By Poorva

Edited by Namrata Caleb

“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”- Franklin D Roosevelt

The Committee on Financial Inclusion, chaired by Dr. C Rangarajan, defined Financial Inclusion as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups at an affordable cost. We all have a fairly good idea of what financial inclusion means. We also know that it has an indispensable role to play in the process of economic development. It promotes savings among households. The access to credit through formal sources is much more convenient than the usually exploitative informal sources of credit. In 2013, a working paper by the RBI plotted the progress that India saw in terms of access to formal and informal sources of credit since independence.

As can be seen from the graph, there has been a significant shift from the informal sources to the formal sources of credit. However, the fact that India has still not been able to eradicate informal sources, says a lot in itself.

Lack of financial inclusion bears a close relation with the failure to eradicate widespread poverty in India. There can be innumerable reasons responsible for the fact that India has a third of world’s poor. The inaccessibility of formal sources of credit, which aren’t generally as exploitative as the informal sources, aggravates the problem. It is not hard to grasp the relation between debt traps and farmer suicides. The recent census revealed that nationwide, the farmers’ suicide rate (FSR) was 16.3 per 100,000 farmers in 2011. The picture seems bleak. However, there have been several steps taken in the right direction.

Financial Inclusion had always been the pet term of the RBI, which has, in fact, taken many steps possible in its purview to achieve financial inclusion. The recent guidelines issued by the RBI, inviting companies to get licenses for setting up payment banks and small banks has come not a moment too soon. The intention behind the setting up of payment banks is to further financial inclusion by providing small savings accounts. The RBI also stated that payment banks will provide remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities, by enabling high volume-low value transactions in deposits and payments / remittance services in a secured technology-driven environment. So with a blend of finance and technology, RBI aims at furthering financial inclusion.

Another aspect that is closely knitted with financial inclusion is financial literacy. The annual MasterCard’s index for financial literacy shows that in terms of overall financial literacy, India is at the bottom among 16 countries in the Asia-pacific region. This gives India another reason to focus on making access to financial services easy and convenient. In fact, the RBI has already started with a Financial Literacy Project, which makes the relevant financial knowledge easily available in all languages. For the fruits of development to be spread to the nook and corner of our country, it is essential for the Indian population to be equipped with the right armoury of financial literacy.

Hence, not all hope is lost. Recent steps taken by RBI have reignited the battle for financial inclusion, an indispensable aspect of development.


Financial Inclusion in India – An Assessment (Speech delivered by Shri P. Vijaya Bhaskar, Executive Director, Reserve Bank of India at the MFIN and Access-Assist Summit organised in New Delhi on December 10, 2013)

Poorva is a first year Economics student at Lady Shri Ram College, Delhi. She keeps herself abreast of all the current affairs and holds a firm opinion about everything happening around her.  She deems all forms of expression, be it acting, painting or writing, as a gift to the mankind. She is also involved in social service through two of her college societies, Enactus and NSS. She can be contacted at

Posted by The Indian Economist | For the Curious Mind