10-05-2013, 12:33 PM
FINANCIAL INCLUSION AND BANKS
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Abstract:
The banking industry has shown tremendous growth in volume and complexity
during the last few decades. Dispute making significant improvement in all the areas
relating to financial viability, profitability and competitiveness, there are concerns that
banks have not been able to include vast segment of the population, especially under
privileged sections of the society, into the fold of basic banking services. Internationally
also efforts are being made to study the causes of financial exclusion and designing
strategies to ensure financial inclusion of poor and disadvantaged.
INTRODUCTION
The essence of financial inclusion is in trying to ensure that a range of appropriate financial
services is available to every individual and enabling them to understand and access those services. Apart
from the regular form of financial intermediation, it may include basic no-frills banking account for making
and receiving payment, a saving product suite to the pattern of cash flows of a poor household, money
transfer facilities, small loans and overdrafts for productive, personal and others purposes, insurance etc.
While financial inclusion, in the narrow sense , may be achieved to some extent by offering in one of these
services, objective of comprehensive financial inclusion would be to provide a holistic set of services
encompassing all of the above.
FINANCIAL INCLUSION
According to Dr. C. Rangarajan , heading the committee of Financial inclusion, defined Financial
inclusion as the Process of ensuring access to the financial services and timely and adequate credit where
needed by vulnerable groups such as weaker sections and low income of affordable cost.” In short financial
inclusion means access to savings, loan and remittances to the entire population of the country.
On the directives Ministry of Finance and Reserve Bank of India, each Bank devised its own financial
inclusion policy drawing a blueprint for its financial inclusion initiatives.
SCOPE OF FINANCIAL INCLUSION
The scope of financial inclusion can be expanded in two ways:
a)Through state-driven intervention by way of statutory enactments.
b)Through voluntary effort by the banking community itself for evolving for various strategies to bring
within the ambit of the banking sector of large strata of society. When bankers don't give the desired
attention to the certain areas, the regulators have no step in to remedy the situation. This is the reason why
Reserve Bank of India is a placing a lot of emphasis on financial inclusion.
Factors affecting access to financial services
Legal identity: Lack of legal identity like voter Id, driving license, birth certificates, employment identity
card etc.
Illiteracy: Particularly financial literacy and lack of basic education prevent people to have access from
financial services.
Level of income: level of income decides to have financial access. Lower income people generally have the
attitude of thinking that banks are only for the rich.
Terms and conditions: While getting loans or at the time of opening of accounts, banks place many
conditions, so the uneducated and poor people find it very difficult to access financial services.
Difficult procedures: Due to lack of financial literacy and basic education, it is very difficult for those
people who lack ability to read term and conditions and account-filling forms.
Psychological and cultural barriers: Many people voluntarily excluded themselves due to psychological
barriers and they think that they are excluded from accessing financial services.
Place of living: As the name suggests, commercial banks operate only in commercially profitable areas and
they set up branches and main offices only in those areas. People who live in under-developed areas find it
very difficult to go areas in which banks are generally reside.
Lack of awareness: Finally, people who lack basic education don't know the importance of the financial
products like Insurance, Finance, Bank Accounts, cheque facility etc.
CONCLUSIONS:
1.There are vast differences among the distribution of financial services involving very less use of financial
services in economically backward region.
2.For providing inclusive services to rural and poor areas Co-operative Banks having big share as compare
to Regional and Commercial Bank.
3.Due to the nationalization of banks the rate of total rural household depts, is increased rapidly.
4.To attract the financially excluded population various measures have been taken by nationalized bank
like RBI, NABARD, RRBs, etc.