Financial Inclusion is the phenomenon of bridging gap between financial services and weaker sections of the Society and the low Income groups at reasonable cost. Financial Inclusion is a much talked about topic these days!
Let us first understand “Financial Inclusion”
Financial Inclusion has a decades old history in India but its major developments have started taking shape now only. It was believed to be like opening new Branches of Banks in remote areas. Now, it is doing much more than just opening various Bank Branches in remote areas to push this phenomenon to new heights. More emphasis is given on providing financial services through Electronic form as it is not feasible to have so many physical Branches as there are few customers in remote areas. Technology will go to play a pivotal role for the success of this scheme of Financial Inclusion.
It ensures access to suitable financial products and services for lower Income groups and weaker sections of the Societyat reasonable costs. It has become one of the most crucial aspects in our Economic Decisions for inclusive growth and development of the Nation.
The Idea behind this Scheme is Inclusive growth of each citizen of a nation where their financial resources are mobilized to strengthen their financial status and thus contributing to Nation’s growth as a whole.
Why Financial Inclusion Important?
The policy makers are looking at financial inclusion of India’s rural and semi-rural areas for the following reasons:
Making a Habit to save Money: Presence of Banking and financial services along with products will provide a habit to save more and grow more. This will ultimately result in booming Capital formation and people will start shifting their savings from real-estate, gold, etc to these formal avenues.
Providing Formal Channels: Financial Inclusion will provide unbanked population with formal channels of financial services unlike moneylenders, friends and family members. With the availability of transparent and fair system of Credit from these formal channels the people will be encouraged at procuring loans and thus bringing prosperity.
Building a Fool Proof System for Subsidies Transfer and Public Welfare: Government of India spends a huge sum of money for Public welfare programmes and providing subsidies to the needy but the corrupt system of Indian Governance loots away major portion of those subsidies which otherwise should have gone to those needy people and weaker sections of our society. Government is therefore directing a way for the Direct Transfer of those Subsidies on Cash basis to the actual beneficiaries directly to their Bank accounts rather than providing subsidies on Non-Cash basis.
There are lots of Bank accounts but few people are going for getting these services as Branches which may be several kilometers away from their residence. Nowadays Banks are opting for Digitization for majority of paperwork and money transfer. There are KYC norms available with minimum paperwork. This is also helping them in cost reduction. Even now the entire system of Banking Space here is working on cash. Banks are trying hard to convince clients to use electronic mode of payments that would reduce a lot on costs.
This blog is written by Sanjay, students of Post Graduate Diploma in Financial Planning (PGDFP), International College of Financial Planning (ICFP).
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