Question : What is financial inclusion? Discuss the various efforts of India towards achieving this goal?
Structure of the answer
- Explain what financial inclusion is.
- Explain on the various efforts of India in achieving this.
Financial inclusion may be 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.
In a diverse country like India, financial inclusion is a critical part of the development process. Since independence, the combined efforts of successive governments, regulatory institutions, and the civil society have helped in increasing the financial-inclusion net in the country.
The state of financial inclusion has improved considerably over time. However, the financial inclusion hasn’t reached the poorest of the poor and there exist many bottlenecks and challenges which need immediate attention.
Financial Inclusion Initiatives
Jan Dhan-Aadhar-Mobile (JAM) Trinity
- The combination of Aadhaar, PMJDY, and a surge in mobile communication has reshaped the way citizens access government services.
- As per the estimates in March 2020, the total number of beneficiaries under Jan Dhan scheme have been more than 380 million.
- By significantly changing the concept of individual identity, Aadhaar has not only brought about a secure and easily verifiable system but also easy to obtain as well to help in the financial inclusion process.
- The government has also launched many flagship schemes to promote financial inclusion and provide financial security to empower the poor and unbanked in the country.
- These include the Pradhan Mantri Mudra Yojana, Stand-Up India Scheme, Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana, and Atal Pension Yojana.
Expansion of financial services in Rural and Semi-Urban Areas
- Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (NABARD) have taken initiatives to promote financial inclusion in rural areas.
- These include the opening of bank branches in remote areas.
- Issuing Kisan Credit Cards (KCC)
- Linkage of self-help groups (SHGs) with banks.
- Increasing the number of automated teller machines (ATMs)
- Business correspondents model of Banking, etc.
Promotion of Digital Payments
- With the strengthening of the Unified Payment Interface (UPI) by NPCI, digital payments have been made secure, compared to the past.
- The Aadhar-enabled payment system (AEPS) enables an Aadhar enabled bank account (AEBA) to be used at any place and at any time, using micro ATMs.
- The payment system has been made more accessible due to offline transaction-enabling platforms, like Unstructured Supplementary Service Data (USSD), which makes it possible to use mobile banking services without internet, even on a basic mobile handset.
Enhancing Financial Literacy
- The Reserve Bank of India has undertaken a project titled “Project Financial Literacy”.
- The Objective of the project is to disseminate information regarding the central bank and general banking concepts to various target groups, including, school and college going children, women, rural and urban poor, defence personnel and senior citizens.
- Pocket Money is Securities and Exchange Board of India (SEBI) and National Institute of Securities Markets (NISM’s) flagship programme aimed at increasing financial literacy among school students.
- The objective is to help school students understand the value of money and the importance of saving, investing and financial planning.
This is a multidimensional approach that involves bringing on board various stakeholders from the government and the people. So this needs not only the involvement from government through their schemes but also the awareness of people on its benefits.