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Financial inclusion is the process of ensuring that vulnerable groups, such as women and low-income people, have access to financial services as well as timely and enough financing when they are needed at a reasonable cost.
Financial inclusion
Financial inclusion is defined as the availability of financial services such as bank accounts for savings and transactions, low-cost credit for productive, personal, and other purposes, financial counselling services, insurance (life and non-life), and so on. In its broadest meaning, financial inclusion refers to universal access to a wide range of financial services at a reasonable cost. Not just banking products, but also insurance and equity investments are included.
Financial inclusion contributes to economic growth by broadening the financial system’s resource base by encouraging a savings culture among a large section of the rural population. Furthermore, by putting low-income populations’ financial holdings and other resources within the formal banking sector, financial inclusion safeguards their financial holdings and other resources in tough times. By providing simple access to formal credit, financial inclusion reduces the exploitation of vulnerable individuals by usurious money lenders.
Role of financial inclusion plays in society
In rural regions, the Gini coefficient increased to 0.28 in 2011-12 from 0.26 in 2004-05, whereas in urban areas, it increased to an all-time high of 0.37 from 0.35.
Financial Inclusion Initiatives requested all banks to open Basic Saving Bank Deposit (BSBD) accounts with no minimum balance, cash deposit and withdrawal at bank branches and ATMs, money receipt/credit through electronic payment channels, and the issue of an ATM card.
KYC regulations have been reduced and simplified to allow the opening of bank accounts, particularly for modest accounts with balances under Rs. 50,000 and total credits under Rs. One lakh per year. When opening bank accounts, banks are also advised not to require client introductions. The Aadhar Card can also be used by banks for identification and address confirmation.
Domestic people have the freedom to open branches in Tier 2 to Tier 6 cities with populations of less than 1 lakh, subject to reporting, to address the issue of unevenly distributed bank branches. Domestic people in the North-Eastern States and Sikkim do not need RBI authorisation to open branches. To further liberalise the market, the government has given domestic scheduled commercial banks (other than rrbs) universal authorization to open branches in Tier 1 centres, subject to certain restrictions.
Banks are required to allocate at least 25% of the total number of branches to be opened during the year in unbanked (Tier 5 and Tier 6) rural localities under the Compulsory Requirement of Opening Branches in Unbanked Villages.
Financial inclusion entails involving and including everyone in society in responsible financial management. In India, many poor households do not have access to banking services. They have no understanding of how banks work. Many poor people, even if they are aware of banks, do not have access to their services.
Aim of Financial Inclusion:
It aims to break down these barriers by providing low-cost financial services to the less fortunate elements of society, allowing them to become financially self-sufficient without relying on charity or other non-sustainable sources of income. In addition, financial inclusion aims to raise public understanding of financial services and money management. It also intends to assist poor people with institutional and systemic credit sources. For many years, formal forms of credit were exclusively available to the middle and upper classes. People were compelled to rely on unorganised and informal credit as a result of their poverty. Because many of them were ignorant and lacked basic financial ability, they were exploited by the society’s selfish and rich members.
Conclusion:
Financial inclusion is defined as the process of providing banking and financial solutions and services to all members of society without prejudice. Its main goal is to integrate everyone into society by providing basic financial services to everyone, regardless of income or savings. Financial inclusion’s main purpose is to give sound financial solutions to economically disadvantaged people without prejudice. It tries to find solutions that are both fiscally and socially equal. It also promises to provide financial aid in an open and honest manner, with no hidden fees or costs.
