FINANCIAL INCLUSIONInclusive growth is possible only through proper mechanism which channelizes all the resources from top to bottom.Financial inclusion is the financial services at affordable cost to lower income groups or financial services to those who cannot afford. Financial inclusion is aimed at providing banking and financial services to all the people in a fair and transparent manner at affordable cost. Financial inclusion is making a habit of people to save their money in banks and get interests from banks instead going over to the people like money lenders. In India, Financial inclusion was introduced in 2005, from a pilot project in UT of Pondicherry by Dr.
K. C. Chakraborthy, the chairman of Indian Bank. Mangalam Village was the first village in India where all households were provided banking facilities.There are various socio-cultural, economic issues that hinder the process of financial inclusion. For instance ,it includes lack of awareness and illiteracy from the demand side and From supply side, lack of avenues for investment such as poor bank penetration,unwillingness of banks to do financial inclusion or high cost involved in financial inclusion seem to be some likely reasons for financial exclusion. Today, so many national authorities have engaged in efforts to improve financial inclusion in their respective countries.
Some national and international organizations have been contributing to these efforts through collecting experiences, developing specific knowledge and providing guidance, among other activities.Simply financial inclusion may be interpreted as having access to and using the type of financial services which meet the user’s needs. For example, a small farmer may find the services of a money transfer operator or a mobile money account for person-to-person funds transfers sufficient to meet his or her specific needs.Payment network operators gives digital business the tools they need to succeed in markets where cash and local payments like e-wallets and bank transfers drive commerce with more than 2.5B customers that depends on cash and local payments everyday. All payment networks transfer money from one point to another from the cardholder to the issuing bank and fund settlement and the all transactions are routed via a network that both the card issuer and the merchant participate in.
Bank nationalization in India marked a paradigm shift in the focus of banking as it was intended to shift the focus from class banking to mass banking. Payment bank was headed by Nachiket More Committee. The main aim of Payment banks are to enhance financial inclusion and that is done by providing small saving accounts in rural areas ,remittance services to small business etc. R.B.I had clearly given an approval to 11 entities to start payment banks in India in August 2015 and Airtel payment bank was the first one to launch.
Other payment banks like Paytm, fino and Aditya Birla payment banks are also operational. People can open a saving account with deposits of rs. 1lakh, which is the maximum amount allowed.
A payment bank is not allowed to give any form of loan or issue a credit card and also they can’t accept fixed or recurring deposits. Some other steps are opening of non frills accounts, relaxation in KYC (Know Your Customer) norms, engaging business correspondents (BCs) etc.In India, the lack of financial services is still a major challenge and around 65% or we can say more than 65% of the population is known as “Under banked or unbanked”.
In 2006, the R.B.I had recognised this problem and introduced a service that was the allowing of banks to provide their services through the use of third party and this model is known as Business correspondents or Banking correspondence (BC’s). Banking Correspondent is a channel for financial inclusion. The BC’s have the direct contact with one or more financial institutions and they charge a commission from the bank for transactions, enrollment of people etc.
The objective of BC’s includes withdrawals, cash deposits, remittances, ATM facilities and balance enquiries in rural areas of the country. Benefits to individual include instant access to banking services at doorsteps, relaxed “Know Your Customer” norms etc. This model is still in a development stage .They are facing the challenges of working with numerous banks because each of them is having their own process of working.