Financial Inclusion: Challenges in India

Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.

Challenges

• Inadequate Coverage: Financial services are used only by a section of the population, the excluded sections are rural, poor areas.
• Financial Illiteracy: It is also one of the challenges in the area of financial inclusion. Lack of basic education prevents the people to have an access from financial services.
• Documents of Proof: Another challenge in the area of financial inclusion is that access to formal financial services requires various documents of proof regarding persons’ identity, income, birth certificates, etc.
• Accessibility: Poor and rural sections may sometimes subscribe these financial services initially, but may not use them as active as others due to high distance between the bank and residence, poor infrastructure, etc. • Language Barrier: Due to difficulty in understanding formal languages, various documents and many formalities in banking procedure people are not comfortable in using financial services.

Financial Inclusion in India

• In India, various multi-model approach to financial inclusion were adopted such as, nationalization of commercial banks in 1969 and 1980, Lead Bank Scheme in 1970, establishment of Regional Rural Banks in 1975, SHG-Bank Linkage Programme in 1992, Kisan Credit Card Scheme in 1998, etc.
• The Reserve Bank of India introduced various reformative measures like rural branch expansion, branch regulations, priority sector lending, differential rate of interest, interest rate ceiling, subsidized rate to priority sector lending, etc.

Major Government Initiatives

• PMJDY: The brick and mortar branches, complemented by the BC model have spread the reach of the banking system to every nook and corner of the country. However, the inflection point in the journey to greater financial inclusion was reached with the launch of Pradhan Mantri Jan Dhan Yojana (PMJDY).
• JAM: The Jan Dhan, Aadhaar and Mobile (JAM) eco-system has brought about a major shift in the field of financial inclusion and several initiatives have been taken to universalise digital payments in a convenient, safe, secure, transparent and affordable manner.