Financial inclusion far from inclusive, finds study

Skoch Development Foundation's findings reveal that “financial inclusion is far from inclusive.”

The Foundation, while hailing the Finance Ministry and the Reserve Bank of India for taking a proactive role in facilitating financial inclusion highlights that only a little more than a third of India's population had access to banking services at present.

“Only 3500 villages have brick and mortar branches; even if another 73,000 habitations are brought under the net through the Financial Inclusion project, there would still be about 5 lakh habitations left uncovered,” notes the study.

The key enabling factor for poverty alleviation is availability of credit and all indicators such as declining growth rate of Self Help Groups, negative growth in total loans issued by co-operatives and deceleration in growth in agriculture credit to 10.6 per cent during 2010-11 from 22.9 per cent in the previous year provide cause for concern.

The total number of no-frill accounts as at end-March 2011 stood at 74.3 million; the number of active accounts reported by various banks varied between 3 per cent and 20 per cent, notes the preliminary findings of the ‘State of the Sector Report'.

Only 0.18 per cent of the total No Frill Accounts are found to have overdraft, which totals Rs 198 crore. Over 80 per cent of this belongs to Bank of India.

Out of a total of 5,165 new branches opened in 2011, only 21.86 per cent are rural branches.

The 700 per cent growth rate in Urban Customer Service Points (CSPs) over the last year point towards urbanization among Business Correspondents (BCs); Although there is not much difference between growth rates, the number of urban households covered by no-frill accounts is almost double than rural households, the study noted.

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