Financial Inclusion

As defined by Rangarajan Committee on Financial Inclusion in 2008, Financial inclusion means everyone is given access to financial services, i.e. Banking, Credit, Insurance & Investment, at affordable cost & in an appropriate time frame.

• It helps the family to cope with unforeseen circumstances like the breadwinner’s death.
• It helps in converting savings to investments, which helps in nation-building. Japan, the USA etc., have earlier followed the same path.
• Protect common people from exploiting informal money lenders who charge exorbitant interest rates. 
• Providing good investment schemes can protect people from falling into traps such as Ponzi Schemes like Saradha & Rose Valley Chit Fund Schemes.
• E – Payment: Cashless subsidies & salaries can save the government ₹1 Lakh crore, according to McKinley’s study.

• In rural areas, there is the problem of accessibility. The number of branches in rural areas is low.
• Geographically hilly and desert regions don’t have extensive bank penetration.
• Gender: Access of women to banks is low. Women have a disproportionately lower number of accounts than men.
• 55% of rural Dalits borrow from money lenders at exorbitant rates.
• MSMEs are given a low value of loans compared to big industrial houses. 

Government is very much concerned to increase Financial Inclusion and taking various steps in this regard.

1 . Committees

Various committees have been formed like

• Nachiket Mor Committee: Suggested various measures like Payment Banks, Small Banks etc.
• Deepak Mohanty Committee for Mid Term Path to Financial Inclusion: Suggested various measures like (1) Use USSD on simple mobiles, (2) Scrap Interest Subvention Scheme for farmers and concentrate on Insurance instead, (3) promote Sukanya Samridhi Scheme to cultivate saving habit in girls etc. 

2. New types of Differential Banks started

• Payment Banks: 11 Licenses given.
• Small Banks: 10 Licenses given.

3. Schemes

• Jan Dhan Yojana is the main one (we are going to read it in detail below).

4. Digital Schemes

The government has taken various initiatives in this regard like

• Introduction of Rupay Card 
• UPI, UPI 2.0 & BHIM
• Bharat pay

5. Small Investment Schemes

• The government has launched to promote the habit of savings among the poor and save them from Ponzi scams
• Main schemes include
  1. Kisan Vikas Patra (doubles money in 8 years 4 months)
  2. Indira Vikas Patra 
  3. Public Provident Fund 
  4. Sukanya Samridhi Yojana (component of Beti Bachao, Beti Padhao): Scheme for small girl children in which the parents can deposit money (between Rs 250 to 1.5 lakh per annum) till girl reaches the age of 14 years and can be later withdrawn by the girl when she reaches the age of 18 years for her studies or marriage. Government offers higher interest than normal rates on such deposits.

6. Digital Banking Units

•  A digital banking unit is a specialized fixed point business unit or hub housing only digital infrastructure for providing banking services  digitally in self-service mode at any time.
• It was announced in Budget 2022. Government opened 75 DBUs in 65 districts . Commercial banks (other than regional rural banks, payment banks and local area banks) with past digital banking experience are permitted to open DBUs in tier 1 to tier 6 centres.

Earlier Schemes for Financial Inclusion

• Bank Nationalization was done in 1969 and 1980. 
• Regional Rural Banks & Cooperative Banks have been opened. 
• Micro Finance Institutions have been promoted by the government.
• Various banks have started no-frills accounts (i.e. accounts with zero balance) schemes.
• 25% rural bank mandate: Banks have to open 25% of their branches in rural unbanked areas.
• Post Office Schemes to deposit money.