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Financial Inclusion

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mainstream formal financial services such as banking accounts, credit cards,  
 
mainstream formal financial services such as banking accounts, credit cards,  
 
insurance, payment services, etc.</p>
 
insurance, payment services, etc.</p>
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<p>Government of India had constituted a committee in 2006 under the  
 
<p>Government of India had constituted a committee in 2006 under the  
 
chairmanship of Dr. C. Rangarajan to study the pattern of exclusion from access  
 
chairmanship of Dr. C. Rangarajan to study the pattern of exclusion from access  
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identify the barriers confronted by vulnerable groups in accessing credit and  
 
identify the barriers confronted by vulnerable groups in accessing credit and  
 
financial services and recommend the steps needed for financial inclusion. The  
 
financial services and recommend the steps needed for financial inclusion. The  
committee submitted its report in January 2008. The committee has given a  
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committee submitted its [http://pib.nic.in/newsite/erelease.aspx?relid=35141 report in January 2008]. The committee has given a  
 
working definition of financial inclusion as;</p>
 
working definition of financial inclusion as;</p>
 
<p><i><b>“Financial inclusion may be defined as the process of ensuring access  
 
<p><i><b>“Financial inclusion may be defined as the process of ensuring access  
 
to financial services and timely and adequate credit where needed by vulnerable  
 
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.”</b></i></p>
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groups such as weaker sections and low income groups at an affordable cost.”</b></i></p> The various financial services identified by the Rangarajan Committee include credit, savings, insurance and payments and remittance facilities.
  
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The Committee on Financial Sector Reforms headed by Dr. Raghuram Rajan in its Report - [http://planningcommission.nic.in/reports/genrep/rep_fr/cfsr_all.pdf A Hundred Small Steps], proposed a paradigm shift in the way Government see inclusion. Instead of seeing the issue primarily as expanding credit, which puts the cart before the horse, the Committee urged a refocus to seeing it as expanding access to financial services, such as payments services, savings products, insurance products, and inflation-protected pensions. According to the committee, financial Inclusion, broadly defined, refers to universal access to a wide range of financial services at a reasonable cost. These include not only banking products but also other financial services such as insurance and equity products.
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<p><b>Various facets of Financial Inclusion </b></p>
 
<p><b>Various facets of Financial Inclusion </b></p>
 
<div align="center">[[File:financial-inclusion.jpg]]</div>
 
<div align="center">[[File:financial-inclusion.jpg]]</div>

Revision as of 15:15, 19 December 2014

Access to safe, easy and affordable credit and other financial services by the poor and vulnerable groups, disadvantaged areas and lagging sectors is recognized as a pre-condition for accelerating growth and reducing income disparities and poverty. In view of this, Financial Inclusion has been identified as a key dimension of the overall strategy of “Towards Faster and More Inclusive Growth” envisaged in the eleventh Five Year Plan (2007-12).

Defining financial inclusion is considered crucial from the viewpoint of developing a conceptual framework and identifying the underlying factors that lead to low level of access to the financial system. Review of literature suggests that there is no universally accepted definition of financial inclusion.

Sometimes, it is easier to define a phenomenon, by stating what it is not, i.e., define financial exclusion (rather than inclusion). Financial inclusion is generally defined in terms of exclusion from the financial system. A target group is considered as financially excluded if they do not have access to mainstream formal financial services such as banking accounts, credit cards, insurance, payment services, etc.

Government of India had constituted a committee in 2006 under the chairmanship of Dr. C. Rangarajan to study the pattern of exclusion from access to financial services across region, gender and occupational structure and to identify the barriers confronted by vulnerable groups in accessing credit and financial services and recommend the steps needed for financial inclusion. The committee submitted its report in January 2008. The committee has given a working definition of financial inclusion as;

“Financial inclusion may be defined 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 various financial services identified by the Rangarajan Committee include credit, savings, insurance and payments and remittance facilities.

The Committee on Financial Sector Reforms headed by Dr. Raghuram Rajan in its Report - A Hundred Small Steps, proposed a paradigm shift in the way Government see inclusion. Instead of seeing the issue primarily as expanding credit, which puts the cart before the horse, the Committee urged a refocus to seeing it as expanding access to financial services, such as payments services, savings products, insurance products, and inflation-protected pensions. According to the committee, financial Inclusion, broadly defined, refers to universal access to a wide range of financial services at a reasonable cost. These include not only banking products but also other financial services such as insurance and equity products.

Various facets of Financial Inclusion

Financial-inclusion.jpg

The essence of financial inclusion is in trying to ensure that a range of appropriate financial services is available to every individual and enabling them to understand and access those services.

In order to achieve a comprehensive financial inclusion, a slew of initiatives have been taken by Government of India, RBI and NABARD. Some of the important initiatives include; SHG-Bank Linkage programme, opening of No Frills Accounts, mobile banking, Kisan Credit Cards (KCC) etc.

Despite the marked progress made in the direction of financial inclusion, the problem of exclusion still persist. For achieving the current policy stance of “inclusive growth” the focus on financial inclusion is not only essential but a pre-requisite. And for achieving comprehensive financial inclusion, the first step is to achieve credit inclusion for the disadvantaged and vulnerable sections of our society.


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