I. Financial Inclusion

Financial Inclusion is about ensuring access to financial services like deposits, fund transfer, loans etc. to each and every member of the society.

• Historically, India has performed poorly on financial inclusion. India ranks 2nd in the world in terms of financially excluded people after China. The reasons for poor performance on financial inclusion is because – financial illiteracy, poor economic background, prevalence of traditional lending system, colonial backdrop, huge population marred by poverty and hunger.

Measures taken to Promote Financial Inclusion

1. Pradhan Mantri Jan-Dhan Yojana (PMJDY)

• It was launched in 2014 and is hailed as the biggest financial inclusion program ever to be undertaken in the world. The objective of PMJDY was to ensure access to various financial services like availability of basic savings bank account, access to need based credit, remittances facility, insurance and pension to weaker sections and low income groups

Achievements

• Against the original target of opening bank accounts for 7.5 crore uncovered households in the country by 26th January, 2015, by July, 2019 more than 36 crore bank accounts have been opened.
• More than 50% of the account holders are women.
• The numbers of zero balance account holder and dormant accounts have reduced with time showing that people are using these accounts to access financial services.

Issues/Challenges

• The only drawback is that people already with an account have opened Jan Dhan accounts in lure of benefits associated (accident insurance of 2 lakhs and overdraft limit of 10000) with the scheme.
• PMJDY have not just brought informal sector to the mainstream economy but have also provided financial literacy to the poor and the illiterate in both urban and rural areas. Hence such schemes are necessary to ensure inclusive growth in the nation.

2. Business Correspondent Model

Against this backdrop, several policy measures were initiated during the year to ensure last mile access to financially excluded sections. To strengthen the business correspondent (BC) model, the Reserve Bank developed a framework for the BC registry. This registry shall capture information on both existing and potential business correspondents and will help in the effective monitoring and oversight of BC operations. This should help to further strengthen the BC eco-system through appropriate policy initiatives.

• BCs also play a crucial role in initiating first-time customers into the domain of mainstream banking. Proper guidance and handholding is a key to their continuing and deepening relationship with banking. Accordingly, the Reserve Bank has developed a framework for BC certification with basic and advanced level courses to enhance their functional and behavioural competencies.