Financial Inclusion is simply a method of offering banking and financial services to every individual of the society irrespective his/her financial or social background. It means that there should not be any discrimination on any grounds while providing these services. As per the Reserve Bank of India, Financial Inclusion is the process of ensuring access to appropriate financial products and services which are needed by vulnerable groups such as weaker sections and low-income groups at an affordable cost in a fair and transparent manner.
Financial Inclusion wants everyone in the society to be involved and participate in the financial management judiciously. There are many poor households in the country that do not have any access to financial or banking services. These people are not aware of banking services and even if they know they don’t know how to use those services for their welfare. They simply don’t have access to banking or financial services due to the lack of financial literacy. Providing financial literacy to the poor and uneducated households is a step towards providing them Financial Inclusion.
There are even people who want to use avail banking services, but can’t do so in normal circumstances. The reason is banks ask for the different type of documents to provide them credit. There are some banks which charge some fee for not maintaining the minimum balance, there are monthly or yearly charges for availing some services like debit cards, net banking, etc. All these factors discourage a person from a weaker background to avail the banking services. Then comes the Financial Inclusion which provides a solution to these problems.
Financial Inclusion aims to eliminate these barriers and provides economical financial services to the weaker sections of the society so that they can be financially independent. Once these financially weaker people are under the financial inclusion, they do not need to depend on landlords, money lender for getting funds which are not sustainable for them. Financial Inclusion also intends to spread awareness about the financial services and financial management among people of the society. Moreover, it develops formal and systematic credit options for the poor people of the society.
Financial Inclusion Schemes in India
The Government of India has been introducing several exclusive schemes for the purpose of financial inclusion. These schemes intend to provide social security to the less fortunate sections of the society. Let’s take a look at some schemes launched by the Government over a period of time while keeping in mind the need for financial inclusion:
- Pradhan Mantri Jan Dhan Yojana (PMJDY)
- Atal Pension Yojana (APY)
- Pradhan Mantri Vaya Vandana Yojana
- Stand Up India Scheme
- Pradhan Mantri Mudra Yojana
- Pradhan Mantri Suraksha Bima Yojana (PMSBY)
- Sukanya Samriddhi Yojana
- Kishan Credit Card Scheme for farmers
- Kishan Vikas Patra Scheme to provide investment option to farmers.
In addition to these, there are various scheme launched by the Government of India, the Reserve Bank of India and Nabard which caters to the need of promoting Financial Inclusion.
Financial Inclusion initiatives by the RBI 😎
The Reserve Bank of India works on exclusive programmes and plans in order to have financial inclusion in the nation effectively. It applies a bank-led strategy in order to attain financial inclusion smoothly. The central bank of India also has firm regulations in place that need to be followed by every bank. The RBI also offers qualified assistance to every bank in the nation in order to attain its objective of Financial Inclusion. Let us take a look at some of the programmes introduced by the RBI in order to improve financial inclusion among the citizens of the country.
- The RBI instructed every bank to have Basic Saving Bank Deposits (BDSD) accounts for the economically weaker sections of the society. These are no-frill accounts where account holders do not have to maintain any minimum balance or minimum deposit. These account holders can withdraw cash at any ATM or at the bank branch. They should also be given the opportunity to make use of electronic payment channels for receiving and transferring money to others.
- The opening of Small Account is allowed by the RBI. A person has to give his valid identity proof for KYC (know your customer) norms to open an account. But what if somebody doesn’t have any identity proof? Can they open an account? The answer is Yes. They are eligible to open “Small Account” as per the guidelines of Reserve Bank of India. A small account can be opened by providing a self-attested photo and signature in presence of the bank officer. It will be valid for only one year and can be extended to further one year if the account holder submits any proof that he or she has applied for any identity proof. In small accounts, balance cannot be exceeded 50,000 rupees at a point of time, total deposits in a year cannot be more than 1 lakh rupees, maximum withdrawal of up to 10,000 rupees is allowed in a month.
- Keeping in mind about the lack of bank branches in rural areas, the RBI has asked all banking institutions to open more and more branches in villages across the nation in order to provide good banking services to the villagers. There are many remote villages where there are no banks and also no good transportation services. It is very difficult for residents of these areas to commute to a far-off bank branch for availing banking services. Hence, with the compulsory rule of the RBI, banks are distributing the ratio of banks in villages and cities to have a balance.
Why Financial Inclusion is needed at all?
Financial inclusion enhances the financial system of the country in a comprehensive way. It strengthens the availability of economic resources for the people from weaker sections of the society. Most importantly, Financial Inclusion develops the concept of savings among the poor people in both the urban and rural areas. More the saving with banks better the health of banks. In this way, financial inclusion contributes to the progress of the economy in a consistent manner.
Happiness comes along with financial inclusion. How it is? Once a person is financially included, he or she can avail the credit facility from the banks. As banks provide money at lesser rates as compared to money lenders or shroffs, the person can save more rather than paying all the earned money as interest. The more the savings, more satisfied the person is. And there is a famous quote which says “Content is Happiness”, that’s why I said, Happiness comes along with financial inclusion.