Financial Inclusion in India: Issues and Challenges

Abstract

This research paper attempts to present an overview into the various challenges related to financial inclusion in India. It proposes a rationale for an enquiry into the factors which inhibit full and effective participation of the underprivileged in the formal financial system. It brings out that the targets of financial inclusion cannot be considered to be achieved only by facilitating ease of opening of bank accounts by the unbanked. The constraints that prevent the meaningful integration of the vulnerable groups of society into the formal banking network have to be addressed. Promoting regular banking habits among these groups would help them to increase their savings, ensure easier access to institutional credit and protect them from the exploitation of moneylenders. Effective financial inclusion alone can protect the poor from livelihood shocks due to crises such as the present Covid-19 pandemic which has resulted in large scale disruption of employment. This has had a particularly devastating effect on the informal sector workforce who have no guaranteed income or savings to rely on.  The paper suggests the need for creative solutions and strategies by banks and productive alliances and innovative products to promote the agenda of inclusive financial growth.