i nc lu s i ve f i nanc e i nd i a re port 2014
120
sector commercial banks for short term crop loans, and
acceleration of IT modernization project of post offices.
In April 2014 the RBI granted two preliminary licenses
to Infrastructure Development Finance Corporation or
IDFC Limited and Bandhan Financial Services to set
up new banks in the country. This announcement came
a decade after the last private bank—Yes Bank—was
founded in 2004. As a culmination of all these initiatives
came the report of the Committee on Comprehensive
Financial Services for Small Businesses and Low Income
Households (Chairman: Nachiket Mor) which has set
the target date to achieve universal financial access as 1
January 2016.
Building on these efforts, the Union Budget 2014–15,
the first from the newly elected government at the centre,
announced two measures—launching of the financial
inclusion mission and creating a framework for licensing
private sector universal banks as also small differentiated
banks. As for the first measure, the Finance Minister in
his budget speech pronounced:
To provide all households in the country with banking services, a
time bound programme would be launched as Financial Inclusion
Mission on 15 August this year. It would particularly focus to
empower the weaker sections of the society, including women,
small and marginal farmers and labourers. Two bank accounts
in each household are proposed to be opened which will also be
eligible for credit.
It must be noted that the Department of Financial
Services had prepared a Comprehensive Financial Inclu-
sion Plan or Sampoorn Vitteaya Samaveshan (SVS) in
June 2014 wherein the learnings from Swabhiman, the
ongoing financial inclusion campaign were analysed
as also the building blocks for future efforts spelt out.
The major drawbacks of Swabhiman were identified as
non-coverage of all villages, poor remuneration to BCs,
lack trust in mobile BC, issues with the technology (for
instance, offline transactions, lock-in to particular ven-
dors), lack of financial literacy and the resultant poor
operation of accounts), and non-covergence of finan-
cial inclusion benefits. The SVS mission was expected
to address these gaps in two phases, i.e., 2014–15 and
2015–18, by which time almost every habitation and all
the households in the country would have access to small
credit protected by the credit guarantee, micro insurance
and micro pension.
Interestingly, the term Sampoorn Vitteaya Samaveshan
abruptly disappeared from usage with the launching
of Jan-Dhan Yojana (JDY) by the Prime Minister on
15 August 2014. The main components of JDY, as
explained in Chapter 1, are similar to SVS. The scheme
aims to ensure two Aadhar-linked bank accounts per
every household, each account having an overdraft
facility, RuPay debit card and accident insurance cover
of Rs. 1 lakh. Like the previous financial inclusion plan,
JDY acknowledges that its operational viability critically
depends on direct transfer of benefits and subsidies to
beneficiary bank accounts. It may be noted that since
2011 the central and several state governments have
begun linking social safety net programmes to banks in
an effort to ensure leakage-free delivery of benefits and
payments to the right target population. This has resulted
in the opening of thousands of bank accounts mainly by
individuals from the poor and marginalized households.
In the following section of this chapter we discuss in
some detail the major policy developments in the bank-
ing and finance sectors that have influenced or can poten-
tially influence the status and quality of access to financial
services by the excluded/partially included segments and
sectors. We will closely analyse the main debates around
these policy initiatives in Section 5.3.
5.1 FINANCIAL INCLUSION IN TIMES OF
REFORMS: EXPERT PRESCRIPTIONS
How has the ideation and strategies around financial in-
clusion evolved in India since it was formally introduced
in the official banking jargon in the mid 2000s? As it is
well known, the inclusion agenda that the country has
been following since the end of the last decade draws
on the framework implicit in the recommendations of
the Committee on Financial Inclusion (2008; Chairman
C. Rangarajan) for improving supply side mechanisms
or delivery systems to tackle the problem of exclusion.
After mapping the existing institutional architecture of
the rural–semi-urban financial services, the committee
acknowledged RRBs as the ‘powerful and best suited
instruments’ of financial inclusion, if their rural orienta-
tion is reinforced with a specific inclusion mandate. In
the light of the increasing conflict between profit orienta-
tion of banks and the fiscal compulsion to extend out-
reach to farther regions and populations, the committee
