Promoting Financial Inclusion - United Nations Development ...

6
The Way Forward
The Government of India is committed to
ensuring financial inclusion for the entire
population and this intention has been
reflected in the policy initiatives taken over
the last few years.Various policies have been
stimulated by the recommendations of the
committees set up for suggesting strategies
to promote financial inclusion and improve
the health of rural financial structures.
Over the past 4-5 years, as financially
inclusive policies have been put in place,
financial institutions have also started
experimenting with different models for
reaching the excluded and offering them
various services. With the overall framework
in place, it is now time to focus on large scale
implementation of the suggested policies.
As discussed in the previous section, and
based on the collective experience so far,
it is apparent that a few issues continue to
decelerate the progress towards financial
inclusion.
6.1 DO BANKS SEE THE BUSINESS
POTENTIAL OF FINANCIAL
INCLUSION?
As part of the renewed emphasis on
financial inclusion, the six lakh villages
(including 72,825 unbanked villages with
population >2,000) have been allocated
to various banks for coverage by 2012-15.
The banks have also been advised by the
RBI to submit their financial inclusion
plans, integrated with their normal business
plans, and approved by their Board. While
this measure undoubtedly encourages the
banks to give the activity some impetus,
the question remains whether banks see
true business potential in the delivery of
financially inclusive services or whether
they view it as a regulatory requirement
that they need to adhere to in order to
continue to do business in the more
profitable segments. Over the decades since
the first wave of bank nationalization in
1969, the regulations have required the
financial institutions to go down-market
and to financially excluded areas.
While much has been achieved under
the regulatory framework, what has been
done by the banks seems to have been the
minimum necessary to allow them to gain
approval. Thus, while significant areas of the
rural hinterland of the major states are now
reasonably served with banking services;
parts of central India, the hill regions and
the northeast as well as many of the poorest
areas of eastern India continue to be sparsely
banked. Even where banking services are
available in these regions they cater to the
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