Financial inclusion is integral to holistic development
PremiumThe government is focusing on ensuring that financial services reach every corner of the country so that none, even in the remotest regions, is left out of India’s development journey.
The success of countries is defined by the relative prosperity of its people. India’s current government is focused on ensuring the availability of basic services in its remotest regions to ensure no person is left behind in the development journey. The essence of this principle was aptly captured in Prime Minister Narendra Modi’s clarion call of “Sabka Saath, Sabka Vikas, Sabka Vishwas" (Everyone taken along, development for all, and with everyone’s trust). He has also set out a vision for ‘India at 100’, which includes complementing macro-economic growth with a micro-economic level inclusive-welfare focus. A major part of this inclusive-welfare vision is to improve financial inclusion in India significantly.
The Prime Minister has led from the front on the issue of deepening financial inclusion. He has highlighted the strength of the Indian financial system, backed by a robust set of government interventions by way of reforms and schemes. This has encouraged bankers to invest in innovations to achieve greater financial inclusion. The Reserve Bank of India (RBI) also recently constituted an innovation hub to address the challenges of financial inclusion and efficient banking. The reforms launched under this government have helped recover about ₹5 trillion from financial defaulters.
Additionally, the government has committed itself to the initiative of resolving stressed assets worth ₹2 trillion via the National Asset Reconstruction Company (NARCL). The central government’s initiatives have helped India strengthen its financial system. For instance, in 2021, an asset-quality review had reported that the gross non-performing assets (NPAs) of public sector banks had decreased by 31.2%.
In her budget speech, finance minister Nirmala Sitharaman detailed the central government’s vision for financial inclusion and stated that 100% of India’s 150,000 post offices will be brought into the core banking system. Furthermore, it will allow access to accounts through net banking, mobile phones and ATMs, and allow the online transfer of funds between post office accounts and bank accounts. This decision will be especially beneficial to farmers and senior citizens in rural areas.
Digitization of financial services has been a catalyst in spreading the benefits of development to all in society. A case in point is the JAM trinity of Jan Dhan-Aadhaar-Mobile. The interlinking of bank accounts, Aadhaar and mobile numbers with an individual’s identity was first done under a pilot project to understand the reasons for leakages in subsidy disbursement. Under the JAM trinity, subsidies provided by the government are provided through a direct benefit transfer (DBT) mechanism to beneficiaries without the involvement of middlemen or agencies where many leakages were identified. In 2020-21, ₹2.1 trillion was sent directly to people’s accounts under schemes such as the Mahatma Gandhi National Rural Employment Guarantee Act, public distribution system and Pradhan Mantri Awas Yojana, among others. The Jan Dhan Yojana has also proved to be a game-changer during the unprecedented covid-related lockdown in 2020. Effective subsidy transfers helped ensure that incentives reached their rightful beneficiaries despite the extraordinary circumstances that existed at the time.
The dream of having financially-able citizens has reached its concluding stages thanks to the sustained efforts of the political administration. The finance minister has been a strong advocate of the vision of a financially-inclusive India. The ministry of finance has encouraged the empowerment of urban and rural cooperative banks. The government has also provided infrastructure and policy support for the fintech sector to prosper. India has witnessed a 72% rise in the number of digital payments processed in 2021 (bit.ly/3ghF9pB) over 2020 (bit.ly/3IYWtvF).
To further accelerate regional financial inclusion, we have launched and operationalized bank mobile vans in Aurangabad. These mobile vans provide banking and ATM services with the aim of spreading financial awareness and enabling people. We have also encouraged the National Bank for Agriculture and Rural Development to launch 12 additional mobile vans. To increase financial literacy, we have held meetings with the state-level committee of bankers to push credit outreach programmes. The ministry has also backed a decision to open 57 new bank branches in Assam and 30 branches in Manipur to speed up development in the country’s northeast region.
Due to such initiatives, more than 180 loan sanctions amounting to ₹21.92 crore were remitted by the State Bank of India to beneficiaries in Assam (October 2021). In Manipur, two credit campaigns were launched, through which more than 580 loan sanction letters were remitted with a total loan amount of ₹30.16 crores. Further, I have directed banks in Assam to increase their cash deposit ratio to 60% from the existing 55%.
The Indian government aims to empower its citizens through financial inclusion to achieve greater economic heights. In the ongoing budget session, key decisions that will improve financial inclusion are to be announced. The aim would be to further bolster development for each and every citizen with financial literacy while enhancing the prosperity of people through digitization.
Bhagwat Karad is minister of state in the ministry of finance, Government of India
Never miss a story! Stay connected and informed with Mint. Download our App Now!!