Financial Inclusion – A global Policy

Financial Inclusion – A global Policy

Financial Inclusion is the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular, at an affordable cost in a fair and transparent manner by regulated mainstream institutional players.


AGENDA 1: Access to formal banking services by the common man at affordable costs;


Each family must have at least one Bank account:

RBI finds that on an all India basis 59 per cent of adult population in the country have bank accounts – in other words 41 per cent of the population is unbanked. In rural areas the coverage is 39 per cent against 60 per cent in urban areas. The unbanked population is higher in the North Eastern and Eastern regions.

Broad objective is to take banking to all excluded sections of the society, rural and urban. Govt. of India and RBI have directed all the scheduled commercial banks including Scheduled Cooperative Banks to open “No-Frill” Savings Accounts and provide Financial Services to the Bottom of the Pyramid (BOP) people at affordable costs;

RBI & Gov. of India have instructed to outsource Banking Services and apply Biometric process so as to contain costs of operations for low value and higher volume of banking transactions.


AGENDA 2: Electronic transfer of subsidies:

Govt. of India in its recent guidelines ( Circular dated 15TH May, 2012) have directed the Banks, Insurance Companies and other Agencies – to take up the matter of Electronic transfer of subsidies under the 32 Schemes of Govt of India in which benefits are to be given directly into the accounts of the beneficiaries who can then withdraw it from the bank branch or the ATM or the micro ATM. For such electronic transfer of subsidies, it is important that the beneficiaries have an account in the service area bank in tune with the guidelines of the Reserve Bank of India on “One District – Many Banks – One Leader Bank” model.


AGENDA 3: Managing Inclusion – Exclusion Cycle:

Reserve Bank of India has given greater responsibilities of managing ‘Inclusion – Exclusion Cycle’ to Scheduled Commercial Banks. In absence of need-based financial products and services for the BOP people, there have been higher incidences of exclusion from the formal financial system. Lack of Financial Literacy further compounded such frequent exclusion damaging the cause.


Financial Inclusion a viable Business Model today:

Contrary to common perception, financial inclusion is a potentially viable business proposition because of the huge untapped market that it seeks to bring into the fold of banking services. Financial inclusion, prima facie, needs to be viewed as “money at the bottom of the pyramid” and business models should be so designed to be at least self-supporting in the initial phase and profit-making in the long run. It is important to keep in mind that service provided should be at an affordable cost. It is also pertinent to note that providing subsidy does not necessarily lead to a better delivery mechanism.



  1. June 2011, opened banking outlets in 1.07 lakh villages up from just 54,258 as on March 2010. Out of these, 22,870 villages have been covered through brick & mortar branches, 84,274 through BC outlets and 460 through other modes like mobile vans, etc.
  2. Opening of No-frills accounts : Basic banking ‘no-frills’ account, with ‘nil’ or very low minimum balance requirement as well as no charges for not maintaining such minimum balance, were introduced as per RBI directive in 2005. As on June 2011, 7.91 crore No-frills accounts have been opened by banks with outstanding balance of Rs.5,944.73 crore. These figures, respectively, were 4.93 crore and Rs 4257.07 crore in March 2010.
  3. Small Overdrafts in No-frills accounts : Banks have been advised to provide small ODs in such accounts. Up to June 2011, banks had provided 9.34 lakh ODs amounting to Rs.37.42 crore. The figures, respectively, were 1.31 lakh and Rs 8.34 crore in March 2010.
  4. General Credit Cards : Banks have been asked to consider introduction of a General Purpose Credit Card (GCC) facility up to Rs. 25,000/- at their rural and semi-urban braches. The credit facility is in the nature of revolving credit entitling the holder to withdraw up to the limit sanctioned. Based on assessment of household cash flows, the limits are sanctioned without insistence on security or purpose. Interest rate on the facility is completely deregulated. As on June 2011, banks had provided credit aggregating Rs.2,356.25 crore in 10.70 lakh General Credit Card (GCC) accounts.
  5. Kisan Credit Cards : Kisan Credit Cards to small time farmers have been issued by banks. As on June 30, 2011, the total number of KCCs issued has been reported as 202.89 lakh with a total amount outstanding to the tune of 1,36,122.32 crore.

    Now, these figures in themselves may not seem very impressive considering the gargantuan task that we have at hand. But if we look at the progress that has been achieved in the last one and a quarter years, and if we are able to scale up and sustain our efforts, I am quite hopeful that the targets set by the banks and our objective of achieving universal financial inclusion is attainable. But, it is not automatic and cannot be taken for granted. There are a number of issues and challenges that have to be surmounted.

Sr. No. Particulars Mar 10- Actual Mar 11- Actual June 11-Actual Mar 12-Actual Mar 13-Actual
1 Villages Covered – Grand Total ( 2+3+4 = 5+6) 54258 100183 107604 218574 352269
2 Villages Covered – Total Branches 21475 22662 22870 24995 26440
3 Villages Covered – Total BCs 32684 77138 84274 192249 323699
4 Villages Covered – Total Other Modes 99 383 460 1330 2130
5 Villages Covered >2000 27353 54246 59640 86806 91440
6 Villages Covered <2000 26905 45937 47964 131768 260829
7 Urban Locations covered through BCs 433 3757 4524 6068 8614
8 No Frill A/Cs (No. in Lakh) 493.27 739.36 790.86 1125.06 1582.93
9 Amount in No Frill A/Cs (Amt in Crore) 4257.07 5702.94 5944.73 7449.86 8871.55
10 No Frill A/Cs with OD (No. in Lakh) 1.31 6.32 9.34 183.61 286.54
11 No Frill A/Cs with OD (Amt In Crore) 8.34 21.48 37.42 1008.04 1636.32
12 KCCs-Total-No. in Lakh 176.30 201.91 202.89 276.59 350.36
13 KCCs-Total-Amt In Crore 98749.5 132352.3 136122.3 144685.5 172775.0
14 GCC-Total-No. in Lakh 4.73 10.83 10.70 37.34 61.23
15 GCC-Total-Amt In Crore 753.49 2328.36 2356.25 4266.13 715.07
16 ICT Based A/Cs-through BCs (No. in Lakh) 125.42 295.41 338.36 641.73 1014.74
17 EBT A/Cs-through BCs (No. in Lakh) 74.81 146.51 164.60 249.07 368.96


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