inclusion is emerging as a new standard of economic growth that plays major
role in driving away the poverty from the country. It refers to delivery of
banking services to masses including privileged and disadvantaged group of
people at an affordable terms and conditions. Financial inclusion is an important
priority of the country in terms of economic growth and advancement of the society.
It enables to reduce the gap between rich and poor society. In the current
scenario financial institutions are the robust pillars of progress, economic
growth and development of the economy. The present study aims to examine the
impact of financial inclusion on growth of the economy over a period of seven
years. Secondary data is used which has been analyzed by multiple regression
model as a main statistical tool. Results of the study found positive and
significant impact of number of bank branch and Credit deposit ratio on GDP of
the country, whereas an insignificant impact has been observed in case of ATMs
growth on Indian GDP.
India is a country of 1.2 billion
people, spread across 29 states and seven union territories. There are around
600,000 villages and 640 districts in our country. A vast majority of the
population, especially in rural areas, is excluded from the easy access to
finance .40% of the households having bank accounts, but only 38% of the
117,200 branches of scheduled commercial banks are working in rural areas.
Accessibility of financial services at affordable and appropriate prices has
been always a global issue. Hence, an inclusive financial system is widely required
not only in India, but has become a policy priority in various countries. So,
RBI has been continuously stimulating the banking sector to extend the banking
network both by setting up of new branches and installation of new ATMs.
Definition: Financial Inclusion is defined as “the process of ensuring access to financial
services and timely and adequate credit where needed by vulnerable groups such
as weaker sections and low income groups at an affordable cost”. During April
2012, World Bank carried out a study which revealed that only 9 per cent individuals’
avails new loans from banks in the previous year and 35 per cent population are
having formal bank accounts in India whereas in the case of developing
economies it is 41 per cent.
Concept of Financial Inclusion :Financial
inclusion means the delivery of financial services, including banking services
and credit, at an affordable cost to the vast sections of disadvantaged and
low-income groups who tend to be excluding .Financial inclusion takes into
account the participation of vulnerable groups such as weaker sections of the
society and low income groups, based on the extent of their access to financial
services such as savings and payment account, credit insurance, pensions etc. The
aim of Financial Inclusion (FI) is to make easy access of financial services to
the large underprivileged population of the country. In order to reap the
benefits of the financial services, lot of measures has been taken by
Government of India in the favour of poor and neglected section of the society.
The different financial services
include access to savings, loans, insurance, payments and remittance facilities
offered by the formal financial system. This aspect of financial inclusion is
of vital importance in providing economic security to individuals and families.
India is one country where the Financial Stability and Development Council
(FSDC) have a specific mandate for financial inclusion and financial literacy.
There is a separate Technical Group on Financial Inclusion and Financial
Literacy under the aegis of FSDC with representation from all the financial
sector regulators. In order to spearhead efforts towards greater financial
inclusion, RBI has constituted a Financial Inclusion Advisory Committee (FIAC)
under the Chairmanship of a Deputy Governor from RBI.
Review of literature
Dangi and Kumar (2013) examined the initiatives and
policy measures taken by RBI and Government of India. This study also focused
on current status and future prospects of financial inclusion in India. It has
been concluded that financial inclusion shows progressive and valuable changes
but sufficient provisions should be incorporate in the business model to
certify that the poor are not driven away from banking.
Suryanarayana (2008) focused
on definition of inclusion/exclusion with reference to an outcome scenario for
broad-based growth as reflected in estimates of production, income, and
consumption distribution. The study helps in drawing a sketch of occupational,
social, regional profiles of the excluded in the mainstream growth process.
Hence researcher made an attempt to provide a perspective, a measure of
inclusion, and finally an evaluation based on the available estimates of
consumption distribution for the year 2004–2005 for India.
Agrawal (2008) studied the financial inclusion from
the behavioral perspective based on both factors supply and demand end. Results
revealed that evaluation from the behavioral perspective provided the scope for
the policy-makers and marketers to strategically align their approach with the behavioral
aspect, without confining their thoughts to the economical evaluations.
the other hand, in 2003, the RBI policy of financial inclusion was to provide
access to financial service to the underprivileged could be earmarked as
another bold initiative in serving the rural transects targeting inclusive
growth. Committee on financial inclusion in 2008 (Rangarajan Committee)
observed that financial inclusion to hitherto excluded segments of the
population was critical to sustain and accelerate growth momentum.
Joseph and Varghese
(2014) analyzed the effect of
financial inclusion on the development of Indian economy by bank growth rate in
terms of number of bank branches, usage of debit card and credit cards. It has
been observed that the usage of debit cards increased tremendously throughout
the study period and decreased the number of people with access to the products
and services offered by the banking system continues to be very limited, even
years after introduction of inclusive banking initiatives in the country.