A

SEMINAR WORK

ON

FINANCIAL INCLUSION
FOR

PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE DEGREE

OF

MASTER OF COMMERCE

UNDER THE GUIDANCE OF: SUBMITTED BY:

Dr. PAVITRA YADAV SALONI GOYAL

(Assistant Professor M.com 2nd Semester

Department of Commerce ) 220222168003

KISHAN LAL PUBLIC COLLEGE, REWARI

AFFILATED BY INDIRA GANDHI UNIVERSITY, REWARI

MEERPUR (Rewari, 123401)

 FINANCIAL INCLUSION
SALONI GOYAL
K.L.P, Rewari
Salonigoyal816@gmail.com

ABSTRACT
Financial inclusion aims to provide economically priced financial services to the underserved
sections of the society so that they can be financially independent. Over the past few years,
financial inclusion has become a very eminent public policy in order to develop the economy in a
sustainable manner. It will also help in minimizing the distance between financial institutions
and customers, and this, in turn, assists in maintaining a healthy relationship. With financial
inclusion, every economic agent in the country will have the ability to make use of formal
financial services which help in the development of the economy. For inclusive growth, the RBI,
Government, NABARD and the implementing agencies will have to put their minds and hearts
together so that the financial inclusion can be taken forward and accelerate growth in the
economy.

Meaning of Finance
Finance is defined as the management of money and includes activities such as investing,
borrowing, lending, budgeting, saving, and forecasting.

Meaning of Inclusion
The practice or policy of providing equal access to opportunities and resources for people who
might otherwise been excluded.

Meaning of Financial Inclusion

It is the process of making financial services (savings, payments, credits, and insurance)
accessible and affordable to all persons and businesses. Financial inclusion strives to remove the
barriers that exclude people from participating in the financial sector and using these services to
improve their lives. It is also called inclusive finance.
WHO ARE THE EXCLUDED AND WHY?
Many people across the globe are excluded from mainstream banking. These range from people
with low income to people with low information and accessibility to people with no social
security or insurance cover. The main reasons behind exclusion are:

a) Lack of information: Lack of information about the role and function of banks, banking
services and products, interest rates, etc. stop people from including themselves in mainstream
banking.

b) Insufficient documentation: Many people are unable to show their self identification
documents during the opening of a bank account or during taking a loan.

c) Lack of awareness: Many people are unaware of the banking terms and conditions laid down
from time to time.

d) High transaction charges: Various commercial banks across the globe levy transaction
charges on credit or debit transactions, on over usage of banking services, on cheque book
issuance etc.

e) Lack of access: Accessibility is a problem from all those people who live in geopolitically
isolated regions. people in rural areas (mainly in developing countries) have a geographical
barrier in accessing banks.

f) Illiteracy: Because of illiteracy, a substantial number of people are unable to take recourse to
banking services

THE GOALS OF FINANCIAL INCLUSION

 Financial inclusion intends to have numerous institutions that offer affordable financial
assistance so that there is sufficient competition so that clients have a lot of options to
choose from.

 Number of institutions that offer inexpensive financial products and services is very
minimal.

 Financial inclusion intends to increase awareness about the benefits of financial

services among the economically underprivileged sections of the society.

 Financial inclusion intends to improve financial literacy and financial awareness in

the nation.
  Financial inclusion aims to bring in digital financial solutions for the economically
underprivileged people of the nation.

 Efficient and safe institutions governed by proper regulation and performance

standards.

 It also intends to bring in mobile banking or financial services in order to reach the
poorest people living in extremely remote areas of the country.

NEED FOR FINANCIAL INCLUSION IN INDIA

The concept of financial inclusion was first introduced in India in 2005 by the Reserve Bank of
India. It is needed for the following reasons

1. Enhance Financial System of the Country- It strengthens the availability of economic

resources. Most importantly, it toughens the concept of savings among poor people living
in both urban and rural areas. This way, it contributes towards the progress of the
economy in a consistent manner.

2. Change situation for rural people- Many poor people tend to get cheated and
sometimes even exploited by rich landlords as well as unlicensed moneylenders due to
the vulnerable condition of the poor people. With the help of financial inclusion, this
serious and hazardous situation can be changed.

3. Introducing Formal banking system- Financial inclusion engages in including poor

people in the formal banking industry with the intention of securing their minimal
finances for future purposes. There are many households with people who are farmers or
artisan who do not have proper facilities to save the money that they earn after putting in
so much effort.

4. Service Delivery -Direct cash transfers to beneficiary bank accounts rather than physical
cash payments will become possible.

5. Banks’ efficiency – Banks which are operating in a financial inclusion sector could
experience higher operating efficiency in financial intermediation. Increasing banking
outreach in newer areas helps reduce distance for consumers = good customer
relationship & know them better = judicious pricing & lending decisions.
MAJOR MILESTONES IN FINANCIAL INCLUSION IN
INDIA

1969 Nationalization of Banks

1971 Establishment of priority Sector Lending Banks
1975 Establishment of Regional Rural Banks
1982 Establishment of NABARD
1992 Launching of the Self Help Groups bank Linkage Programme
1998 NABARD sets a goal for linkage one million SHGs by 2008
2000 Establishment of SIDBI foundation for Micro Credit
2005 One million SHF linkage target achieved three years ahead of date
2006 Committee on Financial Inclusion
2007 Proposed Bill on Micro Finance Regulation introduced in parliament
2008 Committee submitted its final report on Financial Inclusion to Union
Finance Minister in january

FACTORS AFFECTING ACCESS TO FINANCIAL

SERVICES
 Gender Issues Access to credit is often limited for women who do not have, or cannot
hold title to assets such as land and property or must seek male guarantees to borrow.
 Age Factor Financial service providers usually target the middle of the economically
active population, often overlooking the design of appropriate products for older or
younger potential customers.
 Legal Identity Lack of legal identities like identity cards, birth certificates or written
records often exclude women, ethnic minorities, economic and political refugees and
migrant workers from accessing financial services.
 Limited literacy Limited literacy, particularly financial literacy, i.e., basic mathematics,
business finance skills as well as lack of understanding often constraints demand for
financial services.
  Place of living Although effective distance is as much about transportation infrastructure
as physical distance, factors like density of population, rural and remote areas, mobility
of the population affect access to financial services.
 Bank charges In most of the countries, transaction is free as long as the account has
sufficient funds to cover the cost of transactions made. However, there are a range of
other charges that have a disproportionate effect on people with low income.
 Terms and Conditions Terms and conditions attached to products such as minimum
balance requirements and conditions relating to the use of accounts often dissuade people
from using such products/services.
 Level of Income Financial status of people is always important in gaining access to
financial services. Extremely poor people find it difficult to access financial services even
when the services are tailored for them.

Initiatives taken by the Government to improve Financial

Inclusion

Banking initiatives
 Regional Rural Banks (RRBs): RRBs were established to serve banking needs of rural
population. It is very difficult for residents of these areas to commute to a far-off bank
branch for availing banking services. Hence, with the compulsory rule of the RBI, banks
are distributing the ratio of banks in villages and cities to have a balance.

 Priority Sector Lending: It is an important role given by the RBI to the banks for
providing a portion of the bank loans to few specific sectors such as agriculture or small
scale industries.

 Business correspondents: RBI permitted banks to engage business facilitators for

providing door-step delivery of financial and banking services.

 The opening of no-frills accounts: No-frills accounts means the bank accounts which
does not require a minimum balance = Accessibility to vast sections of the population.
These account holders can withdraw cash at any ATM or at the bank branch. They should
also be given the opportunity to make use of electronic payment channels for receiving
and transferring money to others.

 KYC relaxation: Know Your Customer (KYC) requirements for opening bank accounts
were relaxed for small accounts in August 2005. The opening of bank accounts became
even easier with Aadhaar introduction.
  To expand the network of ATMs, the RBI has permitted non-bank entities to start White
Label ATMs.

 Jan Dhan, Aadhaar and Mobile (JAM): It is a three-part strategy based on using digital
technologies Jan Dhan (banking) Aadhaar (Biometric Identity) and Mobile (transactions).

 Financial literacy centres were launched by commercial banks at the request of the RBI.

 Financial inclusion of women through Aadhaar implementation.

 Self-Help Group (SHG) – Bank Linkage Programme was launched by NABARD to

provide door-step banking to the poor with the help of SHGs.

Social security Initiatives

 Pradhan Mantri Jan Dhan Yojana (PMJDY)

PMJDY offers unbanked persons easy access to banking services and awareness about
financial products through financial literacy programes. In addition, they receive a RuPay
debit card, with inbuilt accident insurance cover of Rs. 2 lakhs, and access to overdraft
facility upon satisfactory operation of account or credit history of six months.

 Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

The PMJJBY is available to people in the age group of 18 to 50 years having a bank
account who give their consent to join / enable auto-debit. Adhar is the primary KYC for
the bank account. The scheme is being offered by the Life Insurance Corporation and all
other life insurers who are willing to offer the product on similar terms with necessary
approvals and tie up with banks for this purpose.

 Atal Pension Yojana (APY)

APY was launched on 9th May, 2015 by the Prime Minister. APY is open to all saving
bank/post office saving bank account holders in the age group of 18 to 40 years and the
contributions differ, based on pension amount chosen. Subscribers would receive the
guaranteed minimum monthly pension of Rs. 1,000 or Rs. 2,000 or Rs. 3,000 or Rs.
4,000 or Rs. 5,000 at the age of 60 years. Under APY, the monthly pension would be
available to the subscriber, and after him to his spouse and after their death, the pension
corpus, as accumulated at age 60 of the subscriber, would be returned to the nominee of
the subscriber.
  Pradhan Mantri Mudra Yojana

The scheme was launched on 8th April 2015. Under the scheme a loan of upto Rs. 50,000
is given under sub-scheme ‘Shishu’; between Rs. 50,000 to 5.0 Lakhs under sub-scheme
‘Kishore’; and between 5.0 Lakhs to 10.0 Lakhs under sub-scheme ‘Tarun’. Loans taken
do not require collaterals. These measures are aimed at increasing the confidence of
young, educated or skilled workers who would now be able to aspire to become first
generation entrepreneurs; existing small businesses, too, will be able to expand their
activates.

 Pradhan Mantri Vaya Vandana Yojana

The ‘Pradhan Mantri Vaya Vandana Yojana (PMVVY) has been launched by the
Government to protect elderly persons aged 60 years and above against a future fall in
their interest income due to uncertain market conditions, as also to provide social security
during old age. The scheme is implemented through the Life Insurance Corporation of
India (LIC) and open for subscription upto 31st March, 2023.

Special Financial Products

Keeping in mind that low-income people, scheduled commercial banks have been asked
by the Reserve Bank of India to design and offer exclusive financial products to the
economically weaker sections of the society. They do not know anything about credit
cards or debit cards.

Some of the special financial products provided to them include:

 General Credit Cards (GCC): Banks were asked by the RBI to launch and offer
General Credit Card facilities with an amount of up to Rs.25,000 at their branches located
in semi-urban and rural areas.

 Kissan Credit Cards (KCC): The Reserve Bank of India also instructed banks to
provide Kissan Credit Cards exclusively to small farmers who earn very low incomes.
These Kissan Credit Cards are intended to help farmers make instant purchases whenever
required. Many a time, farmers give up on purchasing things required for their occupation
due to lack of funds.

 ICT-Based Accounts via BCs: It help banks to reach out to the unbanked individuals of
the society by offering information and communications technology. These accounts
allow users to make withdrawals of cash, create deposits, and apply for loans and other
forms of credit through electronic forms. This type of account makes banking
inexpensive and simple.
  Increase in ATMs: The Reserve Bank of India also reported that many rural parts of the
nation do not have enough automated teller machines.In order to increase the availability
of physical cash for these people, the number of ATMs increased massively.

WHAT ARE THE CONCERNS ABOUT THE

INITIATIVES ?

 PMJDY has ensured universal access to bank account and India now has 180 billion
accounts. However, 48% of those accounts haven’t seen any transaction in the last one
year.

 Being a cash-intensive economy, India still remains among countries with the lowest
access to digital payments.

 Financial illiteracy, safety, and security concerns prevent people from moving towards
the digital mode of payments. It has to be noted that, around 76% of the adult population
in India does not understand even the basic financial concepts.

 People buy insurance policies without proper planning and give up halfway since they
don’t have any money to pay the premium.

 Customers end up losing heavily as penalties are very harsh.

 Misuse of SHGs: Panchayats are now competing with NGOs and rural banks in forming
SHGs due to the qualification for government subsidy = Political pressure and misuse of
funds.

 Only 33 percent of all beneficiaries were ready to use their Rupay cards.


WHAT SHOULD BE DONE...

Collaboration Of Fintech Companies With Banks

In order to save poor people from such high expenses banks, NBFCs can collaborate with fintech
companies to come up with simpler and quicker banking processes. The evolvement of such
processes will help India towards financial inclusion.
Financial And Digital Literacy

Lack of effective and broad-based financial and digital literacy is preventing full-scale
implementation of financial inclusion. So, more awareness programs should be run through
several channels. An informed customer is an important gear in the payment ecosystem.

Increased Utilisation Of FI Infrastructure

All the sectors that are currently engaged with Financial Inclusion such as NGOs, banks, non-
banking financial companies, and government departments should be encouraged to increase the
utilization of financial inclusion infrastructure as it has been built by investing huge sums of
money.

Training Programs For Startups

Training programs can be conducted for startups and help them locate solutions across the
Country. The learning from these programs can be utilized to nurture new solutions for financial
inclusion.

Enrichment Of The Bureau

Digital technologies offer affordable ways for the financially excluded be it banking, loans and
insurance. With the tremendous increase in the usage of mobile devices globally, the opportunity
to gain more understanding of consumer behavior has also increased. And that data derived from
digital technologies can help commercial banks and other bureaus to come up with suitable
financial products and evaluate prospective clients more efficiently and improved financial
services will foster financial inclusion in India.

Digital KYC

Using digital IDs to enable eKYC and completely digitalize the on boarding process makes it
easier for people to open an account and more affordable for financial service providers to reach
out to underserved customers of society. The convenience of having financial services at their
doorstep is huge for people who sometimes have to travel long hours and lose a day of wages to
reach a bank branch.It will also be beneficial for financial service providers as they can achieve
to reach a critical mass of users with low operational costs that will lead India towards financial
inclusion.

CONCLUSION
Financial inclusion strengthens the availability of economic resources and builds
the concept of savings among the poor. Financial inclusion is a major step towards
inclusive growth. It helps in the overall economic development of the
underprivileged population. In India, effective financial inclusion is needed for the
uplift of the poor and disadvantaged people by providing them with the modified
financial products and services. Access to financial services such as savings,
insurance and remittances are extremely important for poverty alleviation and
development. . In order to overcome these intricacies there should be effective
planning in financial inclusion plans and at most care be taken in framing financial
inclusion regulation policies, which enables the implementation process in more
effective and efficient manner in the country. The present day Government has
been incepting enormous programs in financial inclusion plans with a motive of
providing access to financial services to all classes of society at an amicable
amount. Thus, financial inclusion is a big road map in which India needs to travel
to make it completely successful. Miles to go before we reach the set goals but the
ball is set in motion.

REFERENCES
https://www.investopedia.com/terms/f/finance.asp
https://www.dictionary.com/browse/inclusion
https://www.business-standard.com/about/what-is-financial-inclusion
https://www.bankbazaar.com/personal-loan/financial-inclusion.html
https://en.wikipedia.org/wiki/Financial_inclusion
https://corporatefinanceinstitute.com/resources/knowledge/finance/finan
cial-inclusion/
https://www.iasexpress.net/financial-inclusion-in-india-upsc-ias/
https://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/MFI101213FS.pdf
http://indianresearchjournals.com/pdf/IJMFSMR/2012/June/5.pdf