Financial Inclusion in India: Panacea or Mirage to Rural Economic Development

Abstract

Financial inclusion has become one of the most critical aspects in the context of inclusive growth and sustainable development in the developing countries like India. Financial inclusion is a process of ensuring access to suitable financial products and services needed by susceptible groups such as weaker sections and low-income groups at an affordable cost in a fair and transparent manner by mainstream financial institutional players. Even after 60 years of independence, a large section of Indian population still remains unbanked. In India out of 19.9 Crore households, only 6.82 crore households, have access to banking services. As far as rural areas are concerned, out of 13.8 crore households in India, only 4.86 crore households have access to banking services. In urban areas only 49.52% of households have access to banking services. Over 41% of adult people in India do not have bank account. This malaise has led generation of financial instability and pauperism among the lower income group who do not have access to financial products and services. However, in the recent years the government and Reserve Bank of India has been pushing the concept and idea of financial inclusion.

The paper highlights the basic features of financial inclusion, and its need for social and economic development of the society. The study focuses on the role of financial inclusion, in strengthening the India’s rural economic development.

Keywords: Financial Inclusion, Rural Economic Development, India, Financial Stability, Reserve Bank of India