2.

5 Under the BF model, banks were permitted to use intermediaries such as,
NGOs/ Farmers' Clubs, cooperatives, community based organisations, IT enabled
rural outlets of corporate entities, Post Offices, insurance agents, well functioning
Panchayats, Village Knowledge Centres, Agri Clinics/ Agri Business Centers, Krishi
Vigyan Kendras and KVIC/ KVIB units, depending on the comfort level of the bank,
for providing facilitation services. As these services were not intended to involve
the conduct of banking business by BFs, no approval was required by banks from
Reserve Bank for using the above intermediaries for facilitation of the services

indian economy in general and banking services in particular

have made rapid strides in the recent past. However, a sizeable
section of the population, particularly the vulnerable groups,
such as weaker sections and low income groups, continue to
remain excluded from even the most basic opportunities and
services provided by the financial sector.
These services are: One common measure of FI is the
percentage of adult population having bank accounts

Financial Inclusion has emerged as a tool for the socio-economic development of the
society, so the purview of Financial Inclusion should encompass not only delivery of banking,
but also other financial services like insurance, pension, remittance, mutual funds, etc. delivered
at affordable, though market driven costs

WHAT IS CONSIDERED AS MAINSTREAM FINANCIAL SERVICES

NECESSARY FOR FINANCIAL INCLUSION OF HOUSEHOLD?

. Basic saving bank account- an account with all basic feature of saving account.
. Payment and remittances services –
. Immediate credit – in case of contingencies like accidents, medical treatment etc,
they should be provided immediate credit.
. Entrepreneurial credit – this means, to run/expand small scale business/shop or any
economic activity, easy credit should be provided, so that financial dependence can
be created amongst households.
. Housing finance- funding for purchasing new residential or reconstruction
. Insurance – life\healthcare- to plan future better
. Financial education\credit counselling centres – to guide them which product suits
them better, where to go credit needs, what are various services available to better
their personal financial planning.
Figure 2: Mainstream Financial Services

REVIEW OF LITERATURE:
1
Due in no small part to the stimulus provided by the United Nations Year of Micro
Credit 2005, policymakers across the world have begun to pay closer attention to increasing
financial inclusion. Financial Inclusion is the delivery of banking services at an affordable cost to
vast sections of disadvantaged and low income groups. Research in the last decade leads us to
believe that a well-functioning and inclusive financial system is linked to faster and equitable
growth (Honohan, 2004). In fact, until recently, the discussion on financial inclusion in policy
and academic circles tended to revolve around the extension of institutional credit at the expense
of providing savings, in spite of evidence that poor people save (Basu, 2005; Dev,2006; Mohan,
2006).
Encouragingly, the RBI-led drive for financial inclusion is thus significant in that it
attempts to extend savings bank accounts to‘unbanked’ households. Although financial inclusion
should signify access to a range of different financial services, the percentage of people in a
given area with access to a bank account is the typical measuring stick for breadth of financial
services, (Beck & De la Torre, 2006). This approach assumes that a bank account enables poor
households to perform important financial functions such as saving money safely outside the
house, accessing credit, making loan or premium payments, and transferring money (Mohan,
2006). Thus, in this framework, a bank account should determine access to and usage of many
other financial services (Littlefield et al, 2006). Many people, particularly those living on low
income, cannot access mainstream financial products such as bank accounts and low cost loans,
which, in turn, imposes real costs on them -often the most vulnerable people (H.M.
Treasury,2007). Many low-income families are, in fact, savers, whether or not they resort to
banks (Berry, 2004). Without the help of a financial institution, however, their savings are at
greater risk (including theft, impulse spending, and access by household members), will grow
more slowly, and may not be readily available to support access to reasonably priced credit in
times of need. Institutions provide safety and control
So, the scheme of nofrills accounts (no pre-condition, low minimum balance maintenance) was
initiated by the Reserve Bank in 2005 to provide an easy financial savings facility to the
population at large, which can act as a means of their entry into the formal banking system. At
end-March 2010, 50.6 million no-frills accounts were opened by the banking system. While no-
frills accounts have grown phenomenally, an important challenge before the banking system is to
keep these accounts operational, as many such accounts are found to be dormant since the poor
often find it difficult to save and deposit money into these accounts. In order to keep these
accounts operational, banks have been advised to provide small overdrafts in such accounts; up
to March 2010, `27.54 crore were provided as overdrafts by banks in such accounts.(RBI
-Report on trend and progress of banking in India 2009-2010)

To avail the services of financial institution ,there exists a challenge for residents
in India, particularly the underprivileged, that is the lack of documentation available to establish
their identity .UID (unique identification number) will serve the purpose. The Inter Ministerial
Group’s report on ‘Delivery of Basic Financial Services Using Mobile Phones’ published in
April 2010 has recommended that all Government payments should be made through linkage to
Aadhaar number. For this purpose the group recommended an ‘account mapper’ that would
provide linkages between Aadhaar No, mobile number and the linked bank account details.
Sherraden and Brobeck (1999) point out some of the obstacles to savings for
low-income households: poor families don’t have access to mainstream financial institutions
nor access to appropriate financial instruments, they don’t have the same institutional
incentives and subsidies for asset accumulation; they lack information needed to make sound
investment decisions; and they need a so cial support network to encourage and facilitate the
saving habit.

Financial inclusion defined as “The process of ensuring access to financial services

and timely and adequate credit where needed by vulnerable groups such as weaker sections and
low income groups at an affordable cost” (The Committee on Financial Inclusion (Chairman: Dr.
C. Rangarajan, 2008)) further observed that in India 51.4%of the poor class of people are
financially excluded from any kind of financial sources.,73% of the poor households do not
access formal sources of credit

He also recommended in his Interim Report establishment of two Funds, namely

the “Financial Inclusion Promotion and Development Fund” for meeting the cost of
developmental and promotional interventions for ensuring financial inclusion, and the
“Financial Inclusion Technology Fund (FITF)” to meet the cost of technology adoption.
The Union Finance Minister, in his Budget Speech for 2007-08 announced the constitution of the
Financial Inclusion Fund (FIF) and the FITF, with an overall corpus of Rs.500 crore each at
NABARD.

From the study it has been found that, Out of 113 habitations to be covered by march 2012,only
25%of villages have been covered so far.

State No. of unbanked No of villages to be covered Percentage

villages (above completion
2000 population) Branch BC Others Total As at Feb
2011.
NCT of Delhi 113 20 93 nil 28 25%

The following banks will be surveyed:

2 Branches of SBI (Jahangirpuri(resettlement colony) seelampur)
1 branch of PNB (Ghevra)
1 branch of HDFC(Barwala)
1 branch of ICICI (Dakshin Patel Nagar)
2 branches of Delhi State Co operative Bank (DSCB)Ghonda,chajjupur)