Financial Inclusion - National Strategy for Financial Inclusion [UPSC GS-III] - Testbook (2024)

Financial inclusion is a term that has been defined by the World Bank as follows:

"Financial inclusion implies that both individuals and businesses have access to useful and affordable financial products and services that cater to their needs – transactions, payments, savings, credit, and insurance – delivered in a responsible and sustainable manner.”

Candidates preparing for theIAS Examcan find relevant information about the structure and other important details in the linked article.

In India, the government has made efforts to financially include its citizens through initiatives like Pradhan Manri Jan Dhan Yojana (PMJDY), Aadhar, etc. The topic of 'Financial Inclusion' is significant for theCivil ServiceExamfrom the perspective of GS-III (Economics.)

This article will provide a comprehensive overview of Financial Inclusion and the government’s National Strategy for Financial Inclusion (2019-2024).

The key facts about the National Strategy for Financial Inclusion are mentioned in the table below:

National Strategy for Financial Inclusion
Who has introduced the National Strategy for Financial Inclusion?	The Reserve Bank of India (RBI) introduced this strategy
What is the duration of this strategy?	2019-2024
What is the aim of the National Strategy for Financial Inclusion?	Its objective is to expedite financial inclusion to foster economic well-being, prosperity, and sustainable development.
What is the approach of the National Strategy for Financial Inclusion?	It aims to provide access to formal financial services in an affordable manner, expanding and deepening financial inclusion, and promoting financial literacy and consumer protection.
What is the vision of the National Strategy for Financial Inclusion?
Which centres are included in this strategy?	All Tier-II to Tier-VI centres
What is a key highlight of the strategy?	One of the goals encompassed in this strategy is to transition towards a less-cash society. The deadline is set for March 2022. An insurance scheme and a pension scheme have been mentioned in the strategy under which any willing and eligible adult who is already enrolled under thePM Jan Dhan Yojana(might be delayed due toWuhan Coronavirus) The Public Credit Registry (PCR) is planned to be fully operational by March 2020. This will enable authorized financial entities to assess the credit proposals from all citizens.
Who are the stakeholders of the National Financial Inclusion Strategy?	Financial Consumers. Financial Market players like banks, non-banking financial companies (NBFC) Educational Institutions. Non Governmental Organizations (NGOs). Financial Sector Regulators. Both Central and State governments. Multilateral international players likeOECD, G-20, and others.
What are tier-I to tier-VI cities?	According to2011 census, they are categorized based on population: Tier-I: 1 lakh and above Tier-II: 50000-99999 Tier-III: 20000 – 49999 Tier-IV: 10000 – 19999 Tier-V: 50000 – 9999 Tier-VI: Less than 5000

Important Points about Financial Inclusion for UPSC

1. The primary concept of financial inclusion is to ensure the delivery of financial services such as:
   • bank accounts for savings and transactional purposes,
   • affordable credit for productive, personal and other purposes,
   • financial advisory services,
   • Insurance facilities (life and non-life) etc.
2. The report on the committee of financial inclusion reforms has provided an overview of the household access to financial services, depicted in the diagram below:

   • 

     Source : Committee on Financial Inclusion

3. There are three challenges to financial inclusion and those can be termed to be:
   • The high cost of the plan
   • Lack of technological advances
   • Lack of awareness among masses

The State of Financial Inclusion in India

Despite numerous governmental initiatives, the state of financial inclusion in India is not very bright:

1. Only about 5% of India’s 6 lakh villages have bank branches. There are 296 under-banked districts in states with below-par banking services.
2. A significant segment of the agricultural sector is deprived of formal credit, forcing the farmers to borrow from the informal moneylenders at exorbitant interest rates.

TheMicro, Small and Medium Enterprises(MSME) sector, which provides 90 per cent of non-farming employment, could access only 4 per cent of institutionalized finance, leaving the rest to usurious money lenders.

Candidates can find the general pattern of the UPSC Civil Service Exam by visiting theIAS Syllabuspage.

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