Strategy and efforts of a Public sector bank for Financial

Inclusion

The basic definition of financial inclusion is the process of ensuring access to

various financial services and timely and adequate credit to the weaker sections
of the society and the low income groups at an affordable cost. These services
include not only the basic banking services but also other financial services like
insurance and equity. The basic banking services are bank accounts for saving,
paying and receiving, providing credit at low cost for productive, personal and
various other purposes, financial advisory services, etc. Financial inclusion plays
an important role in increasing economic development by developing a culture of
savings among all segments of rural population.

Financial Inclusion in India

Inclusive banking began in spirit with the nationalism of banks in 1969 and 1980 in
India. The real thrust on financial inclusion came in 2005 when RBI highlighted its
annual policy statement of 2005-2006. It urged banks to work together and
towards reaching out the masses, offering banking services down to the
hinterland. The worrying problem was mass exclusion of people from the formal
banking system that slowed economic growth.
Every country has their own approach for financial inclusion based on different
parameters. In the mean time India adopted a ‘bank-led model’ for financial
inclusion to introduce various products related to credit, payments, savings etc.

Initiatives taken
In past few years, the central bank and government have made several plans for
providing basic banking services to the people who don’t have bank accounts.
Introduction of no—frills account, liberalization for branch authorization, start of
Pradhan Mantri Jan Dhan Yojna and etc.
The main financial inclusion measures and programs launched in India were:
1) The basic banking account- This is a bank account in which basic minimum
services including savings and payments are given to financially excluded
people.
2) Made atm policies simpler and easier- to expand the amount of ATMs in
the country RBI allowed non-bank entities to start their own ATMs
3) Promoting technology based instruments- Several technological solutions
were initiated by RBI to promote financial inclusion. These included issuing
smart cards, supporting internet banking and mobile banking.
4) Promoting payment infrastructure- Payments are very important banking
service hence RBI itself has the NEFT and RTGS. Also telecom industries are
now allowed to issue mobile wallets as prepaid instruments.
5) Financial Literacy Program- The program was started by commercial banks
on behalf of RBI to spread awareness and educate the public on access to
financial products.

Challenges to Financial Institution

The policies which were meant for improving the financial inclusion were
hurriedly executed without a proper oversight. Credit policies which were
introduced to improve financial inclusion resulted in consumers being in debt
quickly to the point of suicide. After decade of efforts it was found out that
financial inclusion is not possible without financial education. In many mature
countries like US, there has been several social issues rising from easy availability
of credit. This should had been anticipated but wasn’t.