FINANCIAL INCLUSION AND BANKS

                      ''Banks are to be considered not merely as dealers in money ,but more realistically leaders in development '' in the modern economy .Because now banking sector is not cramped within its  traditional role of borrowing and lending but it plays multiple roles from social banking to mass banking for social welfare. 

                      For delving deeper to the subject under concern , the evolution of modern banking sector also have to be  mentioned . It started with the presidency banks (1806 Bank of Calcutta  ,1840 Bank of Bombay , 1843 Bank of Madras) and their  amalgamation to the Imperial bank of India in 1921 was  a breakthrough in the Indian banking sector . But the statistical data shows that only 2.1 % of the  advances were credited to the agriculture sector during 1951 - 1967 . At the end of 1960's ,when 80% of the Indian population were in the rural regions ,only 22% of the bank branches were established there . The realization that this system cannot accelerate social development lead to revolution in the banking sector .

                 After Independence it witnessed series of changes from the  enactment of banking  regulation act 1949  , nationalisation of RBI , establishment of SBI ,liquidation and amalgamation of banks to the social control and nationalisation in 1969 and later in  1980 . The primary aim was to increase the coverage and reach ,greater credit distribution ,over all growth , inclusiveness and stability .Later the efforts to transform banking sector as inclusive and developmentalist gains momentum .It raised the rural deposit share to 15.5% in 1991 from 6.3% of 1961 .

                    "FINANCIAL INCLUSION " is an extension of this idea which we started seriously contemplate during 2000s . Because a World Bank study reported the correlation between financial exclusion and poverty .Financial inclusion  can be defined as "the availability and equality of opportunities to access the appropriate ,affordable and timely financial services and products like Banking ,loan ,equity and insurance ".It targets the unbanked or underbanked to attain universal financial access and sustainable economic growth .Even in 2018 ,1.7 billion adults lacked a bank account with women and rural poor in major  proportion .That is why they remained  vulnerable and marginalised .But the financial inclusion strategy go beyond merely opening a bank account .The goal of the financial inclusion is to remove all barriers in the supply side and demand side .The supply side stem from financial institutions like poor infrastructure ,lack of nearby institutions ,high cost of opening accounts etc where as the demand side includes poor financial literacy,capability and deep rooted believes . So we can collate  the objectives as these :-

1.Access at a reasonable cost for all households to a full range of financial services, including savings or deposit services, payment and transfer services, credit and insurance.

2.Sound and safe institutions governed by clear regulation and industry performance standards.

3.Financial and institutional sustainability, to ensure continuity and certainty of investment.

4.Competition to ensure choice and affordability for clients. (As per the UN report )

SIGNIFICANCE OF FINANCIAL INCLUSION IN INDIAN CONTEXT 

                     " Overcoming poverty -The protection of fundamental human right ,the right to dignity and a decent life .While poverty persists there is no true freedom "

                                 - Nelson Mandela 

' Improving the standard of living' of  the people with socio-cultural diversities can be achieved only by reorienting the banking sector to mass banking from class banking . It can overcome the economic stagnation due to regionally imbalanced and socially inequitable financial services .The socio-financial inclusion of the rural population ,women ,elderly persons etc is the true way of empowerment .In India ,Rural development is considered as the sine -qua -non of overall development of the national economy.But the rural population poses various threats like under-utilization of resources, disguised unemployment ,scarcity of capital and investment thus the vicious circle of poverty . But when the financial services like loans and advances at low interest rate ,deposits ,savings etc reaches their doorstep they could vanquish the underdeveloped and uncoordinated credit structure .

                       'All India rural credit survey committee of RBI in 1954 calculated that only 3 %of agricultural credit is from co-operative banks where commercial banks contribute less than 1%. This ensures that including common people to formal banking structure will save them from unscrupulous money lenders .In 1975 ,regionally based and rural oriented RRB's (regional rural banks )were established with the recommendation of Sri Narasimham committee .It targeted to develop rural economy ,support agriculture,trade and commerce .This promoted a lot of small and marginal farmers & entrepreneurs . The NABARD(national bank for agriculture and rural development),SIDBI(small industries development bank of India -promoting MSMEs) ,NHB(national housing bank) etc perfoms the same purpose .Thus the lending to priority economically &socially backward regions and channelizing the credit to vital sector like agriculture etc is made possible with financial inclusion efforts .That is how financial inclusion fosters poverty alleviation programmes and boosts employment opportunities. 

FINANCIAL SECTOR STRATEGIES 

               The branching and spatial expansion of financial services to the nook and corner of the country was the primary step .In 1972 ,the bank's were instructed to extend atleast 1 % of net bank credit as differential rate of interest to assist weaker sections at concessional rate .Now there are wide range of strategies to adress the excluded .'No frill accounts 'or BSBDA that can be opened with zero or minimal balance now removes the cost barrier to banking for the poor .While the relaxation in 'know your customer 'scheme will eliminate the documentation barrier for  the illiterate . In the BC-business correspondents model ,RBI allows intermediaries to serve the neglected areas  .Even the 'common service centres ' working with gram panchayaths are now acting as BCs.The unique credit cards like kidannu credit card will also encourage the hassle free credits.Most importantly the advancement in the 'FINTECH' financial technology extended the banking services to remote areas as well . The digital financial inclusion with effective use of ICT and the electronic -direct benefit transfer will reduce the cash dependence , lower transaction cost and address corruption .The promotion of digital payments through UPI,NeSL,BHIM ,BBPS etc have gained much momentum in the pandemic period .Other initiatives like Micro atm , AEPS (Aadhaar enabled payment system ) etc have assisted the common man a lot .The self help groups is an another strategy to ensure financial inclusion  by linking the community groups including women to formal banking sector .

GOVERNMENT POLICY STRATEGIES

           The PIB reports that with   The    'Prime minister Jan Dhan Yojana'  63.6% rural accounts and 55.2 % women accounts were opened .PM Garib Kalyan yojana,Suraksha Bhima yojana , Atal pension yojana etc can also be  credited . Some argues that the demonetization  also helped in bridging the economic opportunities.Thus the government and banks are going ahead with concerted efforts to promote financial inclusion .

PROGRESS IN FINANCIAL INCLUSION

            According to the World Bank’s Global Financial Inclusion Database or Global Findex report (2017), 80% Indian adults have a bank account against the 53% estimated in 2014.The Findex 2017 report also estimates that 77% Indian women have bank accounts, against 43% in 2014.It also had 'Multiplier effect 'as reducing poverty and income gap .Now the Active participation of the private players (payment banks like paytm, airtel money and jio money), as they have also realised that bringing the poor into the financial net is beneficial to their business models as well can be witnessed .These changes can be considered as outcome of  the above strategies .

                    The non universal access to bank accounts ,Digital Divide ,Lack of skills , Lack of digital infrastructure,leading to deficit ,the informal sectors and cash dominated economy (impediment to digital finance inclusion) ,Gender gap ,lack of credit penetration and fundamentally illiteracy are some of the major challenges that banking sector is facing to implement financial inclusion . Now it is high time to find sustainable solutions to these problems .

                  "The Project financial literacy " by RBI and the flagship programme "Pocket money "by Securities and exchange board of India  to disseminate financial literacy is expected to bring a positive change . The financial education ,digital literacy and infrastructure have to be ensured in our society . Then we could create an economy where 'poorest of poor ' can also thrive .

                 Thus Financial inclusion in an economy can be regarded as a critical indicator of development and social well being .In a nutshell , Financial inclusion efforts by the bank's will decentralise the economic power , mobilise resources and  disburse credit to plan priorities and neglected sectors . Indian economy ,struggling in the pandemic scenario have to ensure the  financial stability of all .That is the key to achieve UN's sustainable development goals . Let's hope that the Banking sector of  India will continue as an effective catalyst for the socio-economic changes .