Improvement of Financial Efficiency and Cost Effectiveness of Financial Institution for ‘Financial Inclusion’ in India

Abstract

Finance has become an integral part of an economy. Banking institutions play a vital role in facilitating the development of financial system as well as to achieve ‘financial inclusion’ which is the prime objective of policy makers in our economy. The term ‘financial inclusion’ has gained popularity in all emerging economies especially in Indian economy after financial sector reforms. Financial inclusion has become an essential pre-requisite for achieving ‘Inclusive Growth’ in Indian economy and for accelerating economic and social life of all people. The basic financial services at affordable prices to the weaker section of the society are an essential task for policy makers in recent era. Without changing it’s main regular functions, how a financial institution can grow through applying different environmental friendly policies throughout the India is a big question? Due to the various constraints like lack of infrastructural problem, environmental problem, geographical problem, basic education and local political problem, financial institution are not able to reach the needy people in rural areas. Therefore the development of rural financial market with minimum cost and maximum benefit to the people is the prime concern of central authority to reach the mass. Keeping the alarming situation in mind it is time for India to improve the financial efficiency and cost effectiveness of financial institution through minimization of wastage and maximization of sales & profit. On the basis of this background this paper attempts to make a comprehensive study of financial institutional parameters to minimize the cost of operation and maximized profit by using Multi-objective Fuzzy Nonlinear Goal Programming. On the basis of secondary data collected from the annual report and RBI data regarding six financial institutions parameters which can use as a decision making variables for performance measurement of an institution. Regression Analysis method is used to identify the main indicator of financial performance, using SPSS (20) software and LINGO software used to study the Multi-objective Fuzzy Non-linear Goal Programming. The study found that both Internal and external parameters are responsible for doing financial institutions performance and to achieve “Inclusive Growth”. Indian financial backbone can be improved and reach global platform by using an alternative policy like reducing nonperforming assets and increase in managerial performance for customer satisfaction in all levels.