FIANCIAL INCLUSION IN INDIA

Introduction: Financial inclusion is the availability of banking services at an affordable cost to disadvantaged and low-income groups. In India the basic concept of financial inclusion is having a saving or current account with any bank. In reality it includes loans, insurance services and much more. Why We Need Financial Inclusion: In the path of super power we the Indians will need to achieve the growth of our country with equality. To remove poverty from the Indian context everybody will be given access to formal financial services. Inclusive finance will provide banking related financial transactions in an easy and speedy way. People will have safe savings along with other allied services like insurance cover, entrepreneurial loans, payment and settlement facility etc. Opportunity for Banks to increase their business. Boosting up business opportunities will definitely increase GDP and which will be reflected in our national income growth. Financial access will attract global market players to our country that will result in increasing employment and business opportunities. Steps towards Financial Inclusion:  The Reserve Bank of India set up a commission named as Khan Commission in 2004 to look into financial inclusion.  The recommendations of the commission were incorporated into the midterm review of the policy (2005 06).

Proposal for "no-frills" banking account for the poor. KYC norms were relaxed for people intending to open accounts with annual deposits of less than Rs. 50,000. General Credit Cards (GCC) were issued to the poor and the disadvantaged with a view to help them access easy credit.  In January 2006, the Reserve Bank permitted commercial banks to make use of the services of NGOs, SHGs, MFIs and other civil society organization as intermediaries for providing financial and banking services.  To support the growth, a committee on FI was also formed in june 2006, to achieve a higher financial inclusion in the country. Challenges to Financial Inclusion: 1. For the Poor and Financially Disadvantage Group  Lack of legal identity like voter id, driving license, birth certificates, employment identity card etc.  Particularly lack of financial literacy and basic education prevent people to have access from financial services.  Level of income decides to have financial access.  Most of the banks need collateral for their loans.  Many people voluntarily excluded themselves due to psychological and geographical barriers.  People who lack basic education do not know the importance of the financial products like Insurance, Finance, Bank Accounts, cheque facility, etc. 2.From The Bankers Point of view Finding enough costumers in remote locations, like village.

 High operating and establishment cost.  Understanding of costumer behavior.  High security risk associated.  Low and slow Return and Investment.  May suffer to recover the operating cost Conclusion: Financial inclusion is a great step to alleviate poverty in India. But to achieve this, the government should provide a less perspective environment in which banks are free to pursue the innovations necessary to reach low income consumers and still make a profit. Financial service providers should learn more about the consumers and new business models to reach them.