Financial Inclusion

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Literature reviews on Financial Inclusion

1. Financial Inclusion: Taking banking services to the bottom of the pyramid. By dr. k. Srinivasa Rao

To extend the scope of activities of the organized financial system t include within its ambit people with low incomes and to lift the poor from one level to another through graduated credit, thereby facilitating them to break the chain of poverty.

_ Financial inclusion means extending the banking habit and ensuring access to financial services timely, and adequate credit where needed by vulnerable groups such as weaker sections and low income group at an affordable cost. _ Path of the financial inclusion is daunting. The benefits of economic growth have not equitably reached different parts of our society. _ Despite the vast network of bank branches, only 27 % of total farm households are indebted to formal sources. _ Inclusive finance through secure savings, appropriately priced credit and insurance products, and payment services – helps vulnerable groups to increase incomes, acquire capital, manage risk and work their way out poverty. _ The objective of this paper is how to correct this situation and to extend the reach of the financial sector to such groups by minimizing the barriers to access as encountered by them.

Analysis and findings:
_ In India, the government and the RBI have been promoting the necessity of inclusive Banking, as a collective body, has been taking several initiatives in this regard. At the all India level, less than 5% of poor rural households have access to microfinance as Compared to 60% in Bangladesh.

_ Apart from the regular form of financial intermediation, it may include a basic no-frills banking account for making and receiving payments, a saving product suited to the pattern of cash flows of a poor household, money transfer facilities, small loans and Overdrafts for productive personal and other purposes. _ For promoting financial inclusion, bank has to address the issue of exclusion of people who desire the use of financial services, but are denied access to the same. Another facet of exclusion which needs to be addressed is social exclusion, social exclusion is about or than income poverty. It is a short hand term for what can happen when people or areas have a combination of problems such as unemployment discrimination, poor skills, low incomes, poor housing and also perceived difficulties in doing business.

Difficulties in promoting inclusive banking:
_ Small-sized transactions
_ Customers scattered over wide areas
_ Lack of clearly defined property rights
_ The risks faced by small producers need to be assessed and factored into product pricing.

To overcome the above difficulties the following steps have been taken: _ SHG Bank linage programme
_ Recognize the co-operative system
_ Micro insurance
_ National mission of financial inclusion
_ National rural financial inclusion plan (NRFIP)
_ Financial sector policy and regulatory framework in India for inclusive growth _ Products and services needs to be developed that are adapted to the needs of the majority at affordable prices time to time.

The banks need to assess their capacities and local knowledge to promote Financial Inclusion, which would be bank specific. With enabling technology support, the delivery channel could be widened with reduced transaction cost. Further, with the introduction of core banking solution, in most of the banks, there is a huge surplus of manpower. This surplus manpower needs to be reoriented to take up the challenge of advising the rural masses and bring them into the fold of banking and credit.

Financial Inclusion: Issues and Challenges.

- as banking services are in the nature of public good, availability of banking and payment services to the entire population without discrimination would be the prime objective of the public policy.

Finding and Analysis:...
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