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Providing access to affordable banking services to a vast
segment of hitherto unbanked people is the basic objective
of financial inclusion. In developing countries like India,
the access to banking services, especially to the poor,
underprivileged and low income groups, is a prerequisite
for inclusive growth, poverty alleviation and social cohesion.
Availability of easy and cost-effective banking services
for savings, investments and credit enables the people to
break the chain of poverty by using the credit for various
productive and consumption purposes. Today, financial inclusion
has become a buzzword and has assumed a prime place in the
public policy with a view to achieving inclusive growth
in India.
In India, the focus of financial inclusion, at present,
is largely confined to ensuring a bare minimum access to
a no-frills savings bank account to the unbanked people.
Internationally, however, the financial inclusion has been
viewed in a much wider perspective. Merely having a bank
account is not regarded as an accurate indicator of financial
inclusion. Rather, its scope is considered to be quite large
and ranges from empowerment of people through schemes of
financial literacy/education to ensuring their participation
in institutional credit, insurance cover and remittance
services.
The Indian economy is growing at a fast pace mainly due
to contribution from the industry and services sectors.
However, growth in agriculture is quite dismal, despite
being a source of subsistence to a majority of our people.
Limited access to affordable financial services, such as
savings, loan, remittance and insurance, by the vast majority
of the population in the rural areas and unorganized sectors
is believed to be acting as a constraint to the growth impetus
in these areas. Access to affordable financial services,
especially credit and insurance, enlarges the livelihood
opportunities and empowers the poor to take charge of their
lives. Such empowerment aids social and financial stability.
Apart from these benefits, financial inclusion also imparts
formal identity and provides access to the payments system
and to savings safety net like deposit insurance. As such,
the scope of financial inclusion is much broader and hence,
it is considered to be critical for achieving inclusive
and sustainable growth in the country.
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