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FINANCIAL INCLUSION |
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| Indian economy in general and banking services in particular have made rapid strides in the recent past. However, a sizeable section of the population, particularly the vulnerable groups, such as weaker sections and low income groups, continue to remain excluded from even the most basic opportunities and services provided by the financial sector. To address the issue of such financial exclusion in a holistic manner, it is essential to ensure that a range of financial services is available to every individual. These services are: |
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| (i) a no-frills banking account for making and receiving payments, |
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| (ii) a savings product suited to the pattern of cash flows of a poor household, |
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| (iii) money transfer facilities, |
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| (iv) small loans and overdrafts for productive, personal and other purposes, & |
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| (v) micro-insurance (life and non-life) |
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| In order to address the issues of financial inclusion, the Government of India constituted a “Committee on Financial Inclusion” under the Chairmanship of Dr. C. Rangarajan. The Committee submitted its final report to Hon'ble Union Finance Minister on 04 January 2008. |
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Committee on Financial Inclusion |
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The Committee has defined Financial Inclusion 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 .”
The major recommendations of the Committee include : |
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| (i) |
Launching of a National Rural Financial Inclusion Plan (NRFIP) in mission mode with a clear target to provide access to comprehensive financial services, including credit, to at least 50% (say 55.77 million) of the financially excluded rural cultivator/non-cultivator households, by 2012 through rural/semi-urban branches of Commercial Banks and Regional Rural Banks . The remaining households have to be covered by 2015.For the purpose, a National Mission on Financial Inclusion (NaMFI) is proposed to be constituted comprising representatives from all stakeholders to aim at achieving universal financial inclusion within a specific time frame. |
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| (ii) |
Constitution of two funds with NABARD – the Financial Inclusion Promotion & Development Fund(FIPF) and the Financial Inclusion Technology Fund(FITF) with an initial corpus of Rs. 500 crore each to be contributed by GoI / RBI / NABARD. The FIPF will focus on interventions like, “Farmers’ Service Centres”, “Promoting Rural Entrepreneurship”, “Self-Help Groups and their Federations”, “Developing Human Resources of Banks”, “Promotion of Resource Centres” and “Capacity Building of Business Facilitators and Correspondents”, while the FITF will focus on funding of low-cost technology solutions. (This recommendation has already been accepted by GoI.) |
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| (iii) |
Deepening the outreach of microfinance programme through finacing of SHG/JLGs and setting up of a risk mitigation mechanism for lending to small marginal farmers/share croppers/tenant farmers through JLGs |
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| (iv) |
Use of PACSs as Business Facilitators and Correspondents |
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| (v) |
Micro finance – Non Banking Finance Companies (MF-NBFCs) could be permitted to provide thrift, credit, micro-insurance, remittances and other financial services up to a specified amount to the poor in rural, semi-urban and urban areas. Such MF-NBFCs may also be recognized as Business Correspondents of banks for providing only savings and remittance services and also act as micro insurance agents. |
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| (vi) |
Opening of specialised microfinance branches / cells in potential urban centers for exclusively catering to microfinance and SHG - bank linkages requirements of the urban poor. An enabling provision be made in the NABARD Act, 1981 permitting NABARD to provide micro finance services to the urban poor . |
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