Promoting Financial Inclusion - United Nations Development ...

prefer to transact with banks only if the
latter provide overdraft facilities to meet
emergency needs. Their needs are more
often met by remittances and entrepreneurial
credit such as KCC, GCC.
Financial inclusion and banks’ business
plans: Since banks have a tendency to view
financial inclusion as a part of corporate
social responsibility rather than serious
business, financial inclusion is rarely
core to the bank’s business strategy. The
lack of infrastructure and cost effective
technology for facilitating small volume
transactions at the doorstep of the account
holder compounds the perception of high
costs and thus discourages banks from
providing financial services to low income
individuals.
Greater emphasis is required on
financial inclusion for the aged: The
need for financially inclusive services has
actually increased in recent years as the
cost of social commitments such as health,
safety and security has risen along with
improved life expectancy. While people
retire relatively young they need adequate
funds to maintain their standards of living.
The need for financial services such as
insurance, remittances, reverse mortgage
loans, facilities for pensioners and deposit
schemes for the older population has grown
over time.
5.2 PRODUCT SPECIFIC
CHALLENGES
At the same time, there are challenges
specific to financial products and services
introduced/promoted by RBI for the
dissemination of inclusive financial systems.
Analysis of these challenges is crucial to
an understanding of the issues that need
to be addressed to improve the efficacy of
financial inclusion initiatives.
5.2.1 NO FRILLS ACCOUNTS
Ironically, though no frills accounts (NFA)
have been designed keeping in mind the
needs of vulnerable groups, but they are
still not used by most of the NFA account
holders. Some of the reasons identified for
this are:
• Distance from banks: One of the main
constraints to the operation of NFAs
is physical access to banks. The costs of
conveyance and the opportunity cost
of the time required to reach the bank
consumes a significant proportion of
the savings of low income households
and thus becomes an economically
unviable option for them. Keeping this
in mind, the committee on financial
inclusion stressed the provision of
banking services physically close to
the account holders through channels
such as mobile banking, formation of
SHGs and provision of banking services
through BCs.
• Lack of information: Information about
NFAs is publicized either through the
print media or websites. Mostly illiterate
or semi-literate individuals living in
remote areas are unable to obtain the
information necessary to take advantage
of the facility. Though the RBI has
introduced the concept of financial
literacy centres for providing counselling
to the target clients it is yet to take off
on a large scale. The efficacy of such
centres in reaching the target clients is
still untested.
• Irregular fl ow of income: The low income
households for whom the NFAs are
designed tend to have an irregular and
uncertain flow of income; the frequency
and amount of savings undertaken
by such account holders is low and
infrequent as well.
PROMOTING FINANCIAL INCLUSION 33