Financial Inclusion: In a more enhanced way

Financial inclusion is being considered to be one of the most important pillars for the economic growth process in our country since the last one decade. The government of India and the Reserve Bank of India needs to take stringent measures to make our economy financially inclusive. For achieving the same, both quantitative and qualitative measures have to be undertaken; taking into consideration the diverse attributes of our nation.

The banks here have a very important role to play in such a strategy. However, they are usually hesitant in contributing towards the same, taking in view the risks associated with the micro credit services. Usually micro credit schemes are meant to enhance the economic position of economically weaker sections. As a result, the cost of providing them the service is much higher as compared to the other situations. Also, the authorities regulate the commercial banks regarding the interest rate caps, which may have a direct affect on their profitability. Such caps should be removed and instead a target should be given to the banks so that they can achieve that in their own way.

Also, various skill enhancement trainings and awareness programmes should be organised. The rural uneducated class can learn to accustom themselves to the formal sources of finance, rather than depending on the informal ones. Easy accessible and affordable “credit plus services” should be provided to the socially and economically excluded.

Due to the limited amount of transactions done by the poor, a ‘simple to use’ cash dispensing and collecting machines, similar to the ATMs (with clearly mentioned operational instructions) should be set up. This would enhance financial inclusion in rural and semi-urban areas.

Banks can facilitate the financial inclusion process by enrolling SHGs on a large scale. This can be done through bank linkage programme, designing appropriate product on the basis of requirement of a particular group of borrowers, BF and BC models should be used more rigorously and rural branches should be inspected more regularly.

To conclude, financial inclusion is a major step to reduce poverty in India. For doing this, banks and other financial institutions should be provided with more freedom to incorporate low income consumers and still earn profits. Financial institutions should also stress on financial literacy programmes to accelerate the financial inclusion strategy in the economy. The contributions by Government of India and all financial institutions would open gates to a far greater degree of financial inclusion and hence lead the country on the path of growth.