Significance of Financial Inclusion in Indian Economy

Financial inclusion can be defined as the process of ensuring access to appropriate financial products and services needed by all sectors of the society in general and vulnerable groups such as weaker sections and low income groups in particular, at an affordable cost. Financial inclusion not only means that opening of saving bank account but signifies creation of awareness about the financial products such as credit, insurance etc. In fact, the main reason for financial exclusion is poverty. Still now 21.9% people of our country is below poverty line. Their income is so low that they cannot think about their saving. Not only that, the other reasons why they are excluded from the formal financial institution are lack of awareness, illiteracy, distance from branch, branch timings, cumbersome documentation and procedures, unsuitable products, language, staff attitudes, etc. Financial inclusion leads to increase in savings, investment and thereby, inspires the processes of economic growth. It also makes a platform of saving habit especially among the poor who have been living at the bottom of the pyramid, mainly because of absence of savings which make them a vulnerable lot. RBI has taken different types of policies for quick financial inclusion in the country. These are: branch expansion in rural areas, agent banking- business correspondents/business facilitator model, relaxation KYC norm, bouquet of financial services and direct benefit transfer. Thus, it can be concluded that a collaborative approach can definitely help in successfully overcoming this challenge.