____________________________________________________________________________________ ROLE OF BANKS IN FINANCIAL INCLUSION IN INDIA Vatsika Dubey1

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ROLE OF BANKS IN FINANCIAL INCLUSION IN INDIA
Vatsika Dubey1 & Mayank Vardhan2
( 1Department of Post Graduation Diploma in Management – Finance
Xavier Institute of Social Service, Ranchi – 834001, Jharkhand, India)
( 2Department of Post Graduation Diploma in Management – FinanceXavier Institute of Social Service, Ranchi – 834001, Jharkhand, India)
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Abstract: Finance has become an essential part of an economy for development of the society as well as economy of nation. Financial inclusion can play a key role in facilitating inclusive economic growth particularly in a developing economy. An inclusive finance must provide better banking services to all sections of society, especially low-income and weaker sections. The uniqueness of having a bank account is that it not only provides basic banking facility but also finance for investment/production purposes which opens opportunities for improved employment. India is one of the largest and fastest growing economies of the world, but the most disturbing fact about its growth is that its growth has been uneven and discrete. There has been no uniformity in its growth performance. It has been discrete and disconnected with regard to growth and distribution of growth benefits to certain sectors of economy. However, for attaining the objectives of inclusive growth there is a need for resources, and for resource generation and mobilization financial inclusion is required.

In the current scenario financial institutions are the robust pillars of progress, economic growth and development of the economy. The present study aims to examine the impact of financial inclusion on growth of the economy over a period of five years. Secondary data is used which has been analyzed by multiple regression model as a main statistical tool. Results of the study found positive and significant impact of number of bank branch and Credit deposit ratio on GDP of the country, whereas an insignificant impact has been observed in case of ATMs growth on Indian GDP. In this paper, attempt is to understand financial inclusion and its importance for overall development of society and Nation’s economy. This study focuses on approaches adopted by various Indian banks towards achieving the ultimate goal of financial inclusion for inclusive growth in India and analyses of past years’ progress and achievements. The relevant data for this study has been collected with the help of from various Research journals, Articles, reports of RBI, reports of NABARD and online resources.

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Keywords: Financial inclusion, Banking sector, Business Correspondents, Economic Growth, GDP, ATM
I. INTRODUCTION
Financial inclusion is new paradigm of economic growth which plays a major role in driving away the poverty. Lack of access to financial services in most of rural areas due to high informative barriers and low awareness, poor functioning and financial history of financial institutions, near absence of insurance and pension service create the need and scope of financial inclusion. Fruits of development have hardly reached to nearly half of Indian population because no access to loan and insurance and this raises most pertinent issue of financial inclusion. Financial inclusion is integral to the inclusive growth process and sustainable development of the country. It is a policy of involving a wider section of population deposit mobilization and credit intermediation.

II. FINANCIAL INCLUSION & EXCLUSION DEFINED
The Committee on Financial Inclusion headed by Dr. C Rangarajan in 2008 defined financial inclusion as, “the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as the weaker sections and low income groups at an affordable cost.” In general, the term financial inclusion is understood as welfare-oriented measure for enhancing access to and affordability of financial services and products for all. The Committee on Financial Sector Reforms under the Chairmanship of Dr. Raghuram G. Rajan referred to financial inclusion as “Universal access to a wide range of financial services at a reasonable cost. These include not only banking products but also other financial services such as insurance and equity products.” It includes provision of varied financial services such as payment services, savings products, insurance products and inflation-protected pensions.

Financial Exclusion on the other hand refers to the barriers or limitations that prevent people from using financial services. It ranges from not having access to a bank account to financial illiteracy. Several dimensions of barriers have been identified, which include physical exclusion, caused by the problems of travelling to services; access exclusion, caused by processes of risk assessment; condition exclusion, when the conditions attached to products are unsuitable or unacceptable to consumers; price exclusion, where the price of products is unaffordable; marketing exclusion, where certain consumers are unaware of products due to marketing strategies that target others; and, self-exclusion, when people decide to exclude themselves voluntarily on the basis of past rejections or fear that they would be rejected.

III. INITIATIVES FOR FINANCIAL INCLUSION IN INDIA
The history of measures taken towards financial inclusion in India dates back to the Cooperative Movement in 1904. This agenda received further impetus with the nationalization of 14 major commercial banks in 1969, soon after which the lead bank scheme was introduced. This resulted in expansion in the banking network with the opening of large number of branches across the country including some of the remote and difficult to reach areas. Realizing the ramifications of the exclusion of a vast section of population out of the development process, the Government of India has been taking several measures to promote financial inclusion. The Reserve Bank of India (RBI) has been complementing the Government’s efforts through its numerous initiatives like introduction of priority sector lending requirements for banks, establishment of regional rural banks (RRBs), and self-help group-bank linkage programmes to extend the financial services to the poor and marginalized segments of the society. Further, based on the Mid Term Review of Monetary Policy (2005-06), the RBI urged the banks to make financial inclusion as one of their prime objectives. In this respect, various policy prescriptions were suggested by RBI, viz. opening of no-frill account, issuing of General Purpose credit cards, etc. In February 2011, the Government of India and the Indian Banks’ Association (IBA) jointly launched ‘Swabhimaan’, a path-breaking initiative to bridge economic gap between rural and urban India. It aimed atensuring availability of banking facilities within the reach of every village with a population of over 2000 by the end of March, 2012. With this initiative, it was expected that the banking facilities will reach over 73,000 villages in the country which were not served by any bank thus far. The banks in the villages were supposed to facilitate the opening of accounts by villagers, offering them need-based credit, and offering remittance facilities to transfer funds from one place to another.

In August 2014, the Government of India launched the ‘Pradhan Mantri Jan-Dhan Yojana’ to facilitate access to all kinds of financial services to the excluded sections of society. The scheme aimed at ensuring universal access to bank facilities, increase in the level of financial literacy, and providing access to credit, insurance and pension services. RBI also undertook some measures in 2014 to augment financial inclusion, such as granting in-principle approval to the largest MFI in India to commence banking operations, permitting non-banking financial companies to act as business correspondents for banks, and issuing guidelines on differentiated banking licenses for small banks and payments banks based on the recommendations of the committee on “Comprehensive Financial Services for Small Businesses and Low Income Households”, chaired by Dr. Nachiket Mor.

The Reserve Bank continued its focus on ensuring availability of banking services to all sections of people across the country, and further strengthening the credit delivery system to cater to the needs of all productive sectors of the economy, particularly agriculture, and micro and small enterprises sectors. In order to improve credit delivery and promote financial inclusion, a number of initiatives were taken during 2017-18. Some of these initiatives include revision in guidelines on lending to the priority sectors with an emphasis on enhanced flow of credit to more employment intensive sectors, revamping of the Lead Bank Scheme (LBS) to ensure economic development of districts and also adopting innovative approaches to financial literacy to bring more people under financial inclusion. Further, during the year, some of the key recommendations of the Committee on Medium-Term Path on Financial Inclusion (2015) were implemented including launching of the CCCs scheme in co-ordination with Small Industries Development Bank of India (SIDBI) for MSMEs, Business Correspondent (BC) registry portal and BC certification course. Initiatives were also undertaken to provide fillip to financial literacy such as starting a pilot project on the Centers for Financial Literacy (CFL) and also use of various tools for dissemination of financial awareness messages. The Financial Inclusion and Development Department (FIDD) is the nodal department for the seamless implementation of the Reserve Bank’s financial inclusion agenda, and a comprehensive forward looking strategy document on financial inclusion is currently being finalized by the department.

Agenda for 2017-18: Implementation Status
As integrity and consistency of data are crucial for framing policy and designing strategies, an Automated Data Extraction Project (ADEPT) which was initiated for extraction of data from banks by the Reserve Bank, is in the final stage of implementation. Similarly, the National Strategy for Financial Inclusion document is being finalized under the aegis of the Financial Inclusion Advisory Committee (FIAC).

The Statement on Developmental and Regulatory Policies of the first bi-monthly monetary policy for 2018-19, mentioned that a ‘one size fits all’ approach for imparting financial education to various target groups is sub-optimal and financial education sought to be delivered to diverse target groups needs to be customized. Towards this objective, FIDD has developed tailored financial literacy content for five target groups (viz., farmers, small entrepreneurs, school children, self-help groups and senior citizens) that can be used by the trainers in financial literacy programmes. The content in the form of five booklets can also be downloaded from the financial education webpage of the Reserve Bank. Financial Literacy Centers (FLCs) of banks have been advised to structure the pedagogy for the mandated target-specific financial literacy camps with the help of the booklets.

The priority sector lending (PSL) mechanism seeks to provide an access to credit for those vulnerable sections of the society, who are often deprived of it due to their perceived lack of credit worthiness. Small value loans to farmers for agriculture and allied activities, micro small and medium enterprises, poor people for housing, students for education, other low income groups and weaker sections are included under the priority sector. Social infrastructure and renewable energy sectors are also covered under the priority sector. The performance of scheduled commercial banks (SCBs) in terms of their achievement on priority sector lending (PSL) targets is given below.

The Priority Sector Lending Certificates (PSLCs) scheme was introduced in April 2016 as a mechanism to incentivize banks which surpass their targets in lending to different categories under the priority sector. In a manner similar to carbon credit trading, PSLCs allow market mechanism to drive the PSL by leveraging the comparative strength of different banks. For instance, a bank with an expertise in lending to small and marginal farmers can exceed targets and derive benefit by selling the over-achieved credit target through PSLCs. Another bank that is better at lending to small enterprises can buy these certificates while selling PSLCs for micro-enterprise loans. The Reserve Bank has provided the banks with a platform to trade the certificates through its core banking solution portal (e-Kuber).

The PSLC platform saw active participation from all the eligible entities including Urban Co-operative Banks (UCBs) and Small Finance Banks (SFBs) during 2017-18. As at end-March 2018, total trading volume of PSLCs was ?1843.3 billion as against of ?498.0 billion at end-March 2017. Among the four PSLC categories, the highest trading was observed in the case of PSLC-general and PSLC-small and marginal farmer with the transaction volumes being ?796.72 billion and ?696.22 billion, respectively. Foreign banks with 20 branches and above were on a five year roadmap (2013-18), following which the sub-targets for lending to small and marginal farmers and micro enterprises were to apply after a review in 2017. Accordingly, after the review, it was decided to harmonize their priority sector targets with domestic banks and make applicable the sub-target of 8 per cent of adjusted net bank credit (ANBC) or credit equivalent amount of off-balance sheet exposure (CEOBE), whichever was higher, for lending to small and marginal farmers and the sub-target of 7.5 per cent of ANBC or CEOBE, whichever was higher, for lending to micro enterprises, effective from 2018-19.

Figure: Performance in Achievement of Priority Sector Lending Targets

Figure: Targets and Achievements for Agricultural Credit
Based on the stakeholders’ feedback and keeping in view the growing importance of services sector in the economy, it was decided to remove the extant applicable loan limits of ?50 million and ?100 million per borrower to micro/small and medium enterprises (services), respectively, for classification under the priority sector. Accordingly, all bank loans to MSMEs, engaged in services as defined in terms of equipment investment under the MSME Development (MSMED) Act, 2006, shall qualify under the priority sector without any credit cap.

In order to bring greater convergence of the PSL guidelines for housing loans with the affordable housing scheme definition under Pradhan Mantri Awas Yojana and to give a fillip to the low-cost housing for the economically weaker sections and lower income groups, it has been decided to revise the housing loan limits for PSL eligibility from the existing ?2.8 million to ?3.5 million in metropolitan centers (with population of ten lakh and above), and from the existing ?2 million to ?2.5 million in other centers, provided the overall cost of the dwelling unit in the metropolitan center and at other centers does not exceed ?4.5 million and ?3 million, respectively.

The Government of India has been fixing the target for agricultural credit every year. During 2017-18, the Government set the target of ?10,000 billion for agricultural credit. As on March 31, 2018, commercial banks achieved 124.6 per cent of their target whereas co-operative banks and regional rural banks (RRBs) achieved 96.4 per cent and 100.7 per cent, respectively. The Government has set an agricultural credit target of ?11,000 billion for 2018-19. The Kisan Credit Card (KCC) scheme aims to provide an adequate and timely institutional credit to farmers with simplified and flexible procedures. The scheme is implemented by SCBs, RRBs and co-operative banks. It comprises both short-term crop loan and term loan components. The progress on the scheme for the last two years is presented in Figure.

Figure: Kisan Credit Card (KCC) Scheme
As announced in the first bi-monthly monetary policy statement for 2016-17 on April 5, 2016, a framework for accreditation of credit counsellors was prepared by the Reserve Bank, and provided to the SIDBI which subsequently launched the CCCs scheme in July 2017. The SIDBI, acting as a registering authority of CCCs, has issued operational guidelines on the scheme. The CCCs are expected to advise the MSMEs in preparing business proposals, and financial documents/ statements. The CCCs would also share information with MSMEs on suitable credit instruments available in the market. In pursuance of greater awareness, the Reserve Bank has advised banks to sensitize their field level functionaries/dealing officials about the scheme. As on June 30, 2018, 512 credit counselling institutions and 13 certified credit counsellors were registered with the SIDBI.

The MSME sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades, weathering several challenges. This sector has played a crucial role in not only providing large employment opportunities and increasing exports but also in promoting industrialization of rural and backward areas, thereby reducing regional socio-economic imbalances. MSMEs are regarded as complementary to large industries, as ancillary units. In view of the limited availability of data for assessing the challenges being faced in the MSME sector, a comprehensive survey was conducted by the Reserve Bank with feedback from 2,355 MSMEs and 1,790 bank branches across states during January-February 2018 to examine (a) whether the flow of credit to MSMEs was conditioned by demand side rather than supply side factors, and (b) how effective the various government schemes were in promoting the MSME sector.

Figure: Credit Flow to MSEs
IV. STEPS AND MEASURES BY GOVERNMENT AND RBI FOR FINANCIAL INCLUSION
The Reserve Bank continued its efforts towards fulfilling the financial inclusion agenda during the year. In this direction, several new initiatives were undertaken during 2017-18.

Revamping the Lead Bank Scheme (LBS): The LBS was started to ensure economic development of the districts/states by establishing co-ordination between banks and government agencies. In view of changes that have taken place in the financial sector over the years, the Reserve Bank constituted a Committee of Executive Directors of the Bank to study the efficacy of the scheme and suggest measures for its improvement. The Committee’s recommendations were discussed with various stakeholders and based on their feedback, it has been decided to bring changes in the scheme which include, inter alia, streamlining functioning of the State Level Bankers’ Committees (SLBCs) by bifurcating policy and operational issues whereby operational issues would be addressed by specific sub-committees and a steering sub-committee would decide on the primary agenda items for the SLBC; a standardised approach to manage websites of the SLBCs including direct collection of data through respective CBS of all participating banks and a revised agenda for SLBC meetings for more focused reviews on setting up of CBS-enabled banking outlets at the unbanked rural centers (URCs); operations of BCs; digital modes of payments including connectivity; Direct Benefit Transfer (DBT); financial literacy initiatives; digitisation of land records; and discussion on improving rural infrastructure/credit absorption capacity.

Small Finance Banks (SFBs) under the Lead Bank Scheme: SFBs are required to participate in their respective locations, in various fora under the LBS, i.e., SLBC, District Consultative Committee (DCC)/ District Level Review Committee (DLRC) and Block Level Bankers’ Committee (BLBC) as regular members from 2018-19 and also be part of the credit planning exercise.

Assignment of Lead Bank Responsibility: Under the LBS, one bank in each district is assigned the leadership role and acts as a consortium leader to coordinate the efforts of the banks in that district, particularly in matters such as branch expansion and credit planning to meet the credit needs of the district. The assignment of lead bank responsibility to designated banks in every district is done by the Reserve Bank. As of June 2018, 20 public sector banks and one private sector bank have been assigned lead bank responsibility in 714 districts across the country.

Committee on Medium-Term Path on Financial Inclusion: The Committee on Medium-Term Path on Financial Inclusion (Chairman: Shri Deepak Mohanty, Executive Director), 2015 sought to propel the economy to a medium-term sustainable inclusion path. Drawing upon the recommendations of the Committee, the Reserve Bank focused on strengthening the mechanism for effective credit delivery to the productive sectors of the economy. Some of the major recommendations that were implemented during 2017-18 include the following: (a) BC registry portal has since been launched to enable domestic SCBs, excluding RRBs, to upload data pertaining to BCs deployed by them. Subsequently, on stabilisation of the database, facility of using BC tracker for public shall be made available; (b) a basic certification course for BCs has commenced. The translation of the syllabus into different languages is also under process; and (c) The CCC scheme for MSMEs which could help bridge the information gap, and thereby help banks to make better credit decisions was launched during 2017-18.

Financial Inclusion Plans (FIPs): In order to have a planned and structured approach to financial inclusion, banks have been advised to prepare Board-approved Financial Inclusion Plans (FIPs). These FIPs capture banks’ achievements on parameters such as the number of outlets (branches and BCs), Basic Savings Bank Deposit Accounts (BSBDAs), overdraft facilities availed in those accounts, transactions in Kisan Credit Cards (KCCs) and General Credit Card (GCC) accounts and transactions through the Business Correspondent-Information and Communication Technology (BC-ICT) channel.

Penetration of Banking Services: The Reserve Bank has taken several steps to provide banking facilities in the unbanked villages in the country. The use of information technology (IT) and intermediaries has made it possible to increase outreach, scale and depth of banking services at affordable cost. Upon issuance of revised guidelines on branch authorization policy on May 18, 2017 clarifying on ‘banking outlet’, SLBC convenor banks were advised to consider opening of a CBS enabled banking outlet or a part time banking outlet in the villages with population less than 2000 that still remain unbanked.

The guidelines on Branch Authorisation Policy mandate banks to open at least 25 per cent of the total number of banking outlets opened during a financial year in Unbanked Rural Centres (URCs) (i.e., tier 5 & tier 6 centres). SLBC convenor banks were advised that while opening new banking outlets in URCs, banks should give priority to URCs having population above 5000 (i.e., tier 5 centres). To facilitate banks in doing so, SLBCs were also advised to compile and maintain an updated list of all URCs in the state and review the progress in SLBC meetings.

National Strategy for Financial Inclusion: In order to systematically accelerate the level of financial inclusion in the country in a sustainable manner, the National Strategy for Financial Inclusion document is being finalised under the aegis of the FIAC to take forward the momentum generated by the Reserve Bank’s financial inclusion policies, the government’s Jan Dhan programme and the emerging advancements in the field of digital technology.

Apart from an overview of the progress made so far in bringing financial inclusion to the hitherto unserved and underserved sections of the population, the document would also provide a critique on the key issues and challenges that hamper financial inclusion in the country. Based on a cross-country analysis, the document would provide a vision and mission for ensuring sustainable financial inclusion in the country, through provision of easy to use, affordable and appropriate financial services to the entire population.

With an increased understanding of the inter-linkages among financial inclusion, financial literacy and consumer protection framework, the following strategy pillars have been identified in the document: (a) developing adequate physical and digital infrastructure in the country through providing necessary access points and connectivity; (b) designing suitable regulatory framework that balances innovation and risks in the financial sector to enable financial service providers to come up with innovative ways to ensure universal access to financial services; (c) focus on increasing financial awareness among various target groups in order to enable prospective customers and new customers to make suitable choices; (d) putting in place structures for a robust grievance redressal mechanism to protect the customers’ rights and have a timely redressal of their grievances; (e) designing of appropriate scientific assessment tools to granularly measure the extent and issues in financial inclusion; and (f) fostering an effective co-ordination mechanism among all the relevant stakeholders.

Figure: Financial Inclusion Plan (FIP): A Progress Report
NABARD All India Financial Inclusion Survey (NAFIS), conducted by National Bank for Agriculture and Rural Development (NABARD), revealed that farm households register higher income than the families solely dependent on non-farm livelihood activities in rural areas.

The survey, with reference year of 2015-16, which covered 40,327 rural households in 245 districts of 29 states, highlighted that the average annual income of an agricultural household is Rs 1,07,172 compared to Rs 87,228 for families engaged only in non-agricultural activities. The survey defined farm households as families having over Rs 5,000 as value of produce from agricultural operations in the year preceding the survey. For all rural households, the average annual income stood at Rs 96,708. The 48 percent of the rural families are agricultural households. Apart from assessing the income levels of rural households, the survey mapped aspects like debt, saving, investment, insurance, pension and financial aptitude and behaviour of individuals.

Incidence of Indebtedness (IOI), which is a proportion of households having outstanding debt on the date of the survey, was 52.5 percent and 42.8 percent for agricultural and non-agricultural households respectively. All India IOI taking rural households together stood at 47.4 per cent.
While 88.1 per cent rural households and 55 percent agricultural households reported having a bank account, average savings per annum per household was Rs 17,488. About 26 percent of agricultural households and 25 percent of non-agricultural households were found to have been covered under insurance. Similarly, 20.1 percent agricultural households as against 18.9 percent non-agricultural households have subscribed to pension schemes. Notably, the survey was conducted on a pan-India basis drawing samples from as many as 2016 villages in 245 districts and 29 states. A population of 1,87,518 was covered in the process. The data was collected through the paperless method of Computer Aided Personal Interview. The survey was commissioned in 2016.

The increase in income of agriculture household despite decrease in average landholding, is significant as it underlines the enhanced income level of farmers which can lead to reduction in absolute poverty. The farm income will further increase if they are able to develop value chain and provide marketing facilities at farm gate.

Income
Agricultural households, which accounted for 48% of rural households, earned Rs 107,172 during 2015-16 from cultivation, livestock, non-farm sector activities and wages/salaries. Thus, farmers’ income grew at a compounded growth rate of 12% per annum compared to Rs 77,112 per annum as per NSSO assessment in 2012-13. The income levels for 19 out of 29 states are above all India average and 15 states recorded annual compound growth of above 10.5% between 2012-13 and 2015-16.

Agricultural households earned 34% of their income from cultivation. Wage earnings contributed the same proportion to the income followed by salaries (16%), livestock (8%) and non-farm sector (6%). Other sources accounted for the rest.

•Non-agricultural households reported average annual income of Rs 87,228 majorly contributed by wages (54%), followed by salaries (32%) and non-farm sector activities (12%). Agricultural households earned 23% more than non-agricultural households.

Savings & Investment
88.1 per cent of the households reported having a bank account.

33% households reported more than one savings account
26% of HH have women with institutional (including SHG) savings account
55 per cent of agricultural households reported any savings during the last year and of these 53 per cent saved with institutions like banks, post offices and SHGs.
Average savings per annum per saver households was reportedly Rs 17,488, of which 95 per cent is with institutional agencies
10.4 per cent of agricultural households also reported investment with the average investment per investing agricultural households was reportedly Rs 62,734.

For all investments amounting more than Rs 10,000 in the year, 60% of the amount was funded through borrowings from either institutional or informal sources.

Debt
Incidence of Indebtedness (IOI), measured as proportion of households reporting outstanding debt on the date of the survey, is 52.5% for agricultural households and 42.8% non-agricultural households were reportedly indebted at the time of survey. All India IOI taking all rural households together stands at 47.4%.

Average amount of outstanding debt (AOD) for indebted agricultural households is reportedly Rs 1,04,602 as on the date of the survey. Debt outstanding for indebted non-agricultural households is reportedly Rs 76,731. Overall extent of indebtedness taking all households combined is Rs 91,407.

43.5% agricultural households reported to have borrowed any money during last year from some source or the other. 60.4% of them reportedly borrowed from institutional sources exclusively. Further, 30.3% borrowed from only informal sources and 9.2% of agricultural households borrowed from both sources. 56.7% of Non-Agricultural households and 58.6% of all households borrowed from institutional sources during last year.

During the year 2015-16, a borrowing Agricultural households reportedly availed a loan of Rs 107,083 from various agencies, 72% of which was availed from institutional sources including MFIs and SHGs. 69% of borrowings of all households and 65% of non-agricultural households were from institutional sources.

Insurance and Pension
About 26% of agricultural households and 25% of non-agricultural households reported to have been covered under one or the other type of insurance
Among agricultural households who reported to have taken any loan for agricultural purposes in the last one year 2015-16 from institutional agencies, 6.9% reported being covered under crop insurance.

The coverage under any type of pension was reported to be about 18.9 % for non-agricultural households as against 20.1 % for agricultural households
When assessed for type of pension received, 32% of all households with senior citizens reported being covered by old age pension.

Overall, 11.4% household members reported to have been trained in the principal activity that they are engaged in. Among agricultural households 8.5% and in non-agricultural households 14.4% members reported to have been trained.

Figure: Average Monthly Household Income by Source of Income (In Rupees) Contribution of various Sources to Total Income (in %)

Figure: Average savings in the last one year per household (in rupees) Tier-3 to Tier-6 Centers as per RBI classification.

Figure: Proportion of saver households reporting savings in institutions (in percentage)
Overall, 73% of the total amount is invested in physical assets and the remaining 27% is invested in financial assets. 43% of investments are funded by own funds for all investments amounting more than ? 10,000.

Figure: Household Investments

Figure: Average investment per household reporting any investment by type of assets (in rupees)

Figure: Indebtedness

Figure: Distribution of households who took any loan by source of loan (in percentage) Tier-3 to Tier-6 Centers as per RBI classification

Figure: Average amount of loan per households reporting to have taken any loan during the year 2016-2017 (in rupees) Tier-3 to Tier-6 Centers as per RBI classification
Overall, 32% households with at least one member above 60 yrs. reported to be receiving old age pension. Further, 4%, 2% and 1.5% households were covered under Widow Pension, Retirement Pension, and Disability Pension respectively.

Figure: Proportion of households with at least one member having any form of insurance (in percentage)

Figure: Proportion of households with at least one member receiving any pension (in percentage)
On the whole, 23% households reported that any of its members were associated with a microfinance group at the time of survey. When asked about the type of group, 20% reported to be associated with Self Help Groups.

Pradhan Mantri Jan-Dhan Yojana (PMJDY) is India’s National Mission for Financial Inclusion to ensure affordable access to financial services, namely, Savings and Deposit Accounts, Remittance, Credit, Insurance and Pension funds. This financial inclusion campaign was launched by the prime minister of India on 28 August 2014. The Yojana was announced by the prime minister in his Independence Day speech on August 15, 2014.
The key takes of the Yojana are:
It is steered by the Department of Financial Services, Ministry of Finance. On the inauguration day of the Yojana, 1.5 Crore bank accounts were opened.
Guinness Book of World Records acknowledges the achievements made under PMJDY. It writes – “The most bank accounts opened in 1 week as a part of financial inclusion campaign is 18,096,130 and was achieved by Banks in India from 23 to 29 August 2014”.
As of 19th April 2017, over 28 crore bank accounts were opened and almost ?63,960.17 crore were deposited under the scheme.
What comes under the scheme:
Interest on funds kept in the account.
No minimum balance required.
Rupay debit card is issued.
There is no limit on the number of deposits that can be made in a month.
a maximum of four withdrawals in a month, including ATM withdrawals are completely free
Accidental insurance cover of ? one lac, subject to fulfillment of the eligibility condition, i.e., the Rupay card holder has performed at least one successful financial or non-financial customer induced transaction within 90 days prior to date of accident including accident date (Rupay Insurance Program 2016-2017).

Figure: List of all bnks participating in Pradhan Mantri Jan Dhan Yojana
Figure: Statistics of Accounts opened under PMJDY as on 19th April, 2017 (All Figures are in Crore)

Figure: Total Balance in Accounts under PMJDY Scheme

Figure: Statewise account opening Report of Pradhan Mantri Jan Dhan Yojana (PMJDY) as on 10/10/2018
Pradhan Mantri MUDRA Yojana (PMMY)
Pradhan Mantri MUDRA Yojana (PMMY) is a scheme launched by the Hon’ble Prime Minister on April 8, 2015 for providing loans upto 10 lakh to the non-corporate, non-farm small/micro enterprises. These loans are classified as MUDRA loans under PMMY. These loans are given by Commercial Banks, RRBs, Small Finance Banks, Cooperative Banks, MFIs and NBFCs. The borrower can approach any of the lending institutions mentioned above or can apply online through this portal. Under the aegis of PMMY, MUDRA has created three products namely ‘Shishu’, ‘Kishore’ and ‘Tarun’ to signify the stage of growth / development and funding needs of the beneficiary micro unit / entrepreneur and also provide a reference point for the next phase of graduation / growth.

Figure: Total Sanctions made under Pradhan Mantri Mudra Yojana for FY 2016-17, Percentage-wise breakup for Banks

Figure: Banks Category-Wise Target vs Sanction for FY 2016-17

Figure: For FY 2015-16 and FY 2016-17 loans sanctioned by different categories of bank

Figure: Year wise comparison of different schemes under PMMY
V. FINANCIAL LITERACY
Financial literacy is crucial for imparting efficacy to financial inclusion initiatives of the Reserve Bank. In this direction, a number of new initiatives were undertaken during 2017-18.

Innovative Approaches on Financial Literacy: In order to explore innovative and participatory approaches to financial literacy, a block level CFL project was initiated in 2017 by the Reserve Bank across 80 blocks in 9 states. The project is currently being implemented by 6 NGOs in collaboration with 10 sponsor banks.

In order to improve the effectiveness of financial literacy camps, FLCs and rural branches of banks were advised to use hand-held projectors to show audio-visuals and posters on financial awareness messages. Reimbursement for hand held projectors and speakers is provided from the Financial Inclusion Fund (FIF) to the extent of 50 per cent of the cost incurred, subject to a maximum of ?5,000 per rural branch/FLC.

The National Centre for Financial Education (NCFE) supported by the financial sector regulators has prepared audio visuals on the financial awareness messages provided by the Reserve Bank such as (a) address proof declaration under KYC norms, (b) use of BCs, (c) electronic payment systems (NEFT/RTGS), (d) not falling prey to fictitious emails/calls and ponzi schemes, (e) process of using the unified payment interface through BHIM, and (f) various ways of going digital and cashless. FLCs and rural branches of banks were advised to use the audio-visuals while conducting financial literacy camps.

RBI-OECD Global Symposium on Financial Education: The Reserve Bank, in collaboration with the Organisation for Economic Co-operation and Development (OECD), organised the RBI-OECD high level global symposium on financial education during November 8-9, 2017 in New Delhi. The symposium stimulated ideas, discussions and solutions around implementing effective financial literacy policies in a changing financial landscape and focused on financial literacy in the digital age. Two hundred and forty high-level delegates from 40 countries participated in the two-day event, including officials and experts from the OECD International Network on Financial Education (OECD/INFE), ministries of finance and education, central banks, regulatory and supervisory authorities, international organisations, academia, private sector and NGOs. The key takeaways from the conference were as follows: (a) countries have initiated evaluation of programmes in their national strategies and their outcomes; (b) digital financial services make it easy for consumers to access credit but consumers might not comprehend the impact that repayment obligations would have on their finances; (c) the increase in digital delivery of financial services is also creating new pockets of financial and social exclusion such as many elderly and digitally illiterate persons; (d) digital tools represent an opportunity to develop more engaging financial education, in particular for young audiences; (e) evidence on the level of financial literacy of the population is a key building block for developing effective and tailored policies and practices; and (f) countries recognise the need to encourage the use of professional advice and of work place initiatives to support new and existing investors.

Financial Literacy Week 2018: In order to create awareness at a large scale on key topics every year, the Reserve Bank had decided to observe one week in a year as ‘Financial Literacy Week’ starting from 2017. This year, financial literacy week was observed during June 4-8, 2018 with the theme of “Consumer Protection”. The week focussed on four consumer protection messages, viz., ‘Know your Liability for Unauthorised Electronic Banking Transactions’, ‘Banking Ombudsman’, ‘Good Practices for a Safe Digital Banking Experience’ and ‘Risk versus Return’. The activities during the week involved display of financial literacy material in bank branches, ATM, bank websites and conduct of camps by the FLCs. As at end-March 2018, 1,395 FLCs were operational in the country. During the year ended March 2018, 1,29,280 financial literacy related activities were conducted by the FLCs as against 96,315 activities during the preceding year.

VI. RECOMMENDATIONS AND SUGGESTIONS
Achieve cooperation between the technology providers and banking channels to expand reach. Application developers will be required to collaborate core banking with micro financial applications.

Strengthen agency banking micro finance institutions, business facilitators and business correspondents. Post offices will be an appropriate medium to pursue the future long term goals of agency banking especially in rural India.

Banking technology has progressed fast enough. Now the realization that the poor is bankable has arrived. Various immediate measures which government of India should implement or which are under implementations should be executed in a more effective manner.

The bank’s must create more awareness about financial products, money management, debt counseling, savings and affordable credit by designing and organizing aggressive education cum promotion campaigns in unbanked parts of any region.

The banks can further simplify the registration process for customers to seed their mobile number for alerts as well as financial services considering the wide spread availability of mobile phones.

All deposits accounts across banks can also be directly linked to Aadhaar.

The Reserve Bank can also conduct surveys across states to identify the gaps and ascertain the extent of financial literacy. The findings will give a better understanding to the policy-makers of the demand-side challenges.

Region specific issues can be identified by the rural branches and schemes can be prepared for inclusion of different groups with varied income levels. A more robust set of quantitative and qualitative indicators can be developed covering the access and usage dimensions of financial inclusion.

VII. REFERENCES
https://rbi.org.in/Scripts/AnnualReportPublications.aspx?Id=1231https://www.nabard.org/auth/writereaddata/tender/1608180417NABARD-Repo-16_Web_P.pdfhttps://datacatalog.worldbank.org/dataset/global-financial-inclusion-global-findex-databaseC Rangarajan Committee, (2008), ‘Report of the Committee on Financial Inclusion’, Committee Report
The Global Findex Database 2017 – Measuring Financial Inclusion and the Fintech Revolution
https://www.pmjdy.gov.in/statewise-statisticshttp://www.mudra.org.in/PMMYReporthttps://udyamimitra.in/Home/CCCChakrabarty, K.C., (2011), “Financial Inclusion and Banks: Issues and Perspectives” Address delivered at the FICCI – UNDP Seminar on “Financial Inclusion: Partnership between Banks, MFIs and Communities” at New Delhi on October 14 2011.

NABARD All India Rural Financial Inclusion Survey Report 2016-17
Annual Report Of Mudra 2016-2017 ; 2015-2016.

Reserve Bank of India, various volumes, Basic Statistical Returns for Commercial Banks, Mumbai.

Reserve Bank of India, various volumes, Branch Banking Statistics, Mumbai.