Enourmous challenges lie ahead for achieving financial inclusion: RBI

R Gandhi, executive director, RBI says several new ideas, innovative approaches are needed for this great effort

The Reserve Bank of India (RBI) said on Monday that enourmous challenges lie ahead for achieving financial inclusion.

"Post independence, we had a resolution to give attention to poverty alleviation. Our economic planning had poverty alleviation as a key plank. Though the term financial inclusion was not yet coined, India did adopt the core essence of it right from the nationalisation of banks. It encompassed opening branches in rural areas, the priority sector system that directed bank finance to agriculture, rural development, MSME etc sectors, directing finance to the preferred segments of the society like the SC, ST, women, minorities and the weaker sections, and lead a bank system that directed the formal banking system to take concrete efforts. Still, these forty odd years, efforts have not made serious dent. This indicates the enourmous challenges that lie ahead for us in achieving financial inclusion, said R Gandhi, executive director, RBI at an event held in Mumbai.

According to Gandhi, several new ideas, innovative approaches are needed for this great effort.

Gandhi defines financial inclusion as the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular, at an affordable cost in a fair and transparent manner by regulated mainstream institutional players.

According to Gandhi, the underlying challenges here are - what access is acceptable, what set of financial products and services are appropriate, what cost is affordable for the excluded, and what cost is imposable on the formal financial system.