REVIEW OF LITERATURE
Roy (2012) explained the overview of financial inclusion in rural India. His study shows that now a days some of the commercial banks have set up their branches in the remote outskirts of the country. This may further improves the overall development in both social and economic culture of rural population. The Rules and regulations for starting up the bank account have been simplified when compared to later years. The study also tells that banking industry has shown drastic growth of investment during last few years.
Joseph Massey (2010) studied the significance of financial institutions in a developing country like India is important in improving financial inclusion. The efforts of the government of India (GOI) and the Reserve Bank of India (RBI) are to improve the financial inclusion and strengthening the capital market players which includes the financial institutions. These institutions have a very significant role in enhancing the financial inclusion. He further adds up that the financial inclusion is mainly for the upliftment of weaker sections of the society.
V.Ganeshkumar (2013) stated that the density of bank branches in a state measures the opportunity for financial inclusion in India. Financial literacy is an essential requirement for framing investment awareness, and hence it seems to be a tool for financial inclusion. But the above conclusions say that financial literacy alone cannot promise high amount of financial inclusion in a state. Branch density or the total number of bank branches in a state has important role on financial inclusion. By creating investment opportunities alone is not possible to attain the financial inclusion. The financial inclusion can be increased by improving the investment opportunities in India.
Michael Chibba (2009) stated that Financial Inclusion is an overall economic development and Poverty Reduction technique. However, when we examine the current scenario in India, the strengthening of financial Inclusion is now perhaps more important as it will surely rebuild our country into a sustainable one.
OBJECTIVES RELATED TO THE NEED FOR FINANCIAL INCLUSION
· Economic Objectives
For attain an equitable development in all the sections of the society that is both in urban and rural population may lead to the reduction of inequalities in terms of income and savings. Then the financial inclusion can further leads to a boom for both underdeveloped and developing nations.
· Mobilisation of Savings
When the underprivileged community are provided with the amenities of banking services, then their savings can be mobilised. This may ultimately leads to the improvement of household sector and facilitates capital formation for the growth of the economy.
· Larger Market for the financial system
In order to meet the requirements and wants of the large section of society there is an immediate need for the larger market for the financial system. This will open up an opportunity for the new players in the financial sector and that can lead to growth of banking sector also.
· Social Objectives
Poverty Eradication is one of the prime motives of financial inclusion. When there is an improvement in the financial services provided by the banks, it will automatically bridges the gap between the lower income people and their sources of livelihood and by means of income which can be generated for them if they get adequate amount of credit.
· Sustainable Livelihood
If the underprivileged sections of society get some amount as loan they can start their own company or it can be used to invest in various investment avenues or might be used for providing education to their family members in which they can sustain their livelihood. Thus financial inclusion is a boon for the lower income individuals.
· Political Objectives
There are certain measures are taken by the government in order to improve the facilities in the financial sector. This can directly act as an accelerator for the attainment of inclusive growth. When the government initiated certain measures to enhance financial services in the rural sector, the people in the rural areas are willing to invest their savings and investments and to know about the new schemes introduced by the government.
STEPS TAKEN BY RBI TO SUPPORT THE FINANCIAL INCLUSION
Reserve bank of India (RBI) has taken several measures to achieve greater financial inclusion in India. Some of these measures are as follows:
· Simplified KYC Norms
In order to ensure that the weaker section of the society does not face any difficulty in opening the bank account due to complexity, the KYC (Know Your Customer) regulations have been simplified. Also banks are allowed to use Aadhar Card as a proof of both identity and address.
· Basic Saving Bank Deposit
RBI has initiated all banks to provide savings bank accounts or no frills with minimum common facilities such as no minimum balance, deposit and withdrawal of cash at bank branch and ATMs, receipt/ credit of money through electronic payment channels, facility of providing ATM card etc.
· Kissan Credit Card (KCC)
Kissan credit card scheme was introduced in 1998-99 with over 30 million cards issued by 2003. KCC is mainly used by the farmers to reduce the transaction costs. This is given due importance. But the use of the card was not consistent with larger farmers reporting the higher usage rates. However, improvement of financial inclusion clearly states that banks are significantly progressing in areas like opening of banking outlets, giving of credit through KCCs and general purpose credit card (GCCs).
· Easy Credit Facilities
RBI has proposed banks to introduce General purpose Credit Card (GCC) facility up to Rs. 25,000/- at their rural and semi urban branches. GCC has the nature of circulating credit allowing the holder to withdraw up to the limit sanctioned. The interest rate on the facility is fully deregulated.
· Financial Education
RBI has claimed that Financial Literacy Centres (FLCs) should be set up for taking financial literacy efforts through the conduct of Financial Literacy Camps at least once in a month. This facilitates the financial inclusion through providing ‘Financial Literacy’ and ‘Financial Access’.
· Branches in Un-banked Villages
RBI has directed all banks to allocate at least 25% of the total number of branches to be opened in un-banked rural centres.