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Financial Inclusion


Financial inclusion is defined as providing individuals and businesses with useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit, and insurance – responsibly and sustainably.

Financial inclusion has been identified as a necessary condition for the achievement of seven of the seventeen Sustainable Development Goals. The G20 reaffirmed its commitment to advancing financial inclusion globally and to implementing the G20 High-Level Principles for Digital Financial Inclusion. Financial inclusion, according to the World Bank Group, is a critical enabler of poverty reduction and shared prosperity.

Possessing a transaction account is the first step toward broader financial inclusion, as it enables individuals to store money and send and receive payments. A transaction account acts as a conduit for access to additional financial services.

Individuals who hold bank accounts are more likely to use other financial services, such as credit and insurance, to start and expand businesses, invest in education or health, manage risk, and weather financial shocks, all of which can improve their overall quality of life.


  • Low-income households and small informal businesses have a lack of the financial literacy.

  • The traditional banking model's high operational costs.

  • Excessive regulatory requirements for products and market entry, as well as a conservative regulatory approach to new technologies

What has government done?

The government has launched a number of flagship initiatives aimed at promoting financial inclusion and ensuring financial security for the country's poor and unbanked.

The Pradhan Mantri Jan Dhan Yojana, the Pradhan Mantri Mudra Yojana, the Stand-Up India Scheme, the Pradhan Mantri Jeevan Jyoti Bima Yojana, the Pradhan Mantri Suraksha Bima Yojana, and the Atal Pension Yojana are among them. Additionally, financial inclusion is facilitated through the promotion of Aadhaar and direct benefit transfer schemes.

Microfinance is a highly effective method of providing funds to the economically disadvantaged segments of society. Microfinance is the provision of microloans or microcredit to underprivileged entrepreneurs and small-scale business enterprises. This mode of financing has greatly aided India in achieving cost-effective financial inclusion. It has had an impact on the lives of the country's poorest citizens. It entails the provision of loans, savings instruments, and other financial instruments for the purpose of making more money and efficiently saving it for a variety of purposes.

There are many impoverished people in the country who lack access to financial resources and have no idea how to get out of their hopeless financial situation. They will be given opportunities to start a business or get a better job, allowing them to improve their lifestyles, thanks to basic microfinance.

These schemes have resulted in significant advancements. According to World Bank data, 53% of adults in 2014 had a bank account. This increased to 80% in 2017, putting it on a par with China.

Numerous recent independent studies have documented an increase in bank account ownership and active use as a result of the Jan Dhan scheme. Additionally, the penetration of low-cost insurance and pension schemes has increased. While financial assets are becoming more important to Indian households, physical assets remain the primary source of savings for them.

Mobile payments were previously unknown and underutilised in India. However, following demonetization and the launch of the BHIM platform, mobile payment penetration has increased. Numerous new initiatives, such as Aadhaar-enabled payment services and payment banks, will increase mobile payment adoption.

Policy Suggestions

An Arthik Shiksha Abhiyan will help improve financial literacy and may be included in regular school curricula. Furthermore, efforts to improve financial literacy should be supplemented by mass media campaigns that provide information on financial products and how to use them.

Paperless banking will reduce friction, documentation proof requirements, and banking service costs. As a result, a larger proportion of the population will be brought within the purview of the formal financial system. On the policy front, the government may conduct a survey to assess the current functioning and assess impediments and then formulate policy accordingly. As an example, KYC rules could be relaxed.

Make use of payment banks and other platforms to expand payment systems in underserved areas. Post offices are a common sight in every village. Payment banks, such as India Post Payment Bank, have the potential to revolutionise the payments system. The hesitation factor could be addressed by this to some extent.


Financial inclusion seeks to involve everyone in society in prudent financial management. Many poor households in India do not have access to financial services. They are unaware of the functions of banks. Even if they are aware of banks, many poor people do not have access to these services. These economically disadvantaged members of society may also lack proper documents to provide to banks for verification of identity or income. Every bank has a set of mandatory documents that must be provided during the loan application or account opening process.

Financial inclusion aims to remove these barriers and provide economical financial services to the underprivileged segments of society so that they can be financially independent without relying on charity or other non-sustainable sources of funds. Financial inclusion also aims to raise public awareness about financial services and financial management. Furthermore, it intends to create formal and systematic credit avenues for the poor.

Financial inclusion is the concept of encouraging banks and other financial institutions to assist the unbanked segments of society. Many of these institutions are also focusing on empowering women financially by offering special rates, exclusive discounts, and other benefits.


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