.

The beginning of the financial inclusion journey

FI as a policy initiative entered the banking lexicon only after the recommendations of the

Rangarajan Committee in 2008. It began to attract the attention of stakeholders when banks

realised the significance of connecting with more people for business growth. The span of

financial services included provision of basic savings accounts, and access to adequate credit at

affordable costs to vulnerable groups such as the excluded sections of the society and low-

income households. The experience of microfinance units in India and abroad shows that

vulnerable groups who pay usurious interest rates to local moneylenders, can also be worthy

borrowers of banks. One of the broader objectives of FI is to pull the poor community out of the

net of exploitative moneylenders. But despite such emphasis, the penetration of banking services

was initially mostly confined to urban areas and major cities, after which they started spreading

to the hinterland. FI thus became an integral part of the business domain of banks, with RBI

advising all public and private banks to submit a board-approved, three-year FI plan (FIP)

starting from April 2010. These plans broadly included self-set targets in terms of bricks-and-

mortar branches in rural areas, clearly indicating coverage of unbanked villages with population

above 2,000 and those with population below 2,000; deployment of Business

Correspondents1(BCs) and use of electronic/kiosk modes for provision of financial services;

opening of no-frills accounts; and so on. For the dispensation of credit, Kisan Credit Cards

(KCC), General Credit Cards (GCC), and other specific products designed to cater to the

financially excluded segments, were introduced. Such accelerated microcredit was part of

priority sector lending schemes of banks. Further, banks were advised to integrate FIPs with their
business plans and to include the criteria on FI as a parameter in the performance evaluation

metrics of their staff.

Among associated developments, RuPay – an Indian domestic debit card – was introduced on 26

March 2012 by the National Payments Corporation of India (NPCI). It has been a game changer

in creating better digital infrastructure and enabled faster penetration of debit card culture.

The progress of financial inclusion

Faster implementation of FIPs is seen after 2010-11. Commercial banks opened new rural

branches, increased coverage of villages, set up ATMs and digital kiosks, deployed BCs, opened

no-frills accounts, and provided credit through KCCs and GCCs. The introduction of core

banking technology and proliferation of alternate delivery channels aided the process of

inclusion on a larger scale. The statistics on key banking network give a sense of the pace of

progress of banking outreach as part of FI.

They found that return on assets and interest income have a negative correlation with operational

efficiency whereas, positive correlation with asset utilization and asset size. They also revealed

that operational efficiency, asset management and bank size have an impact on the financial

performance of the Indian private sector banks. Sodhi and Waraich (2016) made a fundamental

analysis with the help of key financial ratios to identify the value of stocks of the selected banks

and their investment opportunities. They found that private and foreign banks are trying to

improve their performance due to increasing completion in the banking sector. Majumder and

Rahman (2016) measured the financial performance of the fifteen selected banks in Bangladesh

and identified the significant difference in their performances for the period 2009-2013. The

suggested that the lower ranking banks should take necessary steps to improve their weaknesses.

Balaji and Kumar (2016) examined and compared the overall financial performance of selected
public and private sector banks in India during the period 2011-12 to 2015-16 with help of mean

and T-Test . They concluded that public sector banks must redefine their strategies by

considering their strengths, weakness and operating market. Taqi and Mustafa (2018) analyzed

the growth and performance of Punjab National Bank and HDFC bank for the period 2006-07 to

2015-16. They made quantitative analysis and found that PNB is more financially sound that

HDFC but in context of deposits and expenditure HDFC has better managing efficiency