Analyzing the need gap of financial inclusion in India: Literature Review

Financial inclusion is one of the most discussed topics in economics, particularly in context of development economics. A large section of the society is still outside the purview of formal financial services. Hence, the issues of financial inclusion evolve from the study of financial exclusion. In a developing country like India, specifically in rural India, poverty and illiteracy are the main cause for financial exclusion. Financial inclusion once viewed as a means to eradicate poverty and through reducing inequality. Presently it is being discussed in the context of financial stability and economic development. Banks and other financial institutes specifically micro finance institutes are offering wide range of financial products to cater the financial service need of the society. Those needs include the access of credit, insurance, transaction banking to savings and investment opportunities. The challenges for serving the vulnerable group of people with varied financial services were no more a supplyside problem. The accessibility and availability of financial services can be addressed by the supply-side. But the usage of financial service can be influenced by lack of awareness and knowledge of the demand-side. This demand and supply gap is filled by the various traditional and informal sources to meet their requirements. The presence of Informal financial sources is so strong in some places that formal financial institution could not replace them. This paper attempts to analyze the need gap of financial inclusion in India considering the issues of demand side as well as supply side.