WORLD ACADEMY OF INFORMATICS AND MANAGEMENT SCIENCES
ISSN : 2278-1315
The Indian example provides an even stronger illustration of
Reserve Bank of India had given licenses to 11 banks,
the alignment between financial inclusion and poverty levels
and there were six banks in operation. The successful
– over an 8-year period ending in 2017, there was a 45%
adoption of these banks is indicative of a likelihood of being
increase in the number of financially included citizens, and
able to offer third-party products such as insurance, loans and
the country now has 65 people escaping poverty every
mutual funds, in the near future.
minute. According to the World Poverty Clock, India has
shown one of the fastest rates of poverty reduction in the
As with all successful development-driving activities, the
world, and there are indications that poverty could be
Indian government ensured that their efforts towards
eliminated by 2030. India, which has had the highest global
increasing inclusiveness was closely monitored, with clear
poverty rate (in terms of absolute numbers of people) for
benchmarks, such that all progress could be easily measured.
decades, has now been surpassed by Nigeria.
The country launched its first financial inclusion index in
2013 – the CRISIL Inclusix – with the objective of becoming
At the end of May 2018, a study showed that in comparison
a critical gauge for measuring progress on financial inclusion
to India’s 73 million citizens (11% of the total population)
based on branch penetration, deposit penetration, credit
living in extreme poverty, Nigeria, which has over 40% of
penetration and insurance penetration. This Index would also
its population living in extreme poverty, has now surpassed
enable the government to see where an enhancement of tactics
India. Furthermore, with a year-on-year population increase
and changes in approach might be required.
of 3%, and the overall number of Nigerians with access to
financial services having dropped from 44% in 2014 to 40%
However, while enormous growth continues to be recorded in
in 2017, this report highlights an increased urgency for
India, a neglect of direct financial literacy efforts has been
Nigeria to increase and improve its efforts in establishing
reported by many, who have illustrated a limited awareness of
stronger and more effective long-term approaches to
financial solutions amongst lower income populations and
financial inclusion.
tech-savvy youths. In addition, payment banks face challenges
of over-competition, and an inability to lend money, which
The progress made so far in India provides numerous
result in access limitations. Thus, while India’s approach
lessons for achieving success and avoiding pitfalls in
presents a strong model to follow, the Nigerian market needs
Nigeria’s financial inclusion strategy. India has a long
to adopt its own market-tailored strategy, which
history of efforts by various Indian governments to push for
accommodates all the various ways to develop a more
increased financial inclusion, but few approaches have had
inclusive society, from immediate banking access to enhanced
as much impact as Prime Minister Narendra Modi “Pradhan
literacy and awareness to an efficient leveraging of mobile
Mantri Jan Dhan Yojana” (PMJDY) – a wealth scheme
and broadband technology.
launched in 2014.This scheme was established to increase
the number of people with bank accounts in the country,
FINANCIAL INCLUSION IN INDIA
which in 2014 was at 53% of citizens aged over 15. This
In the Indian context, the term ‘financial inclusion’ was used
effort was based on no-frills accounts and government
for the first time in April 2005 in the Annual Policy Statement
subsidy disbursements and drove a large number of account
presented by Y.Venugopal Reddy, the then governor, Reserve
openings – with over 260 million accounts opened between
Bank of India. Later on, this concept gained ground and came
2014 and 2016. However, this no-frills account structure –
to be widely used in India and abroad. While recognizing the
which allowed the maintenance of accounts with or with
concerns in regard to the banking practices that tend to
little or no minimum balances – created significant systemic
exclude rather than attract vast sections of population, banks
issues. These accounts were largely inactive and thus
were urged to review their existing practices to align them
expensive to maintain, for no associated revenue, while
with the objective of financial inclusion. The Report of the
lending done to the recipients quickly became non-
Internal Group to Examine Issues relating to Rural Credit and
performing, leaving significant liabilities on the bank’s
Microfinance (Khan Committee) in July 2005 drew strength
balance sheets.
from this announcement by Governor Y. Venugopal Reddy in
the Annual Policy Statement for 2005-06 wherein he had
To address these risks, and reduce the burden on the
expressed deep concern on the exclusion of vast sections of
traditional banking sector, the government has established a
the population from the formal financial system. In the Khan
new banking license – payment banks – in 2014. This
Committee Report, the RBI exhorted the banks with a view to
license essentially gives companies who already serve the
achieving greater financial inclusion to make available a basic
poorest members of the wider population the ability to offer
"no-frills"
banking
account.
Khan
Committee
financial services. Companies of this sort could range from
recommendations were incorporated into the mid-term review
FMCG (Fast Moving Consumer Goods) distributors to
of the policy (2005–06). Financial inclusion again featured
telecommunications and retail companies.
later in 2005 when it was used by K.C. Chakraborthy, the
chairman of Indian Bank. Mangalam, Puducherry became the
They provide customers with quick and easy access to a
first village in India where all households were provided
bank account, easy fund transfer, digital debit cards, and
banking facilities.
interest rates on savings accounts, which all combine to
increase their attractiveness. The most successful is Pay TM,
As a result of the great achievement as observed above under
an e-commerce company that also operates under the
the financial inclusion in Nigeria, The Indian Reserve Bank
payment banks license; in just two years of operations, they
vision for 2020 is to open nearly 600 million new customers'
attracted 300 million customers. By April 2018, the
accounts and service them through a variety of channels by
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