Financial Inclusion & “Bharat ki achhe din” by Sudipta De, Dept. of Management

The success of any nation depends upon its productivity and national income. National income depends upon employment generation and industrialization. Therefore success of a country depends on three resource pillars. These are human resources, financial resources and knowledge based resources which is more synonymous as skill. India is the second largest growing economy in the world and it yields demographic dividend from large proportion of young population.

 

The Government of India has started to foster the young population by providing skill based education. Around 10 million fresh Indian join its work force in every year. The absorption capacity of large and medium scale industry with respect to this huge skilled population is very low.  The remedy of such situation is self-employment and starting of own business based on individual skill and providing employment opportunities to the skilled neighborhoods. These entrepreneurial activities may be created in the field of construction, trading or day to day house hold supplies.  Government is trying to nourish the environment of entrepreneurship, because it is not possible for government to provide jobs for huge growing workforce. The prominent obstacle to start up new business is availability of seed capital and capital for further expansion of existing business. The huge proportions of these businesses belong to unorganized sector. The urge to procurement of seed capital recognized the importance of financial inclusion for easy accessibility of credit facility. The farmers, tannery workers, bidi binders, hawkers, lady tailors etc belong to unorganized sector and are still far away from accessing formal financial services. This financial exclusion has happened as a result of number of factors like: distance of local bank branches or ATMs, lack of financial education, unavailability of collaterals, high cost of financial services, poverty, lack of knowledge and information on credit facility, psychological barriers and other demand and supply side barriers.

 

The objective of financial inclusion is to convert unbanked population into banking population. Huge proportion of rural and urban populations still depend upon the credit facility of informal financial sector in spite of hefty interest rate. Therefore huge funds are still untapped in organized financial sector and bank cannot utilize this money for other development purposes. This hampers the growth of the economy and infrastructural developments. These unbanked populations cannot enjoy the facility of different banking products, like education loan, home loan, personal loan and other institutional credits. Financial inclusion is necessary to facilitate the unbanked population by providing banking services, like credit facilities, safe custodies, life and non-life insurances for up gradation of their standard of living and so on.

 

To promote financial inclusion, RBI has taken enormous initiatives. The few prominent initiatives are Pradhan Mantry Jan Dhan Yojana, no-frill bank account, handy and easy KYC norms, establishing bank branches in no-bank areas etc. The remarkable contribution to catalyst the financial inclusion and financial empowerment in the rural and urban areas is the implementation of E-governance. The AADHAR and the blessing of E-governance made the identification easier for new account opener and decreased the corruptions. AADHAR made the KYC norm easier and made it very easy to track the customers of a bank. The prominent challenges to overcome supply and demand barriers are not only financial inclusion but also financial education and financial stability. Financial education educates the population by providing financial awareness in the area of risk and operational process associated with different financial services, procedures to get credit facility and different services provided by bankers. This leads to wipe off the demand side barriers.

 

The financial inclusion facilitates to overcome supply side barriers. These altogether provide financial stability to the users of banking services. The government of India has come out with different types of policies in five year planning programs to provide financial stability to the rural and urban population. The most prominent milestone of this initiative is Mahatma Gandhi NREGA for rural India. To facilitate the rural and urban population the banks have tied up with NGOs and MFIs. The banks have started granting loans to poor people for their household and business requirements through NGOs and MFIs without collaterals and at zero loan processing costs. To facilitate the financial inclusion, the Government of India has adopted different steps. The subsidy on LPG is directly credited to bank account of the customers; different aids and assistance provided by government are distributed through electronic channel. The E-governance process made the compulsory bank account of the beneficiary. The initiatives for financial inclusion made the lives to live to fulfill, inspire, empowerment, recharge, inspired and prosper.

 

 

One Comment

  1. Sagar says:

    That’s an inventive answer to an inteiestrng question

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