“STUDY ON IMPACT OF FINANCIAL INCLUSION IN RURAL AREAS WITH SPECIAL REFRENCE TO SBI IN MANDLA DISTRICT”
India’s growth story in the years ahead will be the story of inclusive growth in which growth will not be treated as an end itself, though faster growth will be the main goal. Our twelfth five year plan also focuses for inclusive growth which states faster, more inclusive and sustainable growth. FINANCIAL INCLUSION
Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society, in contrast to financial exclusion where those services are not available or affordable. An estimated 2.5 billion working-age adults globally have no access to the types of formal financial services delivered by regulated financial institutions. For example in Sub-Saharan Africa only 24% of adults have a bank account even though Africa's formal financial sector has grown in recent years. It is argued that as banking services are in the nature of public good; the availability of banking and payment services to the entire population without discrimination is the prime objective of financial inclusion public policy.
The timely delivery of banking services to the vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair and transparent manner by mainstream Institutional players.
The essence is to ensure a holistic set of services to every individual and enable them to understand and access the financial services.
REASONS FOR EXCLUSION
(i) Geographical Location –
remoteness of residence
hilly & sparsely populated areas with poor infrastructure
distance from bank branch
(ii) Economic Factors
(iii) Social Factors-
ease of availability of informal credit
(iv) Financial illiteracy-
lack of awareness
(v) Documentation Process-
KYC – documentary proof of identity/ address
(vi) Inefficiency of the financial Institutions-
high cost of operations
less volume & more number of clients
poor functioning and financial health of some financial institutions (such as financial cooperatives) which limit the effectiveness of their outreach figures. Primary Agricultural Cooperative Societies (PACS), which restrict their membership to persons with land ownership are also not effective in offering savings services.
CONSEQUENCES OF EXCLUSION
Affects individuals and economy alike
The households, micro and small enterprises dealing entirely in cash are susceptible to irregular cash flows would be affected
Limits options for providing for old age security
Recourse to informal lenders
Exposed to higher interest rates charged by informal lender Highest risk as loans are often secured against the borrower’s property Banking with informal sources does not provide interest benefit and tax advantages and are far less secure
In the most severe forms, it could ultimately lead to social exclusion.
BENEFITS OF INCLUSION
For the customer can avail a variety of financial products provided by institutions regulated and supervised by credible regulators.
The regulator benefits from the audit trail which is available as transactions are conducted transparently in supervised environment.
The economy benefits, as greater financial resources become transparently available for efficient intermediation and allocation, for uses that have the highest returns.
It strengthens the financial deepening and leads to financial development in a country, which would in-turn accelerate economic growth of the country. (a). BACKGROUND OF RESEARCH
INITIATIVES BY THE GOVERNMENT AND THE REGULATOR
Nationalization of banks
Prescription of priority sector targets
Lending to weaker sections at concessional rates...
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