Financial Inclusion

Topics: Bank, Financial services, Banking Pages: 18 (5865 words) Published: January 29, 2013
Chapter 1

1. Introduction
2. Financial Inclusion
3. Rationale for Financial Inclusion
4. Financial Inclusion in India
5. Scope of Financial Inclusion
6. Profile of Syndicate Bank
7. Contribution of Syndicate bank Towards Financial Inclusion 8. Objectives
9. Limitations
10. Methodology

1.1 Introduction
A well functioning financial system empowers individuals, facilitates better integration with the economy, activity contributes to development and affords protection against economic shocks. Inclusive finance through secure savings, appropriately priced credit and insurance products, and payment services helps vulnerable groups such as low income groups, weaker sections, etc. To increase incomes, acquire capital, manage risk and work their way out of poverty. Notwithstanding the efforts made so far, a sizeable majority of the population, particularly vulnerable groups, continue to remain exluded from the opportunities and services provided by the financial sector. With a view to correct this situation and extend the reach of the financial sector to such groups by minimizing the barriers to access as encountered by them, financial inclusion has been come into existence. India is the fourth largest economy in the world on a purchasing power parity (PPP) basis and twelfth on a nominal basis. With the real GDP for ecasted to grow by 5.7% in the year 2009-10, the Indian economy is marching ahead. This rapid expansion is expected to continue as growth in the services and high technology manufacturing sector accelerates. Agriculture, which continues to support around 60% of the population, has grown by a mere 2.7% in the second quarter of 2008-09. In addition, the organized sector employment presently comprises less than 10% of the workforce, leaving the vast majority of the working population with irregular income streams. Notwithstanding the rapid increase in overall GDP and per capita income in recent years, a significant proportion of the population in both rural and urban areas still experiences difficulties in accessing the formal financial system. There is currently a perception that there are a large number of people, potential entrepreneurs, small enterprises and others, who may not have adequate access to the financial sector, which could lead to their marginalization and denial of opportunity to grow and prosper.

1.2 Financial Inclusion
Financial inclusion is delivery of banking services at an affordable cost to the vast sections of disadvantaged and low income groups. Unrestrained access to public goods and services is the sine qua non of an open and efficient society. As banking services are in the nature of public good, it is essential that availability of banking and payment services to the entire population without discrimination is the prime objective of the public policy. The definitional emphasis of financial inclusion varies across countries and geographies, depending on the level of social, economic and financial development; the structure of stake holding in the financial sector; socio- economic characteristics of the financially excluded segments; and also the extent of the recognition of the problem by authorities or governments. The Report of the Committee on Financial Inclusion in India (Chairman: C Rangarajan) (2008) defines financial inclusion as the “process of ensuring access to financial services and timely and adequate credit wher e needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.”

What is Financial Inclusion? Rangarajan's committee on financial inclusion defines it as:

"Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost."

The financial services include the entire gamut -...
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