Financial inclusion can ensure double-digit growth: Subbarao

The Reserve Bank of India (RBI) Governor D Subbarao today said India can achieve double-digit economic growth if millions of people, who are not covered by financial services, are brought under organised banking system which will raise the overall savings level, a must for 10 per cent or more expansion.

He said that providing complete financial services to nearly half the population, who have no access to them, could further raise household and overall savings, "fulfilling one of the necessary conditions to achieve double-digit growth we aspire to".

To make this happen, "we need to deepen penetration and expand the coverage of financial services to all sections of society and to all regions of the country... Particularly to those at the bottom of the economic pyramid", Subbarao said at a workshop on financial literacy organised by the RBI and Organisation for Economic Cooperation and Development (OECD).

India had registered an economic growth of 6.7 per cent in FY09 after posting over 9 per cent growth in the three preceding year, due to the global economic crisis.

He added that the absence of financial awareness and literacy is one of the main reasons behind lack of access to financial products or failure to use them even when they are available.

Quoting a study, he said around 60 per cent of labourers surveyed in India indicated that they store cash at home, while borrowing from money lenders at a high interest rates.

"Financial literacy and awareness are integral to ensuring financial inclusion," he said.

This was not just about imparting financial knowledge and information, but also changing behaviour, he added.