“Role of Government in Financial Inclusion”

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A RESEARCH PAPER
ON
“ROLE OF GOVERNMENT IN FINANCIAL INCLUSION”

Submitted By:
Hemali Shah
(MPM: 2nd Semester)

ABSTRACT:

Financial inclusion means a group of people should take part in growth activities and help to increase economic growth of the country. We cannot say that financial growth has been achieved by opening a bank account, granting huge loan to a single person and closing the account. First, many people have to open an account in a bank, save money regularly so that loans to needy people may be granted on regular basis. It is a process ensuring easy access and usage of financial system for the rich and poor in the country.

The Indian Government wishes that the poor people should be benefited by financial inclusion. They have to be given loans for trading activities or paying back the loan from money lenders. The Reserve Bank of India permits for financial inclusion by allowing banks to grant loan to non-registered bodies, subject to certain norms.

The Government needs to take on a leadership role and focus the attention of the financial services industry and community-based financial institutions on this issue. Promoting financial inclusion requires action by a range of Government departments, including those involved in tackling poverty, protecting consumers and promoting employment and economic growth. Promoting financial inclusion needs to be a key part of the Government’s overall agenda to promote financial inclusion. The Government of India has decided to set up a National Mission on Financial Inclusion (NaMFI) to promote inclusive growth in the country through universal access to finance by the poor and vulnerable groups within a specified time frame. Government has also provided Financial Inclusion fund.

Objectives:

• To make people aware about what the Financial Inclusion is all about. • To give knowledge about what the government is doing for our country related to financial inclusion. • To know about the various financial sectors taking part in helping for the concept of financial inclusion.

What is FINANCIAL INCLUSION?

Financial inclusion means a group of people should take part in growth activities and help to increase economic growth of the country. We cannot say that financial growth has been achieved by opening a bank account, granting huge loan to a single person and closing the account. First, many people have to open an account in a bank, save money regularly so that loans to needy people may be granted on regular basis. It is a process ensuring easy access and usage of financial system for the rich and poor in the country.

The Reserve Bank of India (RBI) today said that financial inclusion is not restricted merely to opening of bank accounts and should imply provision of all financial services like credit, remittance and overdraft facilities for the rural poor. "The accounts must be operational to provide benefits beyond deposit of money like availability of credit, remittance facility and overdraft among others", D. Subbarao, Governor of RBI said here.

Financial Inclusion is a key dimension of the overall strategy “Towards Faster and More Inclusive Growth”. If the intention is to promote ‘more inclusive growth’, then the definition of Financial Inclusion cannot stop at opening a short-duration account in the name of an individual or group. Growth cannot be achieved by transferring a lump sum of money into this account as proof of one loan given, closing both the account after the loan is drawn (or letting it remain dormant) as well as the file itself after the loan is repaid and the subsidy adjusted. Financial inclusion is not a one-off event. In terms of finance provision, it means that hitherto excluded people – either as individuals or as groups – now have access to credit on a regular basis for as long as they continue to abide by the terms of such a credit relationship. For Financial inclusion to promote growth, it has to move from “opening...
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