Financial inclusion (FI) in India was introduced in the year 2005 by RBI, highlighting its importance and role in the Annual Policy Statement. The concept of this model was to reach out to the under-banked and unbanked population in India while serving them with the basic amenities in banking. Considering a major population that remains devoid of banking services, RBI pushed FI as a business objective for the Indian banks.
Financial Inclusion – India Perspective
The Indian Government is continuously putting in efforts to empower the underprivileged sections of society utilising Financial Inclusion. From time to time, it has been bringing out new and exclusive schemes under FI to serve this class. Cited here are the most well-known FI schemes in India:
Business Correspondent Model – Financial Inclusion
As a part of financial inclusion, RBI gave out permissions to banks to appoint representatives who can access the rural population and provide banking facilities to them, anywhere apart from the authorised branch/ATMs, even at the doorsteps of customers. These agents are responsible to extend a range of banking services to people at a low cost i.e. without the need of setting up brick-and-mortar branches and spending on infrastructure, operational costs etc.
There are a number of tasks performed by the business correspondents. Listed under are a few:
The Progress of FI and BC model over the years
With Financial Inclusion and Business Correspondent model, the presence of Indian banks has certainly expanded. People have been realising the importance of savings, taking small-scale loans, depositing cash into bank accounts and doing lots more. This has increased transparency and has helped banks build trust amongst vulnerable groups. Banking products and services are now better understood by masses and thus there has been a significant growth in the opportunities to cross-sell.
Take a look at these statistics on FI and BC:
| Parameter | March ‘10 | March ‘16 | March ‘17 |
|---|---|---|---|
| Number of Bank branches in villages | 33,378 | 51,830 | 50,860 |
| Number of Business Correspondents (BCs) | 34,174 | 531,229 | 543,472 |
| Number of other forms of banking touch points | 142 | 3,248 | 3,761 |
| Number of Basic Savings Bank Deposit Account (no minimum balance, no charges levied) (in millions) | 73 | 469 | 533 |
Source: RBI Annual Report (2016-17)
The Path Ahead
“Financial inclusion is a key determinant of sustainable and inclusive growth, which in turn is essential for building an equitable society.” – Pranab Mukherjee, Ex-President of India.
It is critical that the future policy framework for FI be prepared considering the progress so far. As on November 2016, almost 167 million people still did not hold formal bank accounts. When the FI first began, only about 40% of Indian adult population owned bank accounts. However, today this number has reached about 62%. PMJDY has been a great contributor to this growth. As on December 6, 2017, the number of Jan Dhan accounts opened reached 30.71 crores.
The Indian government, regulators and policymakers together are trying hard to fight poverty and bring in larger financial stability in the country by connecting unbanked population to mainstream banking. But, certain challenges are limiting the scope of FI and so they need to be tackled with utmost priority. In order to achieve the objectives of financial inclusion, concentrated efforts are required.
Financial Inclusion Advisory Committee (FIAC) that was formed in year 2012 has now been restructured to review existing policies of FI and make necessary amendments to accelerate it. More such modifications are already underway and we hope to see a promising future of Financial Inclusion and Business Correspondent Model in the days to come.