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«Published Annually Vol. 6, No. 1 ISBN 978-0-979-7593-3-8 CONFERENCE PROCEEDINGS Sawyer School of Business, Suffolk University, Boston, Massachusetts ...»

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 Another way is to understand the region-wise access to financial services. Central, Eastern and Northeastern regions have 64 per cent of all financially excluded farmer households from formal sources. Overall indebtedness to formal sources of finance alone is only 19.66%. Within these regions North eastern region has lowest i.e. 4.09% indebtedness.

 Another way to know exclusion is how many have bank accounts. Only 59% adult population in the country has bank accounts. It means that still 41% adult population is unbanked. In terms of rural–urban coverage 39% bank accounts are in rural areas and 60% in urban areas.

 One more waay to assess is the number of adult population having loan accounts. The loan accounts were only 14% of adult population. In rural areas the coverage is 9.5 percent and 14% in urban areas.

 Further there are regional differences in the coverage and north eastern region is having low coverage.

Conference papers © Knowledge Globalization Institute, Pune, India, 2012 Poverty prevalence is more in rural areas and certain regions in the country. Above data shows that vast majority of the country has limited access to financial services and it is one of the factor limiting the growth of rural areas in general and certain parts of nation.

It also means that as the extent of the unbanked people is high it means for banking industry there is lot of scope to expand their activities and do more business.

–  –  –

There are various reasons for financial exclusion of large section of the population. The reasons can be analyzed in two ways i.e.

reasons from the supply side of financial services. Similarly there are reasons from people’s side i.e. users or demand side of the financial services.

Some reasons are related to infrastructure. Like having physical access to bank is not possible in remote hilly, desert and sparsely populated areas where transport and communication is difficult. From demand side there are various reasons are illiteracy, lack of awareness and lack of financial literacy are the major. Besides these low income, lack of capacity to give collateral, difficulties in giving address and identity proof and social exclusion of certain groups.

From supply side the reasons are long distance of branch from residences of customers, unadjustable timings of the branch, complicated procedures and documentation, unfamiliar language, unsuitable products, staff attitudes, high transaction cost and transactions of small value.

Impacts of Financial Exclusion

Financial Exclusion has ultimately impacts on people’s development. Firstly people are not able to have safe savings which can help them in emergency. Further they may not adopt for any insurance, it means people are left without any safety net. Lack of access to money advice means they will not have advice for wise investment. Lack of affordable credit leads to unemployment, self employment is not possible or sources of self employment can not have support in crisis situation. All these finally results in lack of asset creation. As poor people do not own any wealth or assets they become disempowered and they are not involved in the decision making which means that their concerns and needs are not addressed which ultimately results in unending poverty. Thus for ensuring development of people and their empowerment financial inclusion is a necessity.

What is Financial Inclusion?

Financial inclusion is unavoidable if we want to ensure sustainable development and reduce poverty. People need to be viewed as valuable assets and their development should be the prime concern. Majority disadvantaged rural and urban population who lives with poverty and sub quality life. Poor people are perceived as liability but they can be converted into assets through affordable banking services. Access to financial services, credit and insurance lead to enhanced livelihood opportunities for poor people. Further access to financial services prevents exploitation and leads to empowerment of poor and underprivileged.

The broader concept of inclusion includes delivery of banking or financial services at an affordable cost to the vast sections of disadvantaged and low income groups. Report of the Committee on Financial Inclusion -2008 defined ‘financial inclusion as the process of ensuring access to financial services and timely ad adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost’. The focus of financial inclusion is making available range of appropriate financial services, enabling the people to understand these services and helping to access these services. Thus the services which will help to save small amounts, availability of these savings when needed for consumption purposes, credit in small amounts for self employment sources, insurance facility and above all the poor person needs financial advice to use his/her small savings and other services wisely.

–  –  –

Easy access to financial services would contribute to the sustainable growth. Considering the need of time Reserve Bank of India declared policy about Financial Inclusion in 2005. Several measures were suggested for financial inclusion.

Some important Steps taken for financial inclusionConference papers © Knowledge Globalization Institute, Pune, India, 2012

1. The aim is to provide banking services to entire population residing in rural, urban and metro centers.

2. The banks are advised to develop financial inclusion plan for three years that is up to March, 2013.

3. Opening of “No Frills Accounts”- a basic banking facility with no or minimum balance.

4. Relaxation of KYC norms –Relaxations were provided in Know Your Customer norms. This has helped the poor people who may not be able to give certain documents.

5. Introduction of BC model – Introduction of Business Correspondents [BC] who can go to doorsteps of poor people and do banking activities. This is to be introduced specially in the villages having population of more than 2000 and below

2000. The target is to provide services to 3,50,000 villages by March,2013.

6. Providing General Credit Cards[GCC] and Kisan Credit Cards[KCC]

7. The payments under 32 different government schemes like NERG, Indira Awas Yojana, SGSY, National Old Age Pension Scheme, Conditional Cash transfer to the Girl Child are done through banks. It is known as Electronic Benefit Transfer [EBT] or Social Transfers. At present it is intorduced on pilot basis.

8. Permission to banks to use services of NGOs, SHGs in extending banking services.

9. Introduction of Financial Literacy Centers and Credit Counseling Centers

10. SHG –Bank Linkage is one of the strategy adopted earlier which has proved to be effective in providing credit facilities to needy poor especially women.

–  –  –

Financial Inclusion has become a prominent agenda of banking sector in India. Following are the key achievments for financial inclusion in India. [The data at the end of March, 2011]

–  –  –

5. Social Transfers or EBT have helped to create access to financial services moslty through No Frills Accounts. It has helped in reducing payment delivery cost to government departments, increased convenience to receipients and reduced leakages and avoided faruds and middleman. Thus it has helped to rural poor.

6. SHG [Self help Saving Groups]-Bank Linkage scheme [ NABARD 2010]

–  –  –

The above data shows that the efforts in financial inclusion are showing good results. Through variety of efforts it is possible to reach the unbanked persons. Financial inclusion will help the people to create access to banking services and deal with their livelihood related issues.

Obligation or business opportunity?

Financial Inclusion is not very easy process and many challenges are faced. Firstly it has to be seen by the banking sector as a business opportunity. The banking sector has to recognise the special needs of the unbanked and design their products accordingly and provide need based services. The banking sector instead of perceiving financial inlcusion as an obligation should take it up as a business challenge.

Challenges in BC model

At present more number of Business Correspondents are required to take banking services in rural areas. Their training is a crucial issue. This model should be evolved in such a way that will ensure viability and stability. At present the operation cost seems to be high but with the increasing use of technology it can be dealt. Under this model Corporate BCs need to be stabilized yet.

Technology Use of technology is unavoidable in expanding the bank services in remote areas. The technology should be available at cheaper cost, it should be more user friendly and it should help to reduce the cost of operations specially involved in BC model.

Financial Inclusion–Movement or programme?

Financial Inclusion should not be perceived only as one of the programmes. It needs to be viewed as a movement for dealing with poverty and livelihood issues. All stakeholders like government, banks, NGOs, service providers and customers need to collaborate with each other to make it stronger and viable.


Financial Inclusion is a need of time as without appropriate financial services majority people may not be able to come out of poverty. Financial Inclusion provides another business opportunity to banks. By ‘banking the unbankable’ the banks not only can do more business but also can contirbute to the economic development of the people. This era is called the ‘era of technology’, with the help of technology it will not be very difficult to find solutions to the issues involved in financial inclusion process. The banks being the major stakeholder in the financial sector has major role to play. It is the time to take it up as a movement and all other stakeholders will have to collaborate actively.

Dr. Anjali Kulkarni Associate Professor and Area Coordinator, Rural Finance and Development, National Institute of Bank Management, Kondhwe, Pune – 411 048[India] anjali@nibmindia.org dranjalikul@gmail.com 1] J.Ramasamy, P.Moorthy [2011] Globalization and Inequality: A study of with Special Reference to Poverty and unemployment in India’ ECONSPEAK Vol.1 Issue 4 Nov.2011, PP. 1-9.

2] Era Sezhiyan [2007]: Globe for the rich – Zero for the poor: Globalization of Indian Economy, Mainstram May, 2007 3] State of Microfinance in India -2009-10 [2010]: NABARD 4] S.Ramesh, Preeti Sahai [2007]:’Universal Fianacial Inclusion in India: The Way Forward ‘ CAB Calling July- Sept.2007.

5] A. Chandrasekhar [2011]: ‘Profitable Models for Financial Inclusion’, Bancon Compendium 11, Oct.2011.

6] Surbhi Goel [not dated]: ‘Financial Inclusion-A Strategic Approach’ india@work 7] S.Sahasrabudhe, S.Kolte, D.Ambarkhane [2010]:‘Measurement of Financial inclusion Through Banking System-A Suggested Approach’ Allana Management Journal of Research’ July-Dec.2010 8] Usha Thorat [2007]: ‘Financial Inclusion –The Indian Experience’ RBI Monthly Bulletin, July, 2007.

9] K.C. Chakrabarty [2011]:’Financial Inclusion –Achievement So Far and Road Ahead’ Presentation at Skoch Summit, June 2, 2011.

10] K.G. Karmakar, G.D. Banerjee, N.P. Mohapatra [2011]:’Towards Financial Inclusion in India’ Sage Publications, New Delhi.

Foreign trade has played a crucial role in the India’s Economic Growth. The composition and direction of India’s foreign trade has undergone substantial changes. Particulary after the liberlisation policy which began in the early 1990s.Our major exports now includes manufacturing goods such as Engieering Goods, Petroleum Products, Chemicles and Related Products, Gems And Jewllery, Textiles, Electronic Goods, Etc. Which constitute over 80% of our export basket.On the other hand major import items constitute capital goods and intermediates which ont only supports the manufacturing sector but also supply raw-materials for the export oriented units. Over the years indian trade with countries of ASIA and ASEAN and Africa has gone up substantially.

India is now a major player in Global Trading System and all the major sectors of Indian Economy are linked to World outside either directly or indirectly through international trade. India’s total external trade (Imports And Exports And Re-exports)in the year 1990-91 stood at Rs.91,893crore.Since Then this has increase and during the year 2008-09 the Value of India’s external trade reached Rs.20,72438 Crore. ASIA and ASEAN accounted for 61.7% Of India’s total imports followed by Europe 18.7%, America 10.1%.Among the individual countries the share of China is highest 10.7% followed by Saudi Arebia 7.1% UAE 6.4% USA 6.0%,Iran 4.3%.


–  –  –

After independence Indian Foreign Trade has made cumulative progress both qualitatively and quantitatively. Though the size of foreign trade and its value both have increased during post-independence era, this increase in foreign trade cannot be said satisfactory because Indian share in total foreign trade of the world has remained remarkable low. In 1950, the Indian share in the total world trade was 1.87% which came down to 0.6% in 1995. According to Economic Survey 2004-05 this share percentage of 0.6% continued in years from 1997 to 1999. Since 1970 this share has remained 0.6% but very slightly increased st th to 0.8% in 2003. Currently India is the 31 leading exporter and 24 leading importer in the world trade. Trade policy (2004-09 has set a target of achieving 1.5% share in the global trade by 2009).


India’s trade links with all the regions of the world have increased over the years. In view of the current wave of world-wide globalisation, India has taken major initiatives to diversify its exports as also their destinations. Indian exports cover over 7500 commodities to about 190 countries while imports from about 140 countries account for over 6000 commodities.

Table No. 1 and 2 indicates the volume of Indian Import-Export and Trade in Post-Independent Era.

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