Promoting Financial Inclusion - United Nations Development ...

Executive Summary
1 A LONG WAY TO GO…
Inclusive growth has been a priority of the
Government of India (GoI) over the past
decade. The policymaking and regulating
institutions (Government of India, RBI,
IRDA, PFRDA (for micropensions) have
developed regulations and guidelines for
strengthening financial inclusion but these
are yet to have a substantial impact on
outreach to the excluded population. It
appears that while some effort has been
made to develop a facilitating regulatory
framework, it has not yet gone far enough to
overcome the substantial cost implications
there are in outreach to large numbers
of people, often in dispersed locations,
with small value accounts. As a result,
the institutions responsible for providing
financial services do not yet perceive
the financial inclusion business as really
sustainable. Some effort has been made by
the banks to reach the financially excluded
sections of the population, but there is still a
long way to go before they can achieve their
first target of covering 55.8 million excluded
households and all villages with >2,000
population by 2012. Progress towards this
goal has been relatively limited so far and it
is apparent that the government’s effort to
encourage the banking system to promote
financial inclusion in an intensive manner
needs a substantial impetus if it is to achieve
adequate results.
Highlights of progress in achieving financial inclusion
Credit: As of March 2009, the number of borrowers with accounts less than `25,000 was 39.2 million
while those with less than `200,000 were 95.8 million. The total number of credit (borrowal) accounts
with banks was around 110.1 million, covering 18.3% of the adult population.
The banks had issued a total of 42.4 million KCC with sanction limits aggregating to `233,190 crore
by 31 March 2010. These contributed to 39% of the total priority sector portfolio lent to agriculture
though only 3.1% is in tiny accounts (