Features Of Financial Inclusion

What is Financial Inclusion?

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 Committee on Financial Inclusion, Chairman: Dr. C. Rangarajan).

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 (The Committee on Financial Sector Reforms, Chairman: Dr.Raghuram G. Rajan). Financial Inclusion is defined as ensuring proper access to financial services (which include not only banking

Each of these offer significant value to the customer and enable banks to generate gain through transaction fees.

• Transaction driven pay per use features: Banks should offer some credit products in addition to deposits and shift their transaction model from conventional rich man’s float based model to unconventional poor friendly, transparent pay per use model, where the customers are charged a small fee for transaction.

• Scalable business models with simple, user friendly, low cost technologies: Profitable business models would need to be scalable and incorporate simple, user-friendly and low-cost technologies so that investments would be increased and profits shows up as the number of people serviced by a particular branch or outlet increases over

Banks should, therefore, make ‘boosting financial literacy in rural India’ an essential component of their business model for financial inclusion.

• Ride on government payments: GOI had several schemes like MGNREGA, where the beneficiaries would receive wage entitlements within 15 days through institutionalized channels like banks and post offices. The amendments now make it mandatory to ensure that every beneficiary has a bank/post office account and the disbursements are made exclusively through these channels. Again, successful models of financial inclusion would, therefore, ride on government payments as an important source of a recurring float providing them another strong reason to push financial inclusion.

• Innovate and test market pilot products/ services: Banks need to realise that the poor find it difficult to save on a regular basis and may also resort to consumption loans to supplement their savings whenever required from a variety of sources to meet their needs. Banks, therefore, need to keep such realities in mind while designing their products/services for the poor. With some understanding and innovation, over a period of time, banks can also capture a bulk of the rural remittances market, a significant chunk of which currently happens through informal