Financial Inclusion seems to be the latest buzzword of Indian Financial Sector. However, this much talked about concept presents a conflicting view. The phrase raises question as to if this is yet another kind of social responsibility, originally of government that is being now thrust upon the banks especially nationalized banks, or is it a financially viable propositions for these banks, the ones that make economic sense.
Secondary data collected from RBI and NABARD database are analyzed with help of statistical tool to show current status of financial inclusion in the country. The results also showcase the overall impacts of FI policies.
"Financial Inclusion (FI) is the delivery of financial services to all the people in a fair, transparent and equitable manner at affordable cost. FI has the potential to improve the standards of life of the poor and the disadvantaged. Financial services permit individuals and households to manage risks and uncertainties to save on better terms, to invest in a business venture or property or to cope with unforeseen expenses."
Once access to financial institutions improves, inclusion affords several benefits to the consumer, regulator and the economy alike. Some of them are listed below:
Customers avail benefits of variety of standard, safer financial products provided and supervised by credible regulators
The regulator benefits such as audit trail is available and transactions are conducted transparently in a medium that can be monitored
The economy benefits, as greater financial resources become transparently available for efficient intermediation and allocation
Present status of Inclusion in India
A median household in India borrows 75% from informal sources, and only 12% from formal sources. This is for credit and it is also true for the saving accounts. Despite the RBI's attempt to get universal savings account, impact is very little. The percentage of household holding stocks and debentures reveals that the penetration is just 5%.
A snapshot of coverage of various financial instruments:
Item Extent of coverage
Check in accounts 70.00%
Financial Assets 2.00%
Assets Insurance 2.53%
Health Insurance 0.20%
Credit Card 3.00%
Debit Card 5.66%