JKRam Abstract
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CONTRIBUTION OF REGIONAL RURAL BANKS
IN THE PROCESS OF FINANCIAL INCLUSION IN ODISHA.
The Blue Book on inclusive finance, a UN publication of 2006, raises the question fundamental to financial
inclusion ³ Why are so many bankable people unbanked?´
What is financial inclusion? ³ It is the process of ensuring access to financial services and timely adequate credit
where needed, to vulnerable groups such as weaker sections and low income groups, at an
affordable cost.´ ( Report of the Committee on FI,2008)
Who are financialy excluded? The poorest and the most vulnerable sections of the society. These are poor,
socially under-privileged, disabled old and children, women,uneducated ethnic minorities,
unemployed, households in remote areas and so on.
What is financial exclusion? Financial exclusion means No bank account, No affordable credit, No assets, No
insurance, No access to monetary advice.
What are the consequences of financial exclusion? It results in reduction of such groups and individuals to
benefit from participation in productive process, realize their potential and cope with adversity.
Financial exclusion reinforces the existence of these vulnerable groups of society and accentuates
their vulnerability. In short financial exclusion leads to Finacial Exploitation, Financial
discrimination, Financial Illliteracy.
Why financial inclusion is important? Recent data show that countries with large proportion of population
excluded from the formal financial system also show higher poverty ratios and high inequality.
Country % of FI % People BPL
India 48 28.6(99-00)
Bangladesh 32 49.8(2000)Malaysia 60 15.5(1989)
Srilanka 59 25.0(95-96)
Thailand 59 13.1(1992)
Source: World Bank 2006 & 2008
A well developed financial system can be an effective povert alleviation tool.
A well developed financial system is able to allocate resources to efficient newcomers.
It ensures that poor households and small entrepreneurs need not depend on middlemen.
µFinancial depth plays a role in lowering inequality and increasing the income of the bottom 80% of the
population. ( Li, Hongyi, Lyn Squire and Heng-fu Zou, 1998. ³ Explaining International and
Intertemporal Variations in Income Inequality´, Economic journal, 108(1):26-43)
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Why to study contribution of the Regional Rural Banks(RRBs) specifically? The formal financial system in
rural India is dominated by commercial banks, regional rural banks and co-operatives. The
contribution of commercial banks to the rural/semi-urban banking networks is far higher at 38%
of total than the 28% contribution of RRBs to the total 94000 bank branches in India. Despite the
apperent importance of commercial banks even in the rural areas however they are neither able
nor willing to serve the poorest sections of the population.According to the M-CRIL Review of Rural Banking in India: Working Paper 1 in March 2006, in the credit categories of direct
relevance to financial inclusion RRBs hold 26.2% of agricultural credit accounts and as many as
55.0% of all artisan/tiny industry loan accounts. This amounts to much lower propertions of
overall credit available under these categories- just 10.9% and 11.0% respectively- since RRBs
loan size average just Rs25,000 and Rs13,000 for those two categories, much smaller than those
offered by the commercial banks. Yet, it is precisely this fact that shows the importance of the
RRBs for otherwise financilly excluded sections of the population.The low income families have
a much lower absolute and proportionate need for credit than better off sections of the population.
Name:- Jitendra Kumar Ram, Senior Manager, Baitarani Gramya Bank, Head Office, Baripada
Date of birth:- 10th
July, 1961
Nationality:- Indian
Address:- Baitarani Gramya Bank Staff Training Centre, Above SBI Evening Branch, Bhanjpur,
Baripada- 757 002
E-mail ID:- [email protected]
Mobile phone no:- 09437320720