Financial inclusion in Punjab: An inter district analysis

Abstract

Despite a tremendous development in the access of financial services, vast proportions of the population are still excluded from the formal financial institutions. The promotion of inclusive financial system is the need of the hour. There is lack of comprehensive measures that can be used to estimate the extent of financial inclusion. This paper has proposed the financial inclusion index based on penetration, availability and usage dimensions of financial inclusion across all the districts of Punjab which takes values between 0and 1. 0 denotes complete financial exclusion and 1 indicates complete financial inclusion in an economy. Since 1955 government of India has been taking efforts for inclusion such as creation of State Bank of India in 1955; nationalization of commercial banks in 1969 and 1980; initiating the Lead Bank Scheme in 1970; establishing Regional Rural Banks (RRBs) in 1975; introducing Self-Help Group (SHG)-Bank Linkage Programmer in 1992 and formulating the Kisan Credit Card scheme in 2001. However, greater access is expected to foster financial inclusion An inclusive financial system should have as many users as possible, that is, an inclusive financial system should penetrate widely amongst its users. Likewise, the availability of bank branches captures the extent of accessibility to the formal financial system only partially. The usage of formal financial services depends on others factors such as GDP per capita, development of agriculture and industries etc. Financial inclusion along with the Governmental developmental programmer however can lead to an overall financial and economic development in the state and extending the banking services to everyone in the state will be the key driver towards an inclusive growth.