Financial Inclusion Essay Example

many offering them a safer and secure future. FINANCIAL EXCLUSION Financial Exclusion is the process by which a certain section of the population or a certain group of individuals is denied the access to basic financial services. The term came to prominence in the early sass's in Europe where the geographers found that a certain pockets or regions of a particular country were behind the others in utilizing financial services.

It was also found that these pockets or regions were poorer compared to regions which utilized more of financial services. DEFINITION The definition of financial exclusion will range upon several dimensions, but he most important dimension are the breadth & focus Of financial exclusion and the concept of relativity or degree I. E. Financial Exclusion is defined in relation to some predefined standard(I. E. Inclusion).

Breadth means the scope of definition; the broadest definitions of financial exclusion recognize that there are many factors interacting between financial exclusion and social exclusion and disadvantage.

The type of such a broad definition is found in the seminal work of Lesson and Thrift, who define financial exclusion as "processes that prevent poor and disadvantaged social groups from gaining access to the financial system". THE INDIAN SCENARIO In India the focus of the financial inclusion at present is confined to ensuring a bare minimum access to a savings bank account without frills, to all. There could be multiple levels of financial inclusion and exclusion.

At one extreme, it is possible to identify the 'super-included', I. E. Those customers who are actively and persistently courted by the financial services industry, and who have at their disposal a wide range of financial

services and products. At the other extreme, we may have the financially excluded, who are denied access o even the most basic of financial products. In between are those who use the banking services only for deposits and withdrawals of money. But these persons may have only restricted access to the financial system, and may not enjoy the flexibility of access offered to more affluent customers.

FINANCIAL INCLUSION:- The word Financial Inclusion could be described as being the opposite of financial exclusion. However, financial inclusion is more of a process rather than a phenomenon. It is a process by which financial services are made accessible to all sections of the population. It is a conscious attempt to bring the UN-banked people into banking. '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 Committee on Financial Inclusion (Chairman: Dry.

C. Ranging, 2008) Financial Inclusion does not merely mean access to credit for the poor, but also other financial services such as Insurance. Financial Inclusion allows the state to have an easier access to its citizens, with an inclusive population, for e. .

: the government could reduce the transaction cost of payments like pensions, or unemployment benefits. It could prove to be a boon in a situation like a natural disaster, a financially included population means the government will have much less headaches in ensuring that all the people get the benefits.

It allows for more transparency leading to curtailing corruption and bureaucratic barriers in reaching out to the poor and weaker sections. An

intelligent banking population could go a long way by effectively securing themselves a safer future. CAUSES OF FINANCIAL EXCLUSION: Financial Exclusion may also have resulted from a variety of structural factors such as unavailability of products suiting their requirements, stringent documentation and collateral requirements and increased competition in financial services. The Causes of financial exclusion can be identifying broadly in two categories, first the demand side and the second supply side.

Supply side barriers Some of the important causes of relatively low extension of institutional credit in the rural areas are risk perception, cost of its assessment and management, lack of rural infrastructure, and vast geographical spread of the rural areas with more than half a million villages, some sparsely populated CONSEQUENCES OF FINANCIAL EXCLUSION - There are three dimensions of scones nuances that financial exclusion has on the people affected: financial exclusion can generate financial consequences by affecting directly or indirectly the way in which the individuals can raise, allocate, and use their monetary resources.

A wider dimension of financial exclusion can be identified as socio-economical consequences I. E. Ropes which are socially excluded are mostly also found financially excluded.

A last dimension can be identified as the social consequences generated by financial exclusion. These are the consequences affecting the various links that are binding the individuals: link to corresponding to self esteem, links binding to the society and links binding to community and/or relationships with other individual or groups.

FIRST PHASE DEVELOPMENTS (1969-1981) In 1 969, the banks were nationalized in order to spread bank's branch network in order to develop strong banking system which can mobile sources/deposits and channel them into productive/needy

sections of society and also government wanted to use it as an important agent of change. So, the planning strategy recognized the critical role of the availability of credit and financial services to the public at large in the holistic development of the country with the benefits of economic growth being distributed in a democratic manner.

In recognition of this role, the authorities modified the policy framework from time to time to ensure that the evangelicalism's needs of various segments of the society were met dissatisfactory Before 1990, several initiatives were undertaken for enhancing the use of the banking system for sustainable and equitable growth. SOCIAL NETWORKING APPROACH The announcement of the policy of social control over banks was made in December 1967 with a view to securing a better alignment of the banking system with the needs of economic policy.

The National Credit Council was set up in February 1968 mainly to assess periodically the demand for bank credit from various sectors of the economy and to determine the priorities for grant of loans and advances. Social control of banking policy was soon followed by the nationalization of major Indian banks in 1969. The immediate tasks set for the nationalized banks were manipulation of deposits on a massive scale and lending of funds for all productive activities.

A special emphasis was laid on providing credit facilities to the weaker sections of the economy. Financial Literacy program: Recognizing that lack of awareness is a major factor for financial exclusion, the Reserve Bank has taken a number of measures towards imparting financial literacy and promotion of credit counseling services.

The Reserve Bank has undertaken a project

titled "Project Financial Literacy".

The objective of the project is to disseminate information regarding the central bank and general banking concepts to various target groups, including, school and college going children, women, rural and urban poor, defense personnel and senior citizens. The banking information would be disseminated to the target audience with the help of, among others, banks, local government machinery, schools/colleges using pamphlets, brochures, films, as also, the Reserve Bank's website.