Financial Inclusion in India – Contemporary Issues and Challenges

Abstract

Financial inclusion has received the attention of researchers and policy makers around the world. It has been a widely accepted fact that for sustainable growth and development of an economy, all the sections of the society must be brought under the aegis of the regulatory financial system. Broadly speaking, financial inclusion is understood as access to formal financial services- savings and deposit services, credit & transfer, insurance and pension services, for marginalized and under privileged sections of society. Financial inclusion bridges the gap between rich and poor. It helps to channelize money-flow to the economy.

Financial inclusion efforts do have a multiplier effect on the economy as a whole through higher savings pooled from the vast segment of the bottom of the pyramid population by providing access to formal savings arrangement resulting in an expansion in credit and investment by banks. The present study attempts to bring out various initiatives which have been undertaken by the RBI, the government as well as the corporate to achieve universal financial inclusion. This paper also highlights several ambitious projects started by private corporate in order to bring disadvantaged segments of the society under the umbrella of formal financial system. The present study highlights various challenges to implementation of measures undertaken and how technology driven initiatives can be of great significance in making banking and financial services a public good which hitherto catered to the needs of the upper strata of the society. To achieve complete financial inclusion and robust economy there is a dire need of change in the outlook of banks and financial institutions. They need to pursue financial inclusion policy whole heartedly as a profitable business opportunity and not social or regulatory obligation which consequently makes their efforts halfhearted.