The promotion of financial inclusion is essential to promote economic growth and development across the world. Access to formal finance can boost job creation, reduce vulnerability to economic shocks and increase investments in human capital. Seven of the United Nations Sustainable Development Goals (SDG) of 2030 view financial inclusion as a key enabler for achieving sustainable development worldwide.
FINANCIAL INCLUSION IN INDIA
Definition: According to Raghuram Rajan Committee on Financial Sector reforms, Financial Inclusion refers to universal access to a wide range of financial services at a reasonable cost. These include not only banking products but also other financial services such as insurance and equity product.
Importance of Financial Inclusion: Financial Inclusion has multiplier effect in boosting economic output, reducing poverty and income inequality. Financial inclusion of women is important to promote gender equality and women empowerment.
Extent of Financial Inclusion: As per census 2011, only 58% of households are availing banking services in the country. However, as compared with previous census 2001, availing of banking services increased significantly largely on account of increase in banking services in rural areas.
Causes of Financial Exclusion: Lack of Financial Literacy; Dominance of Bank Branches in Urban Areas; lack of requisite documents to open Bank accounts; Lack of awareness about Insurance products; Lack of Surplus Income; Poor quality of services rendered.
Important Measures to promote Financial Inclusion: Nationalisation of Banks (1969 and 1980); Setting up of Regional Rural Banks (RRBs); Priority sector lending norms; Opening of Basic Savings Bank Accounts (BSBA); PM Jan Dhan Yojana; Setting up of Payment banks and Small Finance Banks; Launch of UPI, BHIM app etc.
STRATEGY FOR FINANCIAL INCLUSION
The RBI believes that the Financial Inclusion depends upon 3 parameters- Financial Inclusion policies, Financial Literacy and Consumer trust. The Consumer confidence and trust can be strengthened by providing for effective Grievance redressal mechanism. Accordingly, based on such a strategy, the RBI has identified certain pillars to promote financial inclusion.
STRATEGIC PILLARS FOR FINANCIAL INCLUSION
Universal Access to Financial Services: Digital financial infrastructure should be set up by all the banks as well as other non-bank entities to promote efficiency and transparency in the services offered to customers.
Providing Basic Bouquet of Financial Services that include a Basic Savings Bank Deposit Account, credit, a micro life and non-life insurance product, a pension product and a suitable investment product.
Access to Livelihood and Skill Development: The new entrants into the financial inclusion must be must aware of the government initiatives to promote skill building such as National Rural Livelihood Mission (NRLM), PM Kaushal Vikas Yojana (PMKVY) etc.
Financial Literacy and Education: Financial literacy modules with specific target audience orientation (e.g., children, young adults, women, retired employees etc.). These modules can be in the forms of Audio-Video/ booklets and should be made available for understanding the product and processes involved.
Customer Protection and Grievance Redressal by setting up effective grievance redressal mechanism at different levels.
Effective Co-ordination between the key stakeholders i.e. Government, the Regulators, financial service providers, Telecom Service Regulators, Skills Training institutes etc. to make sure that the customers are able to use the services in a sustained manner.