Financial Inslusion the Scope and Effect in Indian Economy

Topics: Bank, Financial services, Microfinance Pages: 7 (2154 words) Published: January 18, 2013
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Promoting Financial Inclusion
Can the constraints of political economy be overcome?

Knowledge Partner

Please contact FICCI at: E-mail: Fax: Tel: Mail: o Website: +91 11 23320714, 23721504, attention FICCI/Permissions +91 11 23738760-70 Federation of Indian Chambers of Commerce & Industry Federation House 1, Tansen Marg New Delhi 110 001 India Please contact M-CRIL at: E-mail: Fax: Tel: Mail: o Website: +91 124230 9520, attention M-CRIL/Permissions +91 124 230 9497, 230 9707, 426 8707, 405 0739 Micro-Credit Ratings International Limited 602 Pacific Square, 32nd Milestone NH8 Gurgaon 122001 India The publication was supported under the UNDP-NABARD Financial Inclusion Project under a Micro Capital Grant to Federation of Indian Chamber of Commerce and Industry. The views in the publication are those of the authors' and do not necessarily reflect those of the United Nations Development Programme.

Preface and acknowledgments List of abbreviations Executive Summary 1 2 3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 4 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 Background What is financial inclusion? Financial inclusion – is it just a distant dream? Penetration of banks – a limited effort at inclusion Credit – needs a huge impetus Savings through deposit accounts – an encouraging trend, perhaps... Coverage through microfinance Limited coverage under micro-insurance – but does credit-life give real life cover? Coverage of the cooperative system – extensive outreach, intensive problems ...and the half-forgotten Regional Rural Banks The policy conundrum – is it prudential or simply restrictive? The business correspondent model – what is its potential? No frills accounts – but also no thrills, perhaps? Micro-insurance regulations– enabling if not adventurous Special funds for financial inclusion – what’s the resulting impetus? Cooperatives and financial inclusion – resuscitation yet again Amalgamation of RRBs – undermining the mandate The informal sector “credit card” schemes – a step forward KYC and identification issues – helping cope with contemporary concerns Branch licensing – policy incentivises inclusive expansion 18 v vii xi 1 2 4

4.10 Payment systems – facilitating inclusion with a few small steps 4.11 Interest rate deregulation – another small step forward 4.12 Consumer education and protection – valuable efforts...

4.13 Conclusions – inclusion constrained by regulatory prudence 5 5.1 5.2 5.3 5.4 5.5 6 6.1 6.2 6.3 Challenges to achieving financial inclusion Broad challenges to financial inclusion Product specific challenges Challenges in offering micro-insurance Challenges faced by the cooperative system and rural banks Conclusions – What are the challenges and how can they be overcome? The way forward –...
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