How Can Financial Institutions Help Out?

Abstract

Financial inclusion is an important facilitator in achieving inclusive growth for the economy. The RBI—inspired by success of microcredit programmes in developing countries in meeting credit needs as well as empowering the poor—took up several steps in the direction of achieving financial inclusion in India. The main identified problems associated with financial inclusion are inadequacy of bank branches and the consequent inability of people to open bank accounts or carry out transaction (RBI 2006). RBI has viewed the banking services of formal financial institutions as a public good and recommended all commercial banks to open at least 25 % of their branches in rural or unbanked areas as a part of their Annual Branch Expansion Plan (ABEP) (ibid). Banks were also encouraged to appoint business correspondents (BC) or facilitators of customer interface. In the budget speech of the Union Finance Minister for the year 2012–2013, banks were advised to construct brick-and-mortar structures at present base branch and BC locations and to have core banking solutions and minimum infrastructures required to carry out large customer transactions (RBI 2012).