Submitted By

P.DHANUNJAY (1703040)
PGDM BIF-A
 DEFINITION
Financial Inclusion 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 essence of financial inclusion is to ensure delivery of
financial services which include - bank accounts for savings
and transactional 2 purposes, low cost credit for productive,
personal and other purposes, financial advisory services,
insurance facilities etc.
The aim of financial inclusion is to make easy access to
financial services to the large underprivileged population of
the country.
 INTRODUCTION
India is a country of 1.2 billion people, spread across 29 states and
seven union territories.
There are around 600,000 villages and 640 districts in our country. A
vast majority of the population, especially in rural areas, is excluded
from the easy access to nance.
40% of the households having bank accounts, but only 38% of the
117,200 branches of scheduled commercial banks are working in
rural areas.
Accessibility of nancial services at affordable and appropriate
prices has been always a global issue. Hence, an inclusive nancial
system is required widely not only in India, but has become a policy
priority in various countries.
RBI appoints SUREKHA MARANDI as the ED of Financial Inclusion.
 Dimensions of Financial Inclusion
The level of financial inclusion in India can be measured based on three
tangible and critical dimensions. These dimensions can be broadly discussed
under the following heads:
I. Branch Penetration:
Penetration of a bank branch is measured as number of bank branches
per one lakh population. This refers to the penetration of commercial bank
branches and ATMs for the provision of maximum formal financial services to
the rural population.
II. Credit Penetration:
Credit Penetration takes the average of the three measures: number of
loan accounts per one lakh population, number of small borrower loan
accounts per one lakh population and number of agriculture advances per
one lakh population.
III. Deposit Penetration:
Deposit penetration can be measured as the number of saving deposit
accounts per one lakh population. With the help of this measure, the extent of
the usage of formal credit system can be analysed.
 Among the three dimensions of financial inclusion, credit
penetration is the key problem in the country as the all India
average ranks the lowest for credit penetration compared to
the other two dimensions. Such low penetration of credit is
the result of lack of access to credit among the rural
households.
Therefore, the problem of low penetration needs to be
understood more deeply. An attempt has been made to study
the problem by examining the progress of financial inclusion
over the years and efforts made by the government for
reducing the low penetration of credit.
Measures taken to increase financial inclusion
 Financial inclusion lies at the core of the economic reform agenda of
the current NDA government. The Reserve Bank of India (RBI), in
its assessment of financial inclusion in India, states that a whopping
73% of farmer households in India do not have access to formal
sources of credit.
The government, through its regulatory institutions, has been
introducing policy initiatives to speed up Indias journey towards an
advanced economic framework on par with western economies. For
instance, the RBI has advised all retail banks operating in India to
allow for Basic Saving Bank Deposit (BSBD) Accounts which offer
facilities like no minimum balance and simplified KYC norms.
Further, banks have also been directed to allocate at least 25% of
the total number of branches to be opened during the year in un-
banked (Tier 5 and Tier 6) rural centres. India has added 24000 new
bank branches since 2014.
 Role of RBI in Financial inclusion
RBI has adopted a bank-led model for achieving financial
inclusion and removed all regulatory bottle necks in achieving
greater financial inclusion in the country.
1. Opening of basic saving bank deposits (BSDB) with minimum common
facilities like minimum zero balance , deposit and withdrawal at bank
branch/ATMs.
2. Relaxed and simplified KYC norms.
3. Simplified bank authorizing policy.
4. Compulsory opening of banks in unbanked areas.
 No of Banking Outlets in Villages (total)
700,000
553,713 586,307 589,849
600,000

500,000
383,304
400,000
268,454
300,000

200,000

100,000

0
2012-13 2013-14 2014-15 2015-16 2016-17
 Interestingly, according to the First Advance Estimates of National
Income, 2016-17 report released by the Central Statistics Office
(CSO), Indias per capita net national income at current prices is
estimated to register year-on-year growth of 10.4%, pointing
towards healthy development on the back of the strong GDP growth
reports. Thus as the country plans for increasing the reach of its
financial systems, the average income levels are rising as well,
pointing towards an increased need for formal banking services.
However, how well the government can synchronise these
developments remains to be seen.
Indias remarkable growth story brings a unique set of challenges as
it moves slowly, but steadily towards a being a developed state. As
of now, financial inclusion seems to be the first bridge that needs to
be built before other goals like increasing insurance penetration can
take the main stage.
Report from GOI About bank accounts
under PMJDY