Indicus Centre for Financial Inclusion

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Financial Inclusion in India

"India has, for a long time, recognized the social and economic imperatives for broader financial inclusion and has made an enormous contribution to economic development by finding innovative ways to empower the poor. Starting with the nationalization of banks, priority sector lending requirements for banks, lead bank scheme, establishment of regional rural banks (RRBs), service area approach, self-help group-bank linkage programme, etc., multiple steps have been taken by the Reserve Bank of India (RBI) over the years to increase access to the poorer segments of society.

Despite all these efforts, a significant proportion of the households, especially in rural areas, still remained outside the coverage of the formal banking system. It is estimated that about 40% of Indians lack access even to the simplest kind of formal financial services.

In India, the term financial inclusion first featured in 2005, when RBI, in its annual policy statement of 2005-06, while recognizing the concerns in regard to the banking practices that tend to exclude rather than attract vast sections of the population, urged banks to review their existing practices to align them with the objective of financial inclusion."

Source: Financial Inclusion | A road India needs to travel. Dr. K.C. Chakrabarty, Deputy Governor, Reserve Bank of India, October 2011.

This section highlights the main policy moves on India’s path towards universal financial inclusion, beginning from 2005.

Financial Inclusion Stakeholders

Formal Financial Institutions

Financial Sector Regulators

  1. Reserve Bank of India (RBI) - Issues in Measurement & Analysis of Financial Inclusion & High Level Financial Inclusion Advisory Committee

  2. Ministry of Finance - Overview of Financial Inclusion

  3. Securities Exchange Board of India (SEBI) - National Strategy for Financial Education   

  4. National Stock Exchange (NSE) - Unique Initiative for Financial Inclusion- Jagruti

  5. Ministry of Micro Small and Medium Enterprises - Empowering of MSME for Financial Inclusion

Major Financial Institutions

  1. National Bank for Agriculture and Rural Development (NABARD)- Financial Inclusion Fund (FIF) & Financial Inclusion Technology Fund (FITF)

  2. Industrial Development Bank of India (IDBI)- Financial Inclusion Plan

  3. Small Industries Development Bank of India (SIDBI)- SIDBI & its activities: financial assistance to MSMEs, MFIs & NGOs for on-lending to micro enterprises & economically weaker sections of society.

  4. Life Insurance Corporation of India (LIC)- Potential for Financial Services Innovation

  5. Unit Trust of India (UTI)- Micro Pensions for Financial Inclusion

  6. Regional Rural Banks (RRBs)- National Mission for Financial Inclusion

Other Stakeholders

  1. National Payment Corporation of India (NPCI) has the core objective to consolidate and integrate the multiple systems with varying service levels into nation-wide uniform and standard business process for all retail payment systems. The other objective is to facilitate an affordable payment mechanism to promote financial inclusion.

  2. India Invest Micro Pension Services is the only social enterprise in the world focused exclusively on encouraging and enabling low income informal sector workers to accumulate micro-savings for their old age.

  3. Indian Bank’s Association  is the premier service organization for the banking industry of India.

  4. Financial Information Network & Operations (FIN0)  is a technology company that provides core banking solutions to agencies including micro-financial institutions, co-operative banks and banks (together, Micro Agencies) catering to the low income households.

  5. A Little World (ALW) provides innovative technologies and multiple financial services to the bottom of the pyramid populace at the lowest cost through mainstream financial institutions.

  6. Eko India Financial Services Pvt. Ltd (EKO)  provides a low cost infrastructure powered by innovation and technology to enable instant, secure and convenient financial transactions. Eko leverages existing retail shops, telecom connectivity and banking infrastructure to extend branchless banking services to the common man.

  7. Sa-Dhan’s objective is to build the field of community development finance in India to help its member and associate institutions, to better serve low-income households, particularly women in both rural and urban India, in their quest for establishing stable livelihoods and improving quality of life.

  8. All India Association for Micro Enterprise Development (AIAMED) had beginnings in the South Asia Network (SAN) in 1994. Its mission is to strengthen non-governmental and other type of organisations involved in micro finance and micro enterprise either fully or partially as its program component. Apart from Capacity Building of these organizations, it is also involved in Institutional Strengthening of the sector.