Financial inclusion

Introduction

What is Financial Inclusion

1. Financial inclusion is a process that involves delivering several banking services at a manageable cost, especially to the low-income groups and disadvantaged sections of society.
2. It is the process of ensuring affordable access to different financial services and a timely and sufficient amount of credit to disadvantaged populations such as poorer sections and low-income groups.
3. Financial services include Credit facilities, Savings, investments, insurance, etc., from a formal financial institution.
4. Financial inclusion can be recognized as the major reason behind poverty alleviation and rapid economic growth worldwide.  

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Significance of Financial Inclusion

1. Financial inclusion allows access to eliminate vulnerability to economic shocks, formal finance to improve job creation, and increase investments.
2. Greater financial inclusion can support sustainable and inclusive socio-economic growth at a macro level.
3. Financial inclusion boosts economic output, minimizes income inequality, and reduces poverty at the national level.
4. Women’s financial inclusion is particularly important for women’s economic empowerment and gender equality. With greater control over their financial lives, women can help themselves and their families to come out of poverty; reduce their risk of falling into poverty, and eliminate their exploitation from the informal sector.
5. An inclusive financial system supports stability, integrity, and equitable growth.
6. It provides safety to small savings and facilitates channelization of small households’ savings, resulting in capital formation.

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Measurement of Financial Inclusion

According to the RBI, three major indicators measure financial inclusion. These include: 

• Measure access includes the ATMs or bank branches at a specified population
• Measure usage counts people with pension policy or saving accounts, and
• Measuring the service quality, including grievance redressal 

Additionally, it is best to conduct regular surveys to assess the current situation.

National Strategy for Financial Inclusion Committee for India 2019-2024

1. The Reserve Bank of India (RBI) with inputs from the central government and financial sector regulators (Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, and Pension Fund Regulatory and Development Authority of India).
2. Below are the Financial Inclusion Strategic Objectives- 

1. Providing basic financial bouquets.
2. Access to financial services.
3. Effective coordination. 
4. Literacy and education.
5. Access to livelihood.
6.  Customer protection.                                                                                                                                                                                            In order to achieve these objectives, there are several milestones, including enabling banking facilities to the masses, developing financial service infrastructure to build a cashless society, and assuring access to financial service providers by March 2024. 

Financial Inclusion Initiatives

Pradhan Mantri Jan Dhan Yojana

1. The first financial inclusion initiative was aimed at getting access to a number of financial services to the financially excluded sections.
2. All households across the country – rural and urban- are to be covered under the scheme.
3. Facilities provided are access to needed credit, savings bank account, insurance, remittance facility, and pension, etc.
4. It also gives bank overdraft facility, accident insurance coverage, and issuance of Rupay debit card.

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Lead Bank Scheme

1. Introduced by the RBI to stimulate the process of financial inclusion.
2. It assigned lead roles to individual banks (both in the public sector and private sector) for the districts allotted to them. 
3. The lead banks are responsible for ensuring the flow of credit to agriculture, small-scale industries, and other economic services.

Priority Sector Lending

1. It is another financial inclusion initiative.
2. Priority sectors are those sectors that get less credit but contribute a lot to the national economy. 
3. Priority sector list is provided by the RBI and updated regularly. 
4. Currently, priority sector lending includes Agriculture, Micro, small and medium enterprises, Social Infrastructure, etc. 

Business Correspondent Model of Banking

1. They are responsible for providing banking services at different locations apart from ATM/bank branches.
2. They enable a bank to provide its limited range of banking services at a low cost.
3. In order to provide basic banking services, the RBI has empowered banks to appoint potential individuals as their agents to spread knowledge, especially in remote areas where it’s nearly impossible to establish a branch physically. 

Direct Benefit Transfer (DBT)

Cash transfer through Aadhar payment Bridge- requires Bank accounts, leading to financial inclusion.

Conclusion

There is enough evidence that shows that economic growth follows financial inclusion. Financial inclusion is the key to inclusive growth with a major focus on the empowerment of the poor, underprivileged and low income population. Financial inclusion is designed to bring about the capability to participate and contribute among the economically and socially excluded people by creating equal opportunities. Achieving financial inclusion will require a systemic effort which leverages technology, viable business models and appropriate regulatory framework cohesively. Financial inclusion is the road that India needs to travel toward becoming a global player. Financial access will attract global market players to our country and that will result in increasing employment and business opportunities. Inclusive growth will act as a source of empowerment and allow people to participate more effectively in the economic and social process.