rs. 1.75 lac crore have been disbursed to small entrepreneurs under the Pradhan Mantri Mudra Yojna. The scheme comprises loans in three categories which include Shishu Loans upto Rs. 50,000/-, Kishore Loans from Rs. 50,000/- upto Rs. 5,00,000/- and Tarun Loans from Rs. 5,00,000/- upto Rs. 7,00,000/-
Training & Skills Development:
An important aspect of the Financial inclusion is the empowering of the masses particularly the employable youth to develop the right skills in order to take up vocations and trades, and also to set up micro and small businesses as opposed to entering the job market.
As can be seen various measures are now being undertaken largely by Scheduled Commercial Banks / Non Banking Financial Institutions under the ageis of RBI and Ministry of Finance to ensure that last mile access to finance is provided through Banking to the unbanked. Clearly a lot needs to be done, yet a beginning has been made and the government is making large strides to ensure financial inclusion for everyone a reality.
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