ROLE OF BANKS IN PROMOTING FINANCIAL INCLUSION

 banks in India work broadly through three
The Indian economy is growing strongly whichsegments namely,. Corporate, retail and treasury.
ensures better recovery and asset valuation. For Instance, in the United States, The
Progressive bank reforms and low interest ratesCommunity Reinvestment Act (1997) requires
will increase borrowing activity to meet theirbanks to offer credit throughout their entire area
financial targets. Banking industry is making rapidof operation and prohibits them targeting only the
strides with Information technology drivenrich neighborhoods. In France, the Law on
initiatives and has led to expansion of productsExclusion (1998) emphasizes an individual’s
(i.e.) expansion of financial services giving birth toright to have a bank account. In the United
the concept of Financial Inclusion. Financial InclusionKingdom, a “Financial Inclusion Task Force”
is the availability of banking services at anwas constituted by the Government in 2005 in
affordable cost to the disadvantaged and loworder to monitor the development of financial
income groups. In India, the basic concept ofinclusion.
financial inclusion is having a saving or currentAmidst this background, the Banking sector is the
account at any bank. In reality, it includes loans,most leading sector in India has been among the
insurance services and much more, for alltop performers in the markets. It is quite
members of an economy. An inclusive financialremarkable to note that, Indian Banking industry
system has several merits. It facilitates efficientcan have itself as one of the most impressive
allocation of productive resources and thus canbranch network comprising of about 47,000
potentially reduce the cost of capital. In addition,branches of Scheduled Commercial Banks
access to appropriate financial services can(including RRB”S) and over 100,000
significantly improve the day to day managementCo-operative Credit outlets in rural and semi urban
of finances.areas. Despite this, a large number of poor
An inclusive financial system can help in reducingcontinue to remain outside the fold of formal
the growth of informal sources of credit such asbanking system. The problem of financial exclusion
money lenders, which are often found to beis very acute in India. According to the 59th round
exploitative. Thus, an all inclusive financial systemof the NSS survey, only 48% of the cultivable
enhances efficiency and welfare by providinghouseholds availed credits from the formal sector.
avenues for secured and safe saving practicesAccording to a recent NCAER–World Bank
and by facilitating a whole range of efficientRural Financial Access survey (RFAS), 70% of the
financial services.marginal landless farmers do not have a bank
In line with the above, after liberalization, theaccount and 87% have no access to formal
banking environment in India had grown morecredit. Hence, the banks in India felt the need for
competitive with the relaxation of restrictions andFinancial Inclusion. The Government of India,
adoption of International standards banks areReserve  Bank of India and NABARD together
forced to adopt measures to survive. The recenthave initiated a number of programs like Poverty
financial reforms and greater competition in theAlleviation programs, SHG – Bank linkage
banking industry have made it necessary forprogram, Micro Finance Institutions (MFI), Kisan
banks in India to concentrate towards theCredit Card (KCC), General Credit Card (GCC), No
excluded mass. Successful banks in India focus onFrill Account, opening up of more Rural Banks, and
the rural sector by providing Financial Inclusionimmediate workable options like NGO’S /
service. The importance of an inclusive financialCBO’S / CSO’S, Farmers club’s,
system is widely recognized in the policy circle andCo-operatives, Agri Clinics / Agri Business Centres
recently Financial Inclusion has become a policy/ Kiosks, Self Help Groups (SHG), local volunteers,
priority in many countries. Legislative measuresRural Development and Self Employment Training
have also been initiated in some countries.Institutes (RUDSET), Post Offices, etc.
Further more, in recent years, Indian Banking According to FICCI survey, the strong focus of
System has become dynamic and there is anthe Indian Banking industry is the regulatory
increasing trend in the number of depositors insystem, enabled India to carve a place for itself in
Banks.  The quest of financial inclusion isthe global banking scene. The regulatory systems
indispensable for the well being and growth of anyof Indian banks are rated above China and Russia,
country, more for a developing country like Indiaand at par with Japan and Singapore.
with large sections of population in the unorganized In India, the Reserve Bank of India has initiated
sector. The Government of India as well asseveral measures to achieve greater financial
Reserve Bank of India has been taking stepsinclusion, such as facilitating “no frill”
over the years to make financial servicesaccounts and “General Credit Cards” for
accessible to all .It is in this context, it is worth tolow deposits and credits. The German
mention the perils of financial exclusion.. FinancialBankers’ Association introduced a voluntary
exclusion not only hurts the excluded by keepingCode in 1996 providing for an “everyman”
them trapped in a vicious circle of poverty butbanking transactions. In South Africa, a low cost
also has ramifications for the entire country.bank account called “Mzansi” was launched
Financial empowerment leads to economic andfor financially excluded people in 2004 by the
social empowerment. There is empirical evidenceSouth African Banking Association. Alternative
on the critical role of finance in economic growth.financial institutions such as micro finance
Therefore financial inclusion, financial literacy andinstitutions and Self Help Groups have also been
inclusive growth are the themes of modernpromoted in some countries in order to reach
banking in India It is found that, the commercialfinancial services to be excluded.