The Indian economy is growing strongly which ensures better recovery and asset valuation. Progressive bank reforms and low interest rates will increase borrowing activity to meet their financial targets. Banking industry is making rapid strides with Information technology driven initiatives and has led to expansion of products (i.e.) expansion of financial services giving birth to the concept of Financial Inclusion. Financial Inclusion is the availability of banking services at an affordable cost to the disadvantaged and low income groups. In India, the basic concept of financial inclusion is having a saving or current account at any bank. In reality, it includes loans, insurance services and much more, for all members of an economy. An inclusive financial system has several merits. It facilitates efficient allocation of productive resources and thus can potentially reduce the cost of capital. In addition, access to appropriate financial services can significantly improve the day to day management of finances.
An inclusive financial system can help in reducing the growth of informal sources of credit such as money lenders, which are often found to be exploitative. Thus, an all inclusive financial system enhances efficiency and welfare by providing avenues for secured and safe saving practices and by facilitating a whole range of efficient financial services.
In line with the above, after liberalization, the banking environment in India had grown more competitive with the relaxation of restrictions and adoption of International standards banks are forced to adopt measures to survive. The recent financial reforms and greater competition in the banking industry have made it necessary for banks in India to concentrate towards the excluded mass. Successful banks in India focus on the rural sector by providing Financial Inclusion service. The importance of an inclusive financial system is widely recognized in the policy circle and recently Financial Inclusion has become a policy priority in many countries. Legislative measures have also been initiated in some countries.
Further more, in recent years, Indian Banking System has become dynamic and there is an increasing trend in the number of depositors in Banks. The quest of financial inclusion is indispensable for the well being and growth of any country, more for a developing country like India with large sections of population in the unorganized sector. The Government of India as well as Reserve Bank of India has been taking steps over the years to make financial services accessible to all .It is in this context, it is worth to mention the perils of financial exclusion.. Financial exclusion not only hurts the excluded by keeping them trapped in a vicious circle of poverty but also has ramifications for the entire country. Financial empowerment leads to economic and social empowerment. There is empirical evidence on the critical role of finance in economic growth. Therefore financial inclusion, financial literacy and inclusive growth are the themes of modern banking in India It is found that, the commercial banks in India work broadly through three segments namely,. Corporate, retail and treasury.
For Instance, in the United States, The Community Reinvestment Act (1997) requires banks to offer credit throughout their entire area of operation and prohibits them targeting only the rich neighborhoods. In France, the Law on Exclusion (1998) emphasizes an individual’s right to have a bank account. In the United Kingdom, a “Financial Inclusion Task Force” was constituted by the Government in 2005 in order to monitor the development of financial inclusion.
Amidst this background, the Banking sector is the most leading sector in India has been among the top performers in the markets. It is quite remarkable to note that, Indian Banking industry can have itself as one of the most impressive branch network comprising of about 47,000 branches of Scheduled Commercial Banks (including RRB”S) and over 100,000 Co-operative Credit outlets in rural and semi urban areas. Despite this, a large number of poor continue to remain outside the fold of formal banking system. The problem of financial exclusion is very acute in India. According to the 59th round of the NSS survey, only 48% of the cultivable households availed credits from the formal sector. According to a recent NCAER–World Bank Rural Financial Access survey (RFAS), 70% of the marginal landless farmers do not have a bank account and 87% have no access to formal credit. Hence, the banks in India felt the need for Financial Inclusion. The Government of India, Reserve Bank of India and NABARD together have initiated a number of programs like Poverty Alleviation programs, SHG – Bank linkage program, Micro Finance Institutions (MFI), Kisan Credit Card (KCC), General Credit Card (GCC), No Frill Account, opening up of more Rural Banks, and immediate workable options like NGO’S / CBO’S / CSO’S, Farmers club’s, Co-operatives, Agri Clinics / Agri Business Centres / Kiosks, Self Help Groups (SHG), local volunteers, Rural Development and Self Employment Training Institutes (RUDSET), Post Offices, etc.
According to FICCI survey, the strong focus of the Indian Banking industry is the regulatory system, enabled India to carve a place for itself in the global banking scene. The regulatory systems of Indian banks are rated above China and Russia, and at par with Japan and Singapore.
In India, the Reserve Bank of India has initiated several measures to achieve greater financial inclusion, such as facilitating “no frill” accounts and “General Credit Cards” for low deposits and credits. The German Bankers’ Association introduced a voluntary Code in 1996 providing for an “everyman” banking transactions. In South Africa, a low cost bank account called “Mzansi” was launched for financially excluded people in 2004 by the South African Banking Association. Alternative financial institutions such as micro finance institutions and Self Help Groups have also been promoted in some countries in order to reach financial services to be excluded.
Dr.R.SRINIVASAN is a Post graduate in commerce and Management. He received his doctoral degree from Alagappa University in 1997. He is now Working as an ASSOCIATE PROFESSORin Post graduate and Research Department of Corporate Secretaryship at Bharathidasan Government College for Women (Autonomous), Pondicherry University, Puducherry.He currently teaches Accounting ,financial management and Research Methodology Subjects. Before Joining BGCW, he was teaching in SNR College, Coimbatore, Sindhi college, Chennai& T.S.Narayanasamy College, Chennai for eight years. He was with the industry for a short term at Salzar Electronics Pvt. Ltd, Coimbatore. He has about 20 years of teaching experience and having research experience of 15 years. His interests are in Accounting and finance, Capital Market, Quantitative Methods. He underwent the Faculty Development Programme at Indian Institute of Management Ahmedabad during 2000-01. He has presented 20 papers in national and international conferences and has published twenty papers in the areas of Finance and Human resource Management in National Journals. Co-authored a book titled, ‘Investors Protection, published by Raj Publications, New Delhi He has delivered lectures in contemporary finance topics at Pondicherry University. He is involved in consultancy projects for Godrej Saralee, Chennai in the areas of Statistical Applications. He has supervised a number of research projects in the area of corporate finance and Human Resource Management. He is the Board of examiner in corporate Secretaryship and Management for the past two decades.
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