Financial inclusion means making the financial services available to everyone at affordable costs. Under this, the services should be available for disadvantaged people and low-income groups.
Thus, the main objective is to serve the basic banking services to the unreserved people in the country. This process is for achieving economic growth in the country.
Also, the main idea is to bridge the gap between poor and rich people. Furthermore, it is done by getting the excess money from and serving it to the poor. The pivotal role in financial inclusion is played by the RBI.
Financial Inclusion by RBI
There are varieties of initiatives through which financial inclusion can be achieved in India. There are some initiatives taken by the financial regulators, government, and banking officials in India. They are:
- No frills account
- BSBDA – Basic savings bank deposit account
- LBS – Lead banking scheme
- PMJDY – Pradhan Mantri Jan Dhan Yojana
- Business correspondent system
Browse more Topics under Financial Banking Institutions In India
- Introduction to Finance
- Financial Institutions for Agriculture
- Financial Institutions for Industries
- Financial Institutions for Specific Areas
- Non-Banking Financial Company
- Financial Stability and Development Council
- Co-operative Marketing
No Frills Account
This is a basic banking account where you keep a minimum balance of zero or a very low balance. Recently, the changes were made in the no-frills account.
Also, these accounts were converted into BSBDA which is basic savings bank deposit account.
This was issued by the RBI in 2012.
Learn more about Commercial Banks and Financial Institutions here
BSBDA – Basic Savings Bank Deposit Account
This account does not have the facility of minimum balance account. As mentioned above, the no-frills account was also converted to BSBDA accounts. In this account, there are many services availed by the banks.
Also, these services include deposit and withdrawal of cash at the bank branch. This can also be done at the respective ATM’s of the bank.
Furthermore, receipt and credit of money done through electronic payment or by the means of cheque. There is also a facility of ATM card or ATM cum debit card.
LBS – Lead Banking Scheme
This scheme envisages the lead role for an individual bank. This includes private banks as well as public banks.
So, it is with respect to the districts allotted to them. Here the lead banks act as a point of contact. It is for coordinating with the credit institutions which perform towards districts.
Thus, this is done to increase the flow of small-scale industries, agriculture, and various other economic services. So, this includes the priority section in semi-urban and rural areas.
The word district here means the basic unit used for the geographical areas.
PMJDY – Pradhan Mantri Jan Dhan Yojana
The main slogan of this scheme is ‘Mera Khata – Bhagya Vidhata’. This means that my bank account is my god.
Also, the scheme is provided for the 50,000 plus overdraft facilities for accounts that are linked with Aadhar card. It is also provided for Rupay debit cardholders.
Business Correspondent System
These are the bank representatives that individually go to the areas that are allowed to them. Here are they have to carry out the banking tasks.
These individuals will help villagers to open their bank account and perform regular transactions.
For every account opened they get a commission from the bank or every transaction made and so on.
Benefits of Financial Inclusion
- By bringing more and more customers to the bank, it potentially increases the business of the banks.
- This also helps to improve the standard of living of the majority of people.
- It bridges the gap between rural people and urban people.
- Furthermore, it boosts the business of the banks and enhances the number of bankable customers.
Practice question Financial inclusion
Q. The financial services that are available at affordable costs to the low income and disadvantaged people of the society is known as
A. Deflation B. Financial stability C. Financial inclusion D. None of the above
Answer: C. Financial inclusion