THE FINANCIAL INCLUSION CHALLENGE

THERE HAS BEEN A SIGNIFICANT EMPHASIS ON FINANCIAL INCLUSION IN THE LAST DECADE WITH INITIATIVES LIKE BASIC BANK ACCOUNTS UNDER JAN DHAN AND MUDRA LOANS FOR SMALL FIRMS. HAVE THEY HELPED ADDRESS THE GAPS IN FINANCIAL INCLUSION?

- ANAND ADHIKARI

RECENTLY IN CHHATTISGARH, a Business Correspondent’s (BC) team faced a situation straight out of a Bollywood movie: a sprint for survival in a remote district—not from Maoists, but from a hostile tribal community wielding knives.

After a two-hour-long trek across challenging terrain, the shocked young executives of the BC, which acts as an extended branch, reached the bank’s brick-and-mortar branch. The base branch was the closest physical link to 30-odd households spread across four isolated villages for last-mile delivery of cash withdrawals and deposits.

The experience of these executives is emblematic of the financial illiteracy in the country’s far-flung areas that is still posing a challenge to financial inclusion. Forget about credit, insurance, or investment; the community was not forthcoming even for basic banking services. But this is not a unique situation. This is a situation that banks, non-banking financial companies (NBFCs), microfinance institutions (MFIs), and financial institutions grapple with in rural India, as 30 per cent of Indian villages are still hampered by financial illiteracy and poor connectivity. The task of serving them falls squarely on BCs, who bear the costs, even though their own viability hangs by a thread.

This situation exists not for want of trying; since Independence, governments have prioritised financial inclusion. Early efforts included nationalising banks, establishing co-operatives, lending to the priority sector, forming regional rural banks, the National Bank for Agriculture and Rural Development (Nabard), self-help groups (SHG), BCs, the establishment of the NBFC-MFI category, and granting specialised banking licences such as small finance bank (SFB) and payments bank.