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 2 nd 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

• 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.

• 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.

• 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.

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

• 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 Adhaar
introduction.

•To expand the network of ATMs, the RBI has permitted non-bank entities to start White Label ATMs.
•Jan Dhan, Adhaar and Mobile (JAM): It is a three-part strategy based on using digital technologies
Jan Dhan (banking) Adhaar (Biometric Identity) and Mobile (transactions).

•Financial literacy centre were launched by commercial banks at the request of the RBI.

•Financial inclusion of women through Adhaar implementation.

•Self-Help Group (SHG) – Bank Linkage Programe 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/fi
nancial-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