FINANCIAL INCLUSION

The Indian growth story is advancing to great heights since quite some time and there is little doubt about its potential for further growth. Demographic dividend which our country enjoys creates lots of responsibilities for government in terms of empowering them with adequate resources. Government of largest democracy has got herculean task in hands to bring entire population under organized banking net. India can make mark in global economy by empowering the disadvantaged population.

Financial Inclusion assumes great importance in light of country’s vision to become a growth engine. India is a home to unbanked population of around 47%. Financial exclusion leads to lower investment, increased unemployment and availing credit from money lenders at exorbitant interest rates. Banks are also advised to make available “no-frills” account with low balances and less stringent KYC requirements to expand the reach of account to large section of population. Self Help Groups (SHG) have played major role in indirectly linking rural people to organized banking. SHGs are group of women who pools savings and gives loans to member.  In 2014 government launched Pradhan Mantri Jan Dhan Yojana (PMJDY) to ensure access to financial services, namely Banking Savings & Deposit Accounts, Remittance, Credit, Insurance and Pension in an affordable manner.

Technology can play crucial role in driving financial inclusion of under banked as well as unbanked population in the country. It is financially unviable for banks to open branches in each and every district instead resources should be diverted in improving online infrastructure.  Government launched Digital India campaign in 2015 with an aim to provide financial and social services seamlessly to citizens. Digitalization and financial inclusion are closely connected as former increases the reach of bank to wider section of people with lower operating cost. RBI has strengthened Unified Payment Interface (UPI) to facilitate digital money transfers and has developed mobile app named BHIM which allows users to send or receive money to other UPI payment addresses or scanning QR code or account number with IFSC code or MMID (Mobile Money Identifier) code to users who do not have a UPI-based bank account. Banks should make effective use of information and communication technology (ICT) to provide doorstep banking service through BC model where accounts can be operated by illiterate customers by using biometrics. Government is also planning to transfer subsidies directly to targeted group through Jan Dhan-Aadhar, Mobile (JAM) to plug leakages in delivery of welfare scheme. Creation of digital economy will bring transparency in system and increase the tax revenues which can be utilized by government in fostering inclusive growth. Many unbanked economies such as Kenya and Bangladesh have use mobile phone in a major way as a catalyst for enabling people to shift for enabling people shift to online money transfers and payments. India has to make most of its mobile penetration to bring entire population to digital platform. India’s leading credit rating agency has come up with an index to measure financial inclusiveness named “Inclusix”. The index gives rating using 0-100 scale on basis of branch, credit and deposit penetration. The present score is 40.1 which is quite low but has definitely improved from where it was 2 years back.

For India to be a global powerhouse it will need its parallel economy to be integrated with mainstream economy. Digitalization has great potential of breaking back of shadow economy and producing higher GDP growth. If digital ecosystem is successfully established then it won’t be far when government’s agenda of financial inclusion will become a reality. Narendra Modi cited “I see technology as a means to empower and as a tool that bridges distance between hope and opportunity”.

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BY: CHINTAN MATALIA

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