1.

FINANCIAL INCLUSION
FINANCIAL INCLUSION IN INDIA : Issues and Challenges

2.ABSTRACT
Inclusive growth is possible only through proper mechanism which channelizes all the
resources from top to bottom. Financial inclusion is an innovative concept which makes
alternative techniques to promote the banking habits of the rural people because, India is
considered as largest rural people consist in the world. Financial inclusion is aimed at
providing banking and financial services to all people in a fair, transparent and equitable
manner at affordable cost. Households with low income often lack access to bank account
and have to spend time and money for multiple visits to avail the banking services, be it
opening a savings bank account or availing a loan, these families find it more difficult to save
and to plan financially for the future. This paper is an attempt to discuss the overview of
financial inclusion in India and Issues and Challenges that exist.

3.INTRODUCTION

Financial inclusion is the recent concept which helps achieve the sustainable
development of the country, through available financial services to the unreached people with
the help of financial institutions. Financial inclusion can be defined as easy access to formal
financial services or systems and their usage by all members of the economy. The committee
on financial inclusion, of government of India, has defined financial inclusion as the process of
ensuring timely access to financial services and adequate credit where needed by vulnerable
groups such as the weaker sections and low income groups at an affordable cost (Rangarajan
Committee, 2008). The process of financial inclusion consists of ensuring bank accounts to
each household and offering their inclusion in the banking system (Reddy, 2007). Financial inclusion
is no longer a policy choice but it is a policy compulsion today. And banking is a key driver for
inclusive growth.
There are various socio-cultural, economic issues that hinder the process of financial
inclusion. For instance on demand side, it includes lack of awareness and illiteracy (see Throat,
2007). From supply side, lack of avenues for investment such as poor bank penetration,
unwillingness of banks to do financial inclusion or high cost involved in financial inclusion
seem to be some likely reasons for financial exclusion

KEYWORDS : Poverty alleviation, financial exclusion, financial illiteracy, Financial Inclusion, RBI,
Information Technology, Business and Profitable models.

4.REVIEW OF LITERATURE
Many researchers have conducted the study on Financial Inclusion from different
perspectives. To conduct the research, I have gone through the following past studies:

Mandira Sarma and Jesim Paise (2008) suggest that the issue of financial inclusion is a
development policy priority in many countries. Using the index of financial inclusion
developed in levels of human development and financial inclusion in a country move closely
with each other, although a few exceptions exist. Among socio-economic factors, as
expected,
income is positively associated with the level of financial inclusion. Further physical and
electronic connectivity and information availability, indicated by road network, telephone and
internet usage, also play positive role in enhancing financial inclusion





Hemavathy Ramasubbian and Ganesan Duraiswamy
(2012) suggested, in their article The Aid of Banking Sectors in Supporting Financial
Inclusion - An
Implementation Perspective from Tamil Nadu State, India, that though over the past six
years the FI strategy had improved the life style of BPL, but missing focus on savings and
credit improvement strategies degrades the benefits of FI. This paper surveys analyzes the
issues pertaining to implementation of financial inclusion in economically down trodden
districts of Tamil Nadu, India.
Data collected from districts were collected and analysed using SPSS tools (SPSS 2011).


Rama Pal and Rupayan Pal (June 2012) analyzed in
their article Income Related Inequality in Financial
Inclusion and Role of Banks : Evidence on Financial Exclusion in India, income related
inequality in financial inclusion in India using a representative household level survey data,
linked to State-level factors. This paper also provides estimates of the effects of various
socio, economic and demographic characteristics of households on propensity of a
household to use formal financial services, and compare that for rural and urban sectors. A
notable result is that greater availability of banking services fosters financial inclusion,
particularly among the poor.


Chattopadhyay, Sadhan Kumar (2011) conducted a
study titled Financial Inclusion in India: A case-study of
West Bengal. An index of financial inclusion (IFI) has been developed in the study using
data on three dimensions of financial inclusion. It is revealed from the index that Kolkata
district leads with the highest value of IFI, while rest of the districts show a very low level of
financial inclusion. A survey was also conducted in the state in order to gauge the financial
inclusion in rural Bengal and the results reveal that around 38 per cent of the respondents do
not have sufficient income to open a savings account in the bank.

Vijay Kelkar (2010) analysed in his article Financial
Inclusion for Inclusive Growth that enhanced financial inclusion will drastically reduce the
farmers indebtedness, which is one of the main causes of farmers suicides. The second
important benefit is that it will lead to more rapid modernization of Indian agriculture.


5.OBJECTIVE OF THE STUDY
1. To study the concepts of financial inclusion
2. To ascertain various factors affecting access to financial services, importance of FI ,
consequences of financial exclusion and issues and challenges that exist.
3. To analyze various important regulatory initiatives taken by the Reserve Bank of India to
strengthened financial inclusion in India.
4. To study present scenario and future prospects of financial inclusion.

6.HYPOTHESIS OF RESEARCH
Null hypothesis : Daily wage earners are financialy included .
Alternate hypothesis : Daily wage earners are not financialy included .

7.METHODOLOGY
- Descriptive Research
- Judgmental Sampling

Universe of the Study : The target population in this research was the daily wage earners
via rickshaw pulling in Delhi

Sample Unit : Sampling unit is the basic unit containing the elements of the universe to be
sampled. The total number of the rickshaw puller in delhi .

Sample Size : Sample size is the number of elements to be included in a study. Keeping in
mind all the constraints 24 respondents was selected.

Data : Data has been collected by administering structured questionnaires and Personal
interviews.

8.TENTIVE CONCLUSION
Financial inclusion is the road which India needs to travel towards becoming a global player.
An people invest and save more and more will remove vicious circle of poverty and
unemployment, it also act as a source of empowerment, better control of finance and allow
people to participate more effectively in the economic and social process thereby increase
per capita income. More financial access will attract more global market players to our
country that will result in increasing employment and business opportunities. There are
certain problems like lower financial literacy, lack of awareness, the cost of transaction and
customer acquisition is high and it is not at all cost-effective. RBI has taken various initiatives
to strengthened financial inclusion. Progress achieved by banks is no doubt sustaining their
efforts, India is quite confident that the targets set by the banks and objective of achieving
universal financial inclusion is attainable. Attempts therefore should be made at the grass
root level to implement those ideas keeping in mind the panoramic view of inclusive growth
prevailing in India. There is a need of 'Technology with a human touch' which acts as a
ladder to achieve our targets. Banks should, therefore, take extra care to ensure that the
poor are not driven away from banking because the technology interface is unfriendly. This
requires training the banks' frontline staff and managers as well as business correspondents
on the human side of banking. Financial service providers should learn more about the
consumers and new business models. However financial inclusion is gigantic and enormous
task.