Financial Inclusion - the Scope and Effect in Indian Economy

With RBI recently giving approval to 11 entities for setting up payment banks, we are now looking at stripped-down versions of banks, which are expected to reach customers mainly through their mobile phones rather than traditional bank branches.

There are some policy recommendations based the findings of this essay. It is a positive thing that enlarges the coverage of financial services, increasing the opportunities of access in financial services and activities. It will benefit for decrease the level of inequality. It claims that by allowing the poor an opportunity to get access into the financial

According to the most recent Federal Reserve study; most of us haven’t set foot in a banking hall in ages. It is a lost battle to banks that opt to use traditional methods to conduct their banking transactions (Gup 2003). By December of last year, close to half of all smartphone users in the United States had transacted some or all of their banking on their phones and iPhones. In the United Kingdom alone, rates of mobile banking transactions doubled over the course of a single year (Scn Education 2001). A banking business that invests in this type of technology gets assured of increasing their customer base.

As their name suggests, they only execute their operations online. Customers can only be in contact with their money over the internet since they do not have any physical branches. Because online-only banks require lower overhead costs, they have the capability to offer more free services and higher interest rates compared to a traditional bank. Online banking provides many customers the convenience of handling their business at any physical location as long as they have access to internet. This is possible because of the variety of services that online banks provide despite limiting interaction to only the internet. Some of their services include applying for loans online, transferring funds and paying bills online. While the convenience of being able to access banking through the internet is worthwhile, there are limits to it. For example, making large deposits to the bank is limited and can only be made through the mail, they don’t service cashier checks for transactions, and withdrawing money from the account is very inconvenient. Luckily, the role of the internet in financial transactions is becoming increasingly prominent so that spending money online is more accessible, but it is important to understand both the benefits as well as restraints of online banking. Nowadays, many large brick-and-mortar banks have caught on and provide some online services in attempts to

As easily seen in the graph from the Federal Reserve’s Study (Reserve, Gerdes and Liu), the number of noncash transactions has greatly increased. Although the number of checks used has decreased greatly, Automated Clearing House transactions – which pass through the Federal Reserve’s control - are still a major player in the number of transactions.

After the end of World War-II there was great need for speedy industrial expansion in the whole world. Both winners and losers had to resurrect and to rebuild their economies from the ruins of war. Development Financial Institurions (DFI) were set up in almost all the countries of the world and the models were suited to their economic, social and cultural values.

One of the major drawbacks for ICICI bank is that it charges very high service taxes for the services provided by the bank as compared to other banks. This makes the bank facilities viable only for higher class. As a result, the middle and bottom economic classes, which are a major chunk of population in India, are being left out

Research into Financial Exclusion in Leeds and a study of alternative community based credit and savings systems, undertaken by Community Finance Solutions at Salford University on behalf of Leeds City Council.

In contrast to the barter economy, the financial sector sits between savers and borrowers: taking funds from depositors and making loans to borrowers, linking together households, companies, and governments. As such, financial sector could allocate the surplus funds in the society to their most efficient use in the needed areas (Diamond, 1984). For example, the credit provision to SMEs fuels real business to invest in new buildings and machineries to foster their growth. In this way, financial sector benefits the nation by expanding the whole society’s productive capacity, then improving people’s living standards eventually. Third, a well-run financial system facilitates the management and allocation of certain risks (Baily & Elliott, 2013). Financial intermediaries have

However, as noted by a recent inquiry done by Ministry of Finance, there remains a case for catalysing the process of attaining greater financial inclusion, with the overarching goal of including over 90% of underserved sections of society in the ambit of formal finance by the year 2021.

Financial aspects essentially concentrates on how laws and government approaches sway the economy. A lot of this takes a gander at duties particularly and all the more for the most part the general population money, which incorporates the spending and borrowing that the government does. The root expression of financial aspects is the economy. Economy originates from the Greek oikos - home and nomos - overseeing. Economy can be portrayed as the present soundness of monetary markers, for example, employments and occupation development, financial profitability and yield, and can likewise be measured by an immense scope of different elements. For example, the exchange shortage, national obligation, GDP, and unemployment rates. In this paper, the impacts of the money related arrangement on macroeconomics, GDP, unemployment, inflation and loan fees will be discussed. Throughout the paper, clarifications on how cash is made will be given alongside examining what fiscal approaches will accomplish the objective of financial development, low inflation, and a sensible rate of unemployment, what mix of money related strategies will better perform this objective.

Competition in urban areas is fierce whereas it is extremely slow in rural areas. With the hope of reaching rural households the government has reduced some of the rules and regulations for banking. Since many banks don’t consider rural communities profitable, they only distribute loans when required by the government. Despite all these efforts, most rural households in India still do not have access to banking. This inhibits them from access to savings and credit. In India it is extremely difficult for the rural poor to get credit. In fact they don’t even have savings account from the formal banking sector. Some urban poor have access to the banking system because of their geographical location whereas most don’t

through financial inclusion would include, developing the technical capacities to meet the emerging challenges of financial inclusion and micro-insurance. This therefore, calls for more dynamic strategies to deepen the insurance

Microfinance programmes are intended to reach poor segments of society as they lack access to formal financial services. It, therefore, holds greater promise to further the agenda of FI as it seeks to reach out to this excluded category of population. India has adopted the Bangladesh’s model in a modified form. The Apex-Bank NABARD started ‘SHG bank linkage programme’ during the last decade of by-gone century, is by far the major programme initiative without parallel in any parts of the world for achieving the FI. The programme has demonstrated across the country its effectiveness in linking banks with excluded category of poor segments of population. In this process role of NGOs in development is quite pronounced in providing the last mile connectivity as enablers and catalyst between the SHGs and Village level co-operatives/banks. This is also supplemented by the MFIs delivering credit. To alleviate poverty and to empower particularly women, the micro-finance has emerged as a powerful instrument to serve the objective of FI in India. With availability of micro-finance, self-help groups and credit management groups have also started in India. More importance is being given to SHGs, since the micro lending to the group rather than individual borrowers is more successful and in the process also making it to reach the goal of FI. All the members of the group are equally benefitted and also the repayment by each member is guaranteed by

India is having the most widely distributed post office system in the world. With 1,55,333 post offices, the India post comes under the Department of Posts which is a part of the Ministry of Communications and Information Technology under the Government of India. The wide distribution network of India post is one important factor that favours india post as a channel for financial inclusion in India. The search of financial inclusion appears to be a tough task. Sustained growth of the nation and its continued prosperity depend critically on universal financial services covering all people. Further, empirical evidence shows that inclusive financial system