Financial inclusion……. An assessment of impact: (Fact finder series; 01)

A well functioning financial system empowers individuals, facilitates better integration with the economy, actively contributes to development and affords protection against economic shocks. For all these reasons financial inclusion has gained prominence in recent years as a policy objective to improve the lives of the poor. Inclusive growth has been a priority of the Government of India (GoI) over the past decade. The policymaking and regulating institutions (Government of India)have developed regulations and guidelines for strengthening financial inclusion but these are yet to have a substantial impact on outreach to the excluded population. Notwithstanding the efforts made so far, a sizeable majority of the population, particularly vulnerable groups, continue to remain excluded from the opportunities and services provided by the financial sector. Progress towards the inclusive dream has been relatively limited so far and it is apparent that the government's effort to encourage the banking system to promote financial inclusion in an intensive manner needs a substantial impetus if it is to achieve adequate results. Data thus clearly reveals the financial inclusion is increasingly becoming urban oriented and the Share of rural branches in total branches has been showing a declining trend, notwithstanding the fact that two third of population is concentrated in rural areas. To put the accounts right commercial banks show a distinct tendency towards financing bigger farmers and their share in the total institutional lending stands at 74.4% of total, while as the RRBs are seen to have favored towards small and marginal farmers and to their disadvantage the share of such institutions merely hovers around a nominal of just 9.9% of the total credit disbursement to the rural sector. Nearly 87% of sc, st(considered to be the most vulnerable target group) and OBC population in rural and 90% in urban areas being denied access to institutional finances is thus left out of the race to inclusive growth. This paper stresses the need for paradigm shift & a complete revisit and restructuring of policy framework to achieve complete financial inclusion, the existing framework of initiatives as such has miserably failed to enforce a substantial overhaul so far as the existing scheme of things is concerned. There are still many rocky miles to go…….