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faster through the ranks. The states that are privileged to
have initial conditions to promote inclusion or proactive
administrative leadership have outdone others.
Despite such multipronged efforts to accelerate finan-
cial inclusion, the drive is yet to gather momentum. Its
intent, however, has become clearer over the years—to
deepen the financial markets by encouraging multiple
institutions and methodologies to co-exits in competition
with each other. This indeed seems a broader interpreta-
tion in terms of scope and strategy compared to the ear-
lier concerns of making financial services available to the
poor households. Be it the targeted credit programmes,
or the microfinance initiatives including SHGs and other
community based microcredit programmes, the thrust in
the past was singularly on economically weaker sections.
Exclusion was seen as a natural corollary of poverty and
hence, these terms were often treated as conterminous.
Such an interpretation of exclusion/inclusion is fast
becoming irrelevant in India.
The RBI has been working progressively towards
developing a pro-market interpretation of financial
inclusion. The earliest efforts in this direction can be seen
in the first Narasimham Committee Report 1991. The
subsequent policies and guidelines from the central bank
have extended the idea of ‘inclusion as market deepening’
bit by bit till it came to be fully articulated through the
prescriptions of the Mor Committee. The report of this
committee also became the point of convergence with
the parallel developments in the non-banking sector. As
of now, the proposed Small Banks and Payments Banks
constitute the central pieces of the package that RBI offers
to further financial inclusion. The pertinent question is
whether we should make fresh and coordinated efforts to
leverage the existing institutional structure or we need a
fresh set of institutions (Ram Mohan, 2014). There has
not been any dearth of ‘big ideas’, some of which did
produce results (like cooperatives, bank nationalization
and regional rural banks). The current wisdom suggests
that banks tend to be universal rather than specialized
given the pressures on viability. In fact this is what the
granting of private bank licenses to Bandhan and IDFC
seek to facilitate.
As of now financial inclusion has evolved into an
all encompassing concept. Searching for the excluded is
increasingly seen as a redundant exercise. In the words
of Raghuram Rajan, governor of RBI ‘…we don’t need
to choose between people. Whoever can benefit, they
should get it’ (i.e., financial services).
1
It is argued that
within economically dynamic settings, there are pockets
of exclusion created by institutional infirmities or sheer
gaps. The micro entrepreneur in an urban slum has a
buoyant business to fall back on in case she applies for a
bank loan. But her business is not ‘formal’ and hence risky
for the lender. Or a farmer group may be capable enough
to organize their production collectively and face up to
market challenges, but they cannot borrow from a formal
institution as the latter has no instruments to appraise
them. Similarly there are migrant workers who are forced
to get trapped in illegal money transfer corridors, despite
their willingness to pay, as there is no easily accessible legal
alternative. The current discourse on financial inclusion
concentrates on these aberrations—regulatory failures,
institutional fissures, and capacity differentials—as having
caused pools of exclusion preventing smooth expansion of
a market driven economy. The renewed interpretation of
financial inclusion, no doubt, has expanded the scope of
action and ideation by a host of financial market players.
New players have emerged, especially who can combine
technological prowess with knowledge of the financial
system. Technological innovation seems to thrive on
financial inclusion.
Importantly, the banks in India are going to spearhead
the inclusion project. The RBI clarifies that banks will
continue to drive the process as they are trusted by people
the most and have better credibility than non-banking
institutions and NGOs. As limited service providers,
both NBFCs and NGOs have also certain inherent
limitations in championing a project that revolves
centrally on making a wide range of products suiting
the specific needs of a wide constituency of potential
customers. Through its new guidelines for small banks
and payments the central bank has opened a channel for
these agencies to formalise their institutional structures
further. Or they can link with the formal structures as
agents and lend them a hand in extending the market
reach. The central bank foresees the advent of diverse
approaches and channels as result of some its inclusion-
focused initiatives.
The MFIs are now faced with a critical and difficult
choice: should they walk the path alone and confident
