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The issue of financial accessibility and inclusion has always commanded an important position in the economic policies of India. Over the years, every government has tried to introduce new policies to make sure that the poorest of poor have access to all sorts of financial services. Interestingly, the country has been witness to policies that lie at opposite ends of the spectrum in the form of bank nationalization (1968) and opening up to the private sector (economic reforms 1991).

Why have these issues concerned the governments over the years?

A number of economic studies have shown a positive relation between the extent of financial inclusion and the economic development of a country. According to the deputy managing director of IMF, Mitushiro Fugusawa, experience has proved that financial inclusion can act as a bridge between economic opportunity and outcome. It opens doors for families to save and invest in their futures and ultimately helps in the overall economic development of the country.[1] Economic theory also suggests that there need to be proper links between the savers and investors in order for the savings to be used productively. In developing countries, most of the poorer families are often employed in the informal sector or are self-employed. This leads to their production and consumption decision being intertwined and them having to depend on informal sources of credit and other financial services. A CGAP research paper proposes that better access to financial services can help such households make better financial decisions, something they have to do in their everyday life.[2]

According to RBI and 59th NSSO results (2012), 73% of farmer households were financially excluded from formal sources of credit and 51.4% of farmers did not have access to both formal and informal sources of credit.[3] According to India’s most comprehensive index measuring financial inclusion in 666 districts, CRISIL Inclusix, the index improved from 51.0 (in fiscal 2013) to 58.0 (in fiscal 2016). The survey also showed that the Jan Dhan Yojana has been instrumental in increasing number of bank accounts. Interestingly, one-third of all new bank accounts were opened under the scheme.[4] Despite this, the level of credit penetration has been as low as 56.0 while deposit penetration stood at 78.3. This proves lack of formal credit sources even with the availability of bank accounts. When compared with other developing and developed countries, India has a lot of work to do in spite of recent success where factors such as bank branches, ATMs and removing regional disparities is concerned. For example, according to the CRISIL Inclusix index, the performance of the southern states is much better (79.8) than the national average (58.0). Furthermore, other disparities such as gender gap and accessibility for the disabled also need to be targeted.

Moving on, let us also look at the some of the major schemes that the Indian Government has adopted so far and how have they been able to impact the financial access of the Indian population over the years.  NABARD has been responsible for creating a number of rural banks and provide cheap formal credit. It popularized the SHG-Bank linkage model where a number of self-help groups were linked with rural banks to target the poorer population. Started in 1992, with the motive to provide access to low-cost financial services, the model has been able to link more than a million SHGs with banks today. In spite of its overall success, the SHG members still face a number of problems such as lack of insurance facilities, delay in sanctioning of loan, inadequate bank loans etc. Swaabhiman program was launched in 2011 with the aim to bridge the gap between rural and urban areas. This program was one of the first schemes to extensively focus on bringing the underprivileged into the formal banking fold. The scheme operated till 2013 and was followed by the launch of the Jan Dhan Yojana. Experts generally see the scheme as unsuccessful and blame its unscientific approach where one bank correspondent was appointed for public sector banks for up to 20 clusters.[5]

After this, the Pradhan Mantri Jan Dhan Yojana was started in 2014 as one of the most ambitious financial inclusion programmes. To expand the reach of Swabhiman scheme, it was decided to abandon the cluster approach and instead adopt a broad collaborative model. It works on the Bank Mitr Model where gram dak sewaks (in the post offices) are utilized as bank mitr or bank correspondents. Unlike many other schemes, it doesn’t focus just on providing cheap credit but also at increasing the number of bank accounts and thus giving a push to savings. So far, impact studies have shown largely positive outcomes. There has been an increase in the number of bank accounts and also in bank deposits. According to a study by International Journal of Research – Granthaalayah, in 2014, 35.37 million accounts were opened which increased to 226.14 million in year 2017.[6] Certainly, increase accessibility of banks has lead to more and more rural people availing banking services. According to the same study, there was found to be a relation between spreading of financial information and inclusion. Thus, this is one area of improvement. The implementation of scheme at grass root level also suffers from problems like lack of budgetary provisions, lack of incentives to private banks, nonregulation of overdraft facility and misuse of authority by bank correspondents. In order to achieve even better results in the future, the policy makers need to focus on eradication of such problems.

Other than these, schemes like Pradhan Mantri Jivan Jyoti Bima Yojana, Sukanya Samridhi Yojana, Rashtriya Swasthya Bima Yojana, Pradhan Matri Mudra Yojana focus on specific issues such as insurances, gender gap and providing easy credit to MSMEs.

In conclusion, the discussion above has proved that the governments with their varied policies have been able to make inroads in the rural areas when it comes to financial inclusion. The tinkering of policies over the years has proved that policy makers have to keep changing their approach from time to time in order to suit the time and the objective. Hence, we must agree that despite the success of schemes like the PMJDY and others, there is always a scope for improvement.


[1] Furusawa, M. (2016, September 20). Financial inclusion: Bridging economic opportunities and outcome [Transcript]. Retrieved from https://www.imf.org/en/News/Articles/2016/09/20/sp092016-Financial-Inclusion-Bridging-Economic-Opportunities-and-Outcomes

[2]  Cull, R., Ehrbeck, T., & Holler, N. (2014, April). Financial Inclusion and Development: Recent Impact Evidence. Focus Note 92. Washington DC: CGAP.

[3] Bhaskar, P.V. (2013, December 10). Financial Inclusion in India: An Assessment [Transcript]. Retrieved from


[4] CRISIL (2018, February).  Financial inclusion surges driven by Jan Dhan Yojana. CRISIL Inclusix volume 4. Retrieved from https://www.crisil.com/en/home/our-analysis/reports/2018/02/crisil-inclusix-financial-inclusion-surges-driven-by-Jan-Dhan-yojana.html

[5] Acharya, N. (2015, November 23). Why Government’s Financial Inclusion plans are Floundering. Business Standard.  Retrieved from http://www.business-standard.com/article/current-affairs/why-government-s-financial-inclusion-plans-are-floundering-115112301163_1.html

[6] Sharma, N., & Goyal, R. (2017, April). Pradhan Mantri Jan Dhan Yojana (PMJDY) - A Conceptual Study. International Journal of Research- Granthaalaya, 5 (4), 143-152.

Image credits-  HeroFinCorp

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Written By Pragya Mishra

Economics Graduate

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