Financial Inclusion - Research Paper

INTRODUCTION
An inclusive financial ecosystem is quintessential to the social contract. It

surmounts both physical and, more importantly, psychological barriers, and helps
achieve sustainable economic growth.
Financial inclusion means that individuals and businesses have access to useful and
affordable financial products and services that meet their needs – transactions,
payments, savings, credit and insurance – delivered in a responsible and
sustainable way (World bank). Being able to access a bank account is a first step
towards broader financial inclusion since a bank account allows people to deposit
money, withdraw money and credit and debit payments. Now these days Bank
accounts are also used for Bill payments,Insurance Payments,ECS facility and
most importantly for receiving payments and subsidies against welfare schemes. A
bank account serves as a gateway to other financial services, which is why
ensuring that people worldwide can have access to a bank account is the focus of
the World Bank Group’s Universal Financial Access 2020 initiative.
Financial Inclusion smoothes the way for Quality Life. As accountholders, people
are generally persuaded to use more of financial services, such as credit and
insurance, to start and expand businesses, invest in business, education or health,
manage risk.Vigorous attempts have been made to include people under the ambit
of financial inclusion and 1.2 billion adults worldwide have gotten access to an
account since 2011. Today, 69% of adults have a bank account.However, close to
one-third of adults – 1.7 billion – are still unbanked, according to the latest Findex
data.
Financial Inclusion has become a watchword now and has attracted the global
attention in the recent past. Lack of accessible, affordable and appropriate financial
services has always been a global problem.In India, the concept of financial
inclusion was first incorporated in 2005, when it was introduced by K.C.
Chakraborthy, the chairman of Indian Bank. Mangalam Village turn out to be the
first village in India where all households were provided banking facilities. Norms
were relaxed for those people who were planning to open accounts with annual
deposits of less than Rs. 50,000. General credit cards (GCCs) were issued to the
poor and the underprivileged with a outlook to help them access easy credit
Reserve Bank of India‟s visualization for 2020 is to open nearly 600 million new
customers‟ accounts and service them through a diversity of channels by
leveraging on IT.
FACTORS IMPACTING FINANCIAL INCLUSION
Some of the major factors affecting access to financial services are:-
 Psychological and cultural barriers- People deliberately excluded themselves due

to psychological barriers and they think that they are excluded from using the
financial services. A very common example of psychological barrier can be easily
noticed when older people find it difficult to use Internet Banking and Mobile
Banking which is the most convenient form of banking today.
Legal Barriers-Lack of legal identity like voter Id, aadhaar card,driving license,
birth certificates, employment identity card etc. is also a major factor affecting
access to financial services.
 Literacy Barriers –Less educated or uneducated people generally have an

attitude of thinking that banks are only for the educated people and would not be
able to understand functioning of Banks. . People do not know the importance of
various financial products like insurance, finance bank accounts, cheque facility
etc.
 Structural procedural formalities-It is very difficult for people to read terms and
conditions and account-filling forms due to lack of basic education.
 Attractiveness of the product-Both the financial services/products (savings

accounts, credit products, payment services and insurance) and how their
availability is marketed are crucial in financial inclusion.
The Pradhan Mantri Jan Dhan Yojana aims to make sure that every Indian has a
bank account. The zero-balance accounts come with several benefits such as
insurance & RuPay cards to withdraw money. These accounts will also be used to
make Aadhar-based Direct Benefit Transfers. "While the Jan Dhan Scheme may
have brought in an additional 310 million Indians into the banking system between
2014-18, the extent to which they have been 'meaningfully included' into the
finance system is not very clear,"
Objectives:
1. To study the factors impacting Financial Inclusion.
2. To assess whether the awareness about the Financial services affects the use
of Financial services and its inclusion into financial ambit.
3. To study the relative importance of the indicators of Financial Inclusion.
Research Methodology
The data for this research is based on individual level survey which has been
collected through structured questionnaire from individuals. In order to assess the
impact of Financial Services on Financial Inclusion, this study has applied the
Multiple Regression Model to find out the interdependence among all the factors
influencing use of financial services and financial decisions.Researchers have used
the latest data by RBI reports, World Bank and Findex.

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INTRODUCTION

An inclusive financial ecosystem is quintessential to the social contract. It

Some of the major factors affecting access to financial services are:-

 Psychological and cultural barriers- People deliberately excluded themselves due

 Literacy Barriers –Less educated or uneducated people generally have an

 Attractiveness of the product-Both the financial services/products (savings

1. To study the factors impacting Financial Inclusion.

3. To study the relative importance of the indicators of Financial Inclusion.

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