Financial Inclusion in India- A Study

Dr. Neelam Goel

Abstract


One of the greatest challenges before the Indian sub- continent which accommodates more than one-third of the population is poverty. India, one of the BRIC nations with more than 1.2 billion population is seen by many developed countries as an emerging economy. India’s economic growth has failed to make a significant improvement in its poverty figures with 400 million- more than the total in the poorest African Nations- still stuck in poverty. Government of India with its concern started various poverty alleviation programs but they have failed to deliver the objectives to the level which is desired. The reasons may be many such as failure to reach the target group, loopholes in the system, developing a robust mechanism to name a few. Many countries including India experimented with subsidized credit which only led to increase in the NPAs. In this context Financial Inclusion appears to have become the principal development concern .This has been particularly evident during the past decade or so, even the world has stumbled through a financial meltdown, more serious than any since the Great Depression, that has exposed the frailties and inequities of the global financial system. Nevertheless, global attempts to bring about ‘an increase in the proportion of individuals and firms that use financial services’ to continue apace. The term ‘financial inclusion’ has acquired universal acceptance as both a mere access to financial services as well as deeper processes. While there is a general consensus about the many benefits of expanding the financial markets to facilitate greater reach of credit, savings and payments services to newer and under-banked segments and to widen access to insurance and pensions, there are also concerns about the plausible ill-effects like over indebtedness of customers and the stability of financial markets. The appropriateness of financial services, especially for poorer segments of the population, has become a critical concern too. This report makes an attempt at tracking and analysing the larger project of financial inclusion in India being designed and implemented by the banking system and other diverse stakeholders such as SHG, s/ MFI’s/ NGO’s etc. the introduction of the concept of financial inclusion has ushered a new phase of financialisation f economic lives of people through the expansion of financial markets. Engagement with the poor is now posed as a ‘win-win’ game, a ‘profitable’ opportunity to make ‘fortune at the bottom of the pyramid’, notions that have been strongly founded in theoretical frameworks of neo-classical and institutional economics. Till now the focus was mainly on poverty alleviation and micro finance but now for a better and diversified growth we have started approaching towards the concept of “Microfinance plus Services”. Freeing the markets, including financial markets, of all constraints to the participation of different sections of economic actors is the crux of this philosophy of development. This paper tries to examine the growth of financial inclusion in India, its location in poverty development discourse, various initiatives taken by the banks and the government.


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