Financial Inclusion in India

 As the modern day shoppers swiftly swipe their credit and debit cards in glittering malls and trade online, there remains a class which is excluded from even the basic financial amenities in India. While we take a variety of financial instruments for granted, some people do not even have a simple savings account with a bank. Involving everyone in the formal banking system is an essential element of country’s sustainable economic development. However, in India even after 68 years of independence, financial inclusion remains an elusive goal for India. According to the 2011 Census of India, only 58 percent of Indian population availed of banking services in 2011. About 67 percent of the urban households had access to banks against 54 percent in the rural areas.

To put an end to such ‘Financial untouchability’, Prime Minister Narendra Modi launched an ambitious scheme ‘Jan Dhan Yojana’ (JDY) for financial inclusion on 28 August 2014. In simple terms financial inclusion refers to making financial services available universally at an affordable cost. Well, one can then ask why does having access to the banking system matter? Financial inclusion brings with it many opportunities: opportunity for savings, credit and insurance. Access to formal banking system promotes saving behavior and routes public savings into formal channels. It can also curb Ponzi financial schemes and chit funds frauds. Savings sitting in a tiffin box or under the pillow cannot be termed economically meaningful savings unless they enter the financial mainstream.
  In addition, financial inclusion offers formal credit through banks. In India 68 percent population lives in the rural areas and 47 percent of total employment is still in Agriculture. In these rural areas, a common source of credit is the local moneylenders which are known for their unscrupulous lending practices. Bringing rural population under the umbrella of financial system will put a stop to such malpractices and break the vicious borrowing and payoff cycle for rural people. Make consumption, housing and business loans with transparent lending terms and regulated interest rates available to them. 
Also, being a part of banking system can provide better avenues for contingency planning. Insurance for unforeseen events, retirement and buffer savings for marriages and other events. When hitherto unbanked population adds savings and credits to the economic mainstream it can accelerate economic development and growth. Being added to the economic mainstream can offer many avenues of employment and thereby raise the living standards of people.

         The central bank in India- the Reserve Bank of India and central and state governments have taken many steps to achieve financial inclusion. Some of these initiatives include mobile banking, easy, promoting financial literacy.  there are several supply and demand side factors which hinder the effectiveness of these programs. Among the states Karnataka and Maharashtra have high financial inclusion while North Eastern states, West Bengal and Bihar lag far behind. Also, across genders, only about 35 percent females have access to banking.

        The world bank has declared 2020 as the year for achieving complete financial inclusion. Whether that can be achieved in idnia will depend upon the pace of finacial reforms that are much awaited to be undertaken.