Financial Inclusion Requires a Boost

R Gopalan

The backbone of financial inclusion activities is the use of IT solutions, mobile connectivity and biometric identification

Inclusive growth is one of the main planks of the government and bringing in hitherto excluded people to the mainstream of the financial institution network is an important priority in the medium term. The focus to financial inclusion was provided by the Rangarajan Committee through its aspiration that financial inclusion should denote delivery of credit and other financial services at an affordable cost to the vast sections of the disadvantaged and low-income groups. Based on this, over the last four to five years, a series of initiatives and programmes have been launched by the Reserve Bank of India to bring more and more people into the fold of formal financial institutions. The Reserve Bank of India set up four working groups to test the effectiveness of technology, identify the changes that are required to be made in the regulations and provide inter-connectivity across banks for taking the process of financial inclusion forward. On this occasion, we acknowledge the significant contribution made by RBI in fostering financial inclusion.

In India, focused attention on financial inclusion started in 2005. In November 2005, banks were advised to make available a basic banking - ‘no-frills’ account with low or nil minimum balance, as well as charges, to vast sections of the population. Banks were required to make available all printed material in the concerned regional languages. To encourage people to open accounts, simplified Know Your Customer (KYC) norms were introduced for accounts with balances not exceeding Rs 50,000. Banks were asked to consider introduction of a General purpose Credit Card (GCC) facility up to Rs 25,000 at their rural and semi-urban branches. Since it was clear that it would be difficult to set up branch networks across all villages in the country banks were encouraged to appoint Business Correspondents. Further the norms for appointment of Business Correspondents were also liberalised. Various categories of individuals, kirana shops etc. were allowed to become Business Correspondents for banks. Subsequently, mobile banking guidelines were also issued by RBI as mobile connectivity was thought of as a cheap but reliable model to reach out to the people. Recently, there has been relaxation in some provisions of the Prevention of Money Laundering Act, only to enable and facilitate the opening of small accounts for poor people. In addition, the guidelines for Business Correspondents have been liberalised to allow corporate and for- profit companies to become Business Correspondents’ of banks.

The Finance Minister decided to take advantage of the work done so far on financial inclusion and directed that habitations having population over two thousand, as per 2001 census, should be provided with banking facilities through business correspondent model by March 2012. He made an announcement to this effect in his budget speech last year. Banks were subsequently asked to devise a roadmap for their financial inclusion initiatives with the approval of RBI and also obtain clearance by each state level Bankers’ Committee. The Financial Inclusion Plans of all public sector banks are being constantly reviewed by the Department of Financial services. We believe that banks will be achieving the same within the stipulated timeframe. 

The backbone of financial inclusion activities is the use of tried and tested technology. This includes IT solutions, use of mobile connectivity and bio-metric identification. Financial inclusion got a big boost by the roll-out of the AADHAR process of the UIDAI. Most importantly, as we implement the process of financial inclusion, we are confident of meeting through this programme, the various objectives of the government.

I should recall at this stage the significant contribution made by the banking community in realising government’s objective through financial inclusion. But for their whole-hearted effort, it is not possible for us to succeed in our objective of financial inclusion. I should place on record government’s appreciation of the significant contribution made in this regard by the banking community, Having closely associated with the financial inclusion programme in the past one year, I am sure Swabhimaan will lead to more inclusive growth. We expect all the stakeholders to work together to realise our dream. 

Excerpts from Secretary – Economic Affairs S Gopalan’s address at the launch of Swabhimaan, February 2011, New Delhi

(The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of INCLUSION. Comments are welcome at

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