Inclusive Banking

Topics: Bank, Financial services, Credit union Pages: 9 (1847 words) Published: November 10, 2014


TABLE OF CONTENTS

Introduction……………………………………………………………………………..…….2 Inclusive Banking………………………………………………………………......................3 Bottlenecks…………………………………………………………........................................3 Way Forward……………………………………………………………………………….....3 Why Priority Sector Lending………………………...………………………………….…….4 New Initiatives…………….…………………………………………………………….…….5 Plan for ICICI Bank……..………….……………………….…………………………….…..5 Product…………………………………………….…………………………………………..6 Channels of Distribution……………………………………………………………………....6 Credit Guarantee………………………………………………………………………………7 Costs Incurred…………………………………………………………………………………7 Selling Opportunities………………………………………………………………………….7 References………………………………………………………………..……………....…....8

INTRODUCTION
WHAT IS 'FINANCIAL INCLUSION'?
Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society, in contrast to financial exclusion where those services are not available or affordable. Access to financial products is constrained by several factors which include: lack of awareness about the financial products, unaffordable products, high transaction costs, and products which are not convenient, inflexible, not customized and of low quality. Financial Inclusion promotes thrift and develops culture of saving and also enables efficient payment mechanism strengthening the resource base of the financial institution which benefits the economy as resources become available for efficient payment mechanism and allocation. The empirical evidence shows that countries with large proportion of population excluded from the formal financial system also show higher poverty ratios and higher inequality. If we are talking of financial stability, economic stability and inclusive growth with stability, it is not possible without achieving Financial Inclusion. Thus financial inclusion is no longer a policy choice but is a policy compulsion today. And banking is a key driver for inclusive growth.  However, we must bear in mind that apart from the supply side factors, demand side factors, such as lower income and /or asset holdings also have a significant bearing on inclusive growth. Owing to difficulties in accessing formal sources of credit, poor individuals and small and macro enterprises usually rely on their personal savings or internal sources to invest in health, education, housing, and entrepreneurial activities to make use of growth opportunities. The role of the financial sector in the financial inclusion efforts in India, date back to early 60s when the focus was on channeling of credit to the neglected sectors of the economy and weaker sections of the population. Starting with 1990s the focus shifted to strengthening financial institutions as part of financial sector reforms. The merits of financial sector reform need to be seen through the prism of what finance could do to harness the growth potential with stability, and financial inclusion represents a critical component of the policy process that intends to make the financial system serve the needs of the real economy. The 1990s also saw introduction of self-help groups – bank linkage programme and launch of Kisan credit cards in the country. The present phase of pursuing financial inclusion as a declared policy objective started in 2005.

INCLUSIVE BANKING
Its objective is to take banking services to everybody to meet their entire savings, credit and remittance needs initially, and needs for all other financial products and services subsequently. Initially it focused on villages with population above 2000 but the banks need to plan to cover villages with population below 2000 in an integrated manner over a period of next 3 to 5 years. The objective is also to provide banking services to entire population residing in Urban and Metro Centers.

BOTTLENECKS
Non-availability of appropriate banking technology till a few years ago. Lack of...
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