Importance of financial inclusion and its impact on indian economy
Answers
Financial inclusion of the unbanked masses is a critical step that requires political will, bureaucratic support and constant pressure by the RBI. It is expected to unleash the huge untapped potential of the bottom-of-pyramid section of Indian economy.
Benefits of financial inclusion:The rural masses will get access to banking like cash receipts, cash payments, balance enquiry and statement of account can be completed using fingerprint authentication. The confidence of fulfilment is provided by issuing an online receipt to the customer.Reduction in cash economy as more money is brought into the banking ecosystemIt inculcates the habit to save, thus increasing capital formation in the country and giving it an economic boost.Direct cash transfers to beneficiary bank accounts, instead of physical cash payments against subsidies will become possible. This also ensures that the funds actually reach the intended recipients instead of being siphoned off along the way.Availability of adequate and transparent credit from formal banking channels will foster the entrepreneurial spirit of the masses to increase output and prosperity in the countryside.Hence, it is believed that financial inclusion can initiate the next revolution of growth and prosperity. In the 21st century, India has been pulling all the right levers to advance financial inclusion and economic citizenship by channeling its own transactions to lubricate the system. India’s journey towards economic ascension relies on how the 65% unbanked population of India (conservative 2012 estimate by World Bank) is enabled with financial infrastructure.
1. contribute to sustaining economic werlfare and reducing poverty thus supporting economic, monetary and financial stability by making savings and investiment decision more efficient
2. mobilisation of savings. if the weaker sections of society are provided with the facilities, these savings can be mobilised and effectively utilised for capital formation and growth within the economy
3. social objectives, poverty eradication is considered to be the main sole objective since they bridge the gap between the weaker and sources of livelihood and the means of income which can be generated for them if they get loans and advances and hence participate in the insurance sector
4. larger market for financial systems.
5. equitable growth in all sections of the society
6. encourage financial services providers to embrace new technologies