Ensuring financial inclusion to promote equitable growth
This article is authored by Shikhar Aggarwal, chairman, BLS E-Services.
Not too long ago, cash withdrawal was quite a hassle; ATMs were few and far between, especially in smaller towns and rural pockets of the country. For many, the nearest ATM was miles away, making frequent cash withdrawals a luxury they could not afford. As a result, people entrusted their debit cards and PINs to someone willing to fetch cash from the city on their behalf.
However, this struggle for cash gradually faded away with the advent of digitisation, which allowed even small retailers to transact digitally with customers. Today, with the ability to transfer money instantly at the tap of a button using Unified Payments Interface (UPI), India’s financial inclusion story is breaking new ground. In fact, as per recent data, a staggering 40% of all payments in India happen digitally, with UPI commanding the lion's share.
Recognising the importance of financial inclusion, the Government of India has undertaken concerted efforts to ensure universal access to banking and financial services. A flagship initiative in this regard is the Pradhan Mantri Jan Dhan Yojana (PMJDY), launched in 2014. This scheme aims to provide every unbanked household with a zero-balance bank account and a RuPay debit card, facilitating their entry into the formal financial system.
Complementing the PMJDY is the JAM (Jan Dhan-Aadhaar-Mobile) trinity, which leverages the unique biometric Aadhaar identification system and the widespread availability of mobile phones. This integrated approach has enabled the government to directly transfer financial benefits to citizens' bank accounts in a transparent and efficient manner, eliminating intermediaries and reducing leakages.
To empower citizens with financial knowledge and skills, the government has initiated various financial literacy and awareness programmes in collaboration with regulatory bodies, banks, and business correspondents. These initiatives aim to educate individuals, especially those from disadvantaged backgrounds, on effective financial management and informed decision-making.
Furthermore, the government has introduced schemes such as the Pradhan Mantri Mudra Yojana (PMMY) and the Stand-Up India programme to facilitate access to credit for micro, small, and medium enterprises (MSMEs), promote entrepreneurship among women and underprivileged sections, and foster economic growth from the bottom up. The Atal Pension Yojana (APY) has also been introduced, allowing individuals to contribute towards a pension fund during their working years, ensuring financial security in old age.
Despite the significant progress made, financial inclusion in India continues to face several challenges. One major hurdle is the lack of financial literacy and awareness among the underprivileged sections of society, making it difficult for them to fully utilise the available banking facilities and benefit from financial inclusion initiatives. Another challenge is the geographical barriers and limited access to banking infrastructure in remote and rural areas, as well as stringent Know Your Customer (KYC) norms and documentation requirements that can pose difficulties for low-income groups.
Addressing these challenges through simplified processes, financial education campaigns, and leveraging technology-driven solutions such as mobile banking and banking correspondents will be crucial in bridging the gap and ensuring universal financial inclusion.
Looking ahead, the future of financial inclusion in India looks promising. With the government's continued focus on digital initiatives, expanding banking infrastructure, and promoting financial literacy, more and more citizens are gaining access to formal financial services. The widespread adoption of digital payment platforms like UPI has revolutionised the way transactions are conducted, making financial services accessible even in remote areas. Moreover, the growing emphasis on entrepreneurship and the availability of credit facilities for marginalised communities is fostering economic empowerment and driving inclusive growth. As these efforts gain momentum, India is well-positioned to achieve its goal of comprehensive financial inclusion, unlocking the economic potential of its vast population and propelling the country towards a more prosperous and equitable future.
This article is authored by Shikhar Aggarwal, chairman, BLS E-Services.