Financial inclusion has been viewed as important means to enhance economic growth and counter income inequality by increasing access of the poor to formal financial services. This has been getting momentum with initiative of G20 countries, including China and India, since 1999 as finance sector reform agenda to counter global economic crisis.
Globally, it aims for universal financial inclusion by including half of excluded working age population into the services of formal financial system that includes deposits service, saving, payment and transfer and credit and insurance. Mostly, the poor and people in informal sector have very insignificant access to institutional financial services affecting their income and development.
Along with the Global Partnership for Financial Inclusion, as a global platform of G20 countries, there are a large number of global players engaged in promoting financial inclusion such as G20, European Union, United Nations Capital Development Fund, International Fund for Agricultural Development, World Bank, IMF, DFID and VISA, Master Card, Citi Bank, Bill and Melinda Foundation, Ford Foundation and US Aid etc. The growth programme by DFID and Small Industries Development Bank of India (SIDBI) aims to improve basic financial services for the poor in four States of Bihar, UP, MP and Odisha.
CRISIl, one of India’s rating agencies, in its report in 2015 on index for measuring the progress of financial inclusion in India covering 632 districts says in terms of banking service, the branch, and deposit and credit still remain under penetration in most parts of the country. One third of Indian did not have a bank saving account at the end of March 2013 and only one in seven have access to credit.
The census of 2011 estimated that 42 per cent of the households had no access to banking and among rural households only 55 per cent have access to banking. Among urban households, more than 30 per cent have no access to banking. In the present banking network of the country, rural areas still remain neglected in terms of bank branches and ATM networks. Out of total bank branches, only 38 per cent are in rural areas and the ATM networks account for14 per cent in rural area till March, 2014.
With the slogan of Sab Ka Sathe Sabka Vikas, Prime Minister of India has formally launched the Prime Minister Jana Dhana Yojana (PMJDY) in August 2014 as a national mission for financial inclusion, under the Department of Financial Services, Union Ministry of Finance, with a target of easy and universal access to banking facility especially to weaker section of the society, women, small and marginal farmers and labourers in rural and urban areas with bank account, saving, remittance, overdraft, debit card and credit, accident insurance and pension facility. The accounts can also be used to transfer the benefits of various subsidy schemes of the Government directly to the beneficiaries of respective programmes through DBT. RBI has permitted Aadhaar as a proof of both identity and address for the purpose of opening bank account.
The Government of India has been trying to ensure universal access of banking services to all households. In the year 1969 bank nationalisation was done with the objectives to reach to the poor by ensuring banking service for their development by opening of branches and also there have been priority sector lending provisions specially for the rural and urban poor and people engaged in agriculture, farmers, small and marginal farmers, landless share croppers, micro entrepreneurs and other self employed activities. The poor States with backward areas having less connectivity and large numbers of illiterate people are prone to all kinds of exclusion in accessing financial services. The States of Himachal Pradesh, Punjab, Kerala and Karnataka have good bank density where as States such as Odisha have not achieved a favorable bank density with limited branches. It is reported by a State level bankers committee that in about 3,800 villages in the State, not a single household is availing banking facility and out of 96, 61,085 households, nearly 45 per cent i.e. 43,51, 103 households have availed banking facility.
It is being suggested by many that financial inclusion is very relevant to State like Odisha having a vast majority of poor and illiterate poor who mostly depend on casual labour and informal sector employment. In order to fight poverty, access to institutional financial service is very important which can play a critical role in generating employment and income at micro level. It will also contribute in arresting the exploitative private money lending which is rampant in the State.
It is being reported by many that during last 45 years of bank nationalization, not much visible changed have occurred in the life of rural poor in informal sector. Banking service still remains inaccessible for the poor and they are excluded in getting services of institutional financial services. They largely depend on traditional process to manage their finance with all risk and vulnerability.
It has been reported many a time that the poor people are being routinely harassed by the bank officials while opening a bank account or pursuing small credit for livelihood development. Banking services remain limited with the educated and financially well-off, while there has been very limited effort by the banks to reach to the inaccessible rural areas and especially to the poor and informal sector. Money lending has been a major problem in rural and tribal area of Odisha which has been very much exploitative with higher rate of interest and in this process people get dispossessed from their productive assets such as land. In Odisha there is law to prevent money lending in tribal area by money lenders but this problem still continues in the absence of institutional finance service. Most of the small and marginal farmers and landless sharecroppers are compelled to take loan from private money lenders to meet the agricultural activities and other needs and during harvesting seasons they pay it back with very higher rate of interest.
The State level bankers committee of Odisha reports 2013-2014 say that there are 4,281 branches which include 25 public sector banks, 11private sector banks , two regional rural banks and State Cooperative Bank in the State out of which the public sector banks have maximum branches of 2,637. The State Bank of India has highest number of branches, followed by UCO Bank. In order to carry out the financial inclusion plan in the State, the Chief Secretary of Odisha has reviewed the process in meeting of PMJDY implementation committee to facilitate the financial inclusion plan. There are 4,200 Business Correspondences (BCs) and bank agents appointed in the State for helping the villagers in linking them with bank services, but it is reported that banks found it difficult to get business correspondence in interior parts. BCs are representatives of banks to provide banking services to the poor and get paid commissions by banks. It is targeted to open 2,000 branches in Gram Panchayats without bank in the year 2015-2016.
The PMJDY has given emphasis to open branches in hilly, tribal and difficult areas which the State Government should give priority. Added to the financial literacy, rural connectivity and power supply have been a major issue in opening braches. The State Government along with other international and national agencies and private companies should help the banks in expanding new branches in interior parts of the State by building basic infrastructure and other required facilities and at the same time, promote financial literacy among the rural poor and specially people in interior parts.