Fathom this! 50% people in our society do not have bank accounts. And 90% of them do not have access to bank credit. What more? 99% do not have access to capital account. After years of introducing inclusive banking initiatives in the country, limited number of people have access to formal banking services. These can be categorized into two groups. Ones that are financially excluded and the others who are underserved! Financially excluded are the ones who do not have access to basic banking facilities. And financially underserved have traditional bank accounts but lack any access to electronic payment modes. This is indeed disheartening!
Poverty and exclusion have adversely impacted India's socio-economic conditions. Financial inclusion is a gateway for the unbanked masses that constitute the bottom of the social pyramid to the whole new world of banking that can make their lives comfortable and productive. Well not mentioning the fact that it opens a whole new untapped market into the hinterland for the lenders too. And banks being central to the financial system have tremendous potential to drive the economic recovery. But what's stopping them to do so? Well there remain quite a good number of challenges here.
A recent research study by a renowned market research firm has some revealing results. Firstly, it comes as a shock that the financially underserved and the excluded class largely fall into the age group of 35-38 years. This age group is ideally the working group contributing to the GDP of the nation. But invariably they might fail to do so as they stand devoid of basic banking services. Secondly, much of the financially excluded class has no sufficient sums to open a bank account. Many a times they cannot afford the high bank account fees too. Then there are others who despite possessing a mobile phone have not heard of mobile banking practices. There are few others who are averse to technological changes. The consumer benefits derived from having a bank account are quite large. But many are yet to realize this fact. Lack of education is therefore the biggest barrier in achieving the financial inclusion in our nation.
Over the past five years, the Reserve Bank of India has pursued the agenda of financial inclusion as a priority. Quite lucidly RBI puts forth the definition of financial inclusion. "It is the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular, at an affordable cost in a fair and transparent manner by regulated, mainstream institutional players".
Financial inclusion per se can lead to economic recovery. How? Financial inclusion helps in getting the unbanked into the formal banking system, channelize their savings, boost investments by making available the credit and thus give a fillip to the economy. Undoubtedly, the objective of financial inclusion if met would prove a win-win situation for all. And this would also place Indian banks on a surer footing on a global platform in terms of financial stability and sustainability.
Do you think financial inclusion can help attain financial stability and boost economic recovery? If yes, share your views on Equitymaster Club.