Financial Inclusion in India: An Evaluation of the Coverage, Progress and Trends

PRESENTED BY :

VINEET KUMAR DUBEYBM-010165

UNDER THE GUIDANCE OF :

PROF. NANDITA MISHRA(Faculty Finance)

INTRODUCTION

Financial inclusion has indeed far reaching positive consequences, which can facilitate many people to come out of the abject poverty conditions.

OBJECTIVES OF THE STUDY

•To appreciate the significance of financial inclusion in terms of inclusive growth for sustainable economic development;•To appreciate the trends of financial inclusion in other select countries.•To evaluate the extent of financial exclusion in India in terms of:

oSpatial distribution of banking services;oNumber of deposit and credit accounts in scheduled commercial banks;oPopulation coverage per office region-wise;oRatio of direct agricultural credit to agricultural GDP, total GDP and total credit;oCoverage of farmer households as per social groups; andoNon-indebted farmer households as per different land holdings.

METHODOLOGY 

The study attempts to realize the objectives by employing a well-structured and more appropriate methodology. The approach and data collection methods are explained below. 

THE APPROACH 

Based on the well-accepted approaches for evaluation of the coverage of financial inclusion, the study employs the following criteria for understanding the extent of financial inclusion:

1.Analysis of the spatial distribution of banking services;2.Analysis on the basis of the performance of rural credit;3.Analysis on the basis of coverage of farmer households; and4.Analysis on the basis of coverage of farmer households based on land holdings.

Further, on the basis of the above-mentioned criteria the study has

endeavored to analyze the following:

1.Spatial distribution of banking services;

2.Number of bank accounts (deposit and credit accounts) of

households;

3.Regional distribution of banking services;

4.Contribution of agriculture to GDP;

5.Coverage of farmer households; and

6.Coverage of small and marginal farmers.

DATA COLLECTION

The study is based on the secondary data available from the various

sources at the international and national level.

INTERNATIONAL SOURCES :

World Bank, DFID, Commonwealth institutes .

NATIONAL SOURCES :

RBI, NABARD, reports of various committees, National Sample

Survey Organization (NSSO), National Accounts Statistics of Central

Statistical Organization (CSO) and other apex level organizations.

FINANCIAL EXCLUSION

FINANCIAL EXCLUSION: THE GLOBAL SCENARIO

STRUCTURE OF INDIAN BANKING

FINANCIAL INCLUSION – PRESENT SCENARIO IN INDIA: AN ANALYSIS MEASURES OF THE EXTENT OF FINANCIAL INCLUSION

Table 2: illustrates that rural and semi-urban offices constitute a majority of the commercial bank offices in India. Rural bank offices as a percent of total have increased from 22 in 1969 to 45 in 2005.

TABLE 4: ILLUSTRATES THE LEVEL OF FINANCIAL INCLUSION IN INDIA THROUGH REGION-WISE STATISTICS.

Further, the rise in the number of credit accounts per population has not been significant despite the fact that there has been increase in the number of bank branches right across all the regions of the country.

ANALYSIS BASED ON THE PERFORMANCE OF RURAL CREDIT

Even though the share of agriculture in overall GDP has declined from around 33.1% in 1980s to 20.8% during 2000-06, the fall in the proportion of population dependent on this sector has been restricted.

ANALYSIS BASED ON THE COVERAGE OF FARMER HOUSEHOLDS

ANALYSIS ON THE BASIS OF COVERAGE OF FARMER HOUSEHOLDS BASED ON LAND HOLDINGS

While the extent of non-indebtedness is highest in the case of marginal farmers (70.6%), it is lowest in the case of large farmers (0.6%). In the case of medium farmers it is 3.2% and 8.5% in the case of semi-medium farmers. However, in the case of small farmers it is 17.1% . 

FINDINGS OF THE STUDYFINDINGS OF THE STUDY

• Distribution of Banking Services

• Number of Bank Accounts (Deposit and Credit) of Households

• Distribution of Banking Services

• Ratio of Direct Agricultural Credit to Agricultural GDP, Total GDP

and Total Credit

• Contribution of Agriculture in GDP

• Coverage of Farmer Households

• Coverage of Small and Marginal Farmers

RECOMMENDATIONSRECOMMENDATIONS

• Financial Inclusion as a Policy Priority

• Strategize the Provision of Bank Credit 

• Cover the Poor 

• Extensive Use of Cooperatives 

• Procedural/Documentation Changes 

• Proactive Role of Government 

• Role for Rural Post Offices

• Effective Use of IT Solutions 

• Adequate Publicity for the Project of Financial Inclusion 

• Financial Inclusion: Latest Developments in India

CONCLUSION CONCLUSION 

• The importance of financial inclusion arises from the problem of financial exclusion of nearly 3 billion people from the formal financial services across the world. India, with only 34% of population engaged in formal banking and 135 million financially excluded households, is in the second highest after China. Further, the real rate of financial inclusion in India is also very low and about 40% of the bank account holders use their accounts not even once a month.

• Financial inclusion has, in reality, far reaching positive consequences, which can help resource poor people to access the formal financial services in order to pull themselves out of abject poverty. The focus on the common man is particularly imperative in India as he is the more often ignored one in the process of economic development. Indeed, with the process of financial inclusion, the attempt should be to lift the resource poor from poverty through coordinated action amongst the banks, the government and other related institutions in order to facilitate access to bank accounts and other related services.

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