Financial Inclusion: Meaning and Barriers

Definition: Financial inclusion is delivery of banking services at an affordable cost to the

vast sections of disadvantaged and low income group

Advantages
of Financial
Inclusion:
Turns
savings
into
investment
Financial ecurity of family
Income ine!uality falls
Boosts "D#$
Investment in Agri and allied activities
#rotection from money lenders and #on%i schemes
&omen empowerment etc$ etc$

teps Taken By "overnment towards Financial Inclusion

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These teps
may have
introduced lot of new terms to you) so lets take a look at these measures in detail*
BA+,"-./0D I0F.-MATI.0 'banking system(
0o1Frills2 Account :
In the Mid Term -eview of the #olicy '3445146() -BI e7horted the banks to make
available a basic banking 8no frills2 ' frill9unnecessary features( account
either with 80I:2 or very minimum balances
&ith charges that would make such accounts accessible to vast sections of the
population$
The nature and number of transactions in such accounts would be restricted and
made known to customers in advance in a transparent manner$
8implification of 8,now ;our +ustomer ',;+(2 0orms :
<nable those belonging to low income groups without documents of identity and
proof of residence to open banks accounts$
In such cases banks can take introduction from an account holder on whom full
,;+ procedure has been completed and has had satisfactory transactions with the
bank for at least si7 months$
ome upper cap on deposits and credit is there$
<nsuring reasonableness of bank charges :
-BI has issued instructions to banks making it obligatory for them to display and
continue to keep updated) in their offices=branches as also in their website) the details
of various services charges in a format prescribed by it$
&hite :abel ATMs
Doesn2t have such Bank logo) hence called &hite label ATMs$
-BI has given license = permission to non1bank entities to open such ATMs
ponsor bank : provides the cash
&hite :abel ATM company : -ents the place) looks after maintenance and
servicing of the machine
-BI re!uires &hite label1ATM companies to install machines in the ratio of >
Two ATMs in 'tier ? to 6 place( : .ne ATM in 'tier @13 place($ 'tier 3 means above
54)444 population (
Aalue added services like mobile recharge) utility bill payments etc also available
value added services plus elling advertisement space in the room and above the
door lead to revenue generation
Business +orrespondent 'B+( ystem
Business correspondents are bank representatives$
They help villagers to open bank accounts$
They help villagers in banking transactions$ 'deposit money) take money out of
savings account) loans etc$(
The Business +orrespondent carries a mobile device$
The villager gives his thumb impression or electronic signature) and gets the
money$
Business +orrespondents get commission from bank for every new account
opened) every transection made via them) every loan1application processed etc$
0".s) B"s)MFIs)#ost .ffices) Insurance agents) #anchayats) +ivil ociety
.rganisations '+.s( etc$ can become B+ or banks
FI0.) India2s largest Business +orrespondents company
FI0.9Financial Inclusion 0etwork and .perations 'FI0.($
It is promoted by various #ublic and #rivate sector banks and insurance
companies like :I+
wabhiman #roCect
Initiative by the Finance Ministry D Indian Banks2 Association
launched in 34@@
Make banking facilities available to every habitat with a population E3444 'by
March 34@3$(
Banks will provide basic services like deposits) withdrawal) ,isan +redit +ard
',++s( etc via Business +orrespondents 'B+s( also known as Bank aathi$$
"overnment will send subsidies and social security benefits 'pension etc$( directly
to beneficiary2s account$
Background Information '+-<DIT(
"++
to increase flow of credit to individuals for entrepreneurial activity in the non1
farm sector
All +redit +ard 'e$g$ Artisan +redit +ard) :aghu /dyami +ard) waroCgar +redit
+ard) and &eaver2s +ard etc$( catering to the non1farm entrepreneurial credit needs of
individuals are covered by "eneral +redit +ard cheme$
the consumption credit e7tended to individuals is not be reported under "++
,++
implemented by +ommercial Banks ) --Bs ) and +ooperative
&hat Are the benefits of ,++:
It follows a simplified procedure for credit to farmers) a large number of whom
are illiterate or poorly educatedF
There is no need to apply for loan every year as ,++ provides the farmers with a
credit facility on ongoing basis or revolving creditsF
This allows the farmers to buy seeds) fertili%ers and other inputs as per his needsF
-epayment is allowed after harvest period and thus farmer finds it easier to settle
the loan by selling his produceF
There is a fle7ibility of drawal of funds from any branch even when he has gone
to town for purchase of agricultural inputs
<ligibility:1
Farmers G Individuals=Hoint borrowers 'owner cultivators(
Tenant Farmers) .ral :essees I hare +roppers
B"s or Hoint :iability "roups of Farmers including tenant farmers) share
croppers etc$
&hat are the Benefits to Banks
@ &ork load of rural branches is considerably reduced as there is no need for
repeated appraisal and processing of loan papers
3 implification of documentation and disbursement procedure$
? -eduction in transaction cost to the banks$
J Better Banker G +lient relationships
Background 'Insurance(
Agricultural Insurance
0ational Agricultural Insurance cheme '0AI(: By Agriculture Insurance
+ompany of India :td$
&eather Based +rop Insurance cheme: to insure farmers against adverse weather
incidence
Aam Admi Bima ;oCna
landless agricultural families D those involved in J6 other trades including beedi
workers) carpenters) cobblers) fishermen) weavers) persons with disability employed
in different sectors) sweepers) drivers) anganwadi teachers and members of self1help
groups K insurance benefits under this scheme$
Besides providing a life cover of -s$ ?4)444 for natural death) -s$ L5)444 amount
would be paid to the family in case of death due to accidents$
If the person covered under the insurance becomes partially disabled) he will be
paid -s$ ?L)544 as insurance amount and if the victim becomes fully disabled he will
be paid -s$ L5)444$
For children : Also) two children in his family will be paid -s$ @44 a month as
scholarship$
Hanashree Bima ;oCana'launched 3444( was merged with Aam Aadmi Bima
;oCana'launched 344L(
-ashtriya wasthya Bima ;oCna
<very Mbelow poverty lineN 'B#:( family holding a yellow ration card pays I0-
registration fee to get a biometric1enabled smart card containing their fingerprints and
photographs$
This enables them to receive inpatient medical care of up to I0- ?4) per family
per year in any of the empanelled hospitals$
#re1e7isting illnesses are covered from day one) for head of household) spouse
and up to three dependent children or parents
The scheme started enrolling on April @) 344O
-aCiv "andhi hilpi wasthya Bima ;oCana
+omprehensive health insurance scheme for the handicraft artisans across the
country$
#ost office
Bas tied up with :I+ G offering many insurance schemes like "ram urakha)
uvidha) umangal etc$
Background 'Investment(
-aCiv "andhi <!uity avings cheme '-"<(
Ta7 saving scheme$
To attract more people to invest in securities market$
annual income must be below @3 lakh
This must be your first investment in securities market
Money locked in for ? years
;ou must purchase approved shares=mutual funds only$
For investment upto -s$54444) you get 54P deduction in income ta7$
;ou don2t have to pay ta7 on dividends paid by the company$