All Indian Rural Financial Inclusion Survey

Why is Financial Inclusion important?

1. Financial Inclusion provides individuals and businesses access to useful and affordable financial products and services. They should be delivered in a responsible and sustainable way.

2. The unbanked and underbanked will have better access to financial services.

3. Financial Inclusion was defined by C Rangarajan committee 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”.

4. The target group comprises the weaker strata of rural (agricultural and non-agricultural) and urban households.

Which steps have been taken to increase Financial Inclusion?

Financial Inclusion has gained importance over the last 2 decades in India. Some of the measures taken are-

1. “Pradhan Mantri Jan Dhan Yojna” by the Government of India to increase the number of bank accounts.

2. Several Startups are working towards increasing Financial Inclusion.

3. Several measures have been initiated by RBI like facilitating no-frill accounts and General Credit Cards scheme (GCCs) for small deposits and credits.

4. The opening of branches in unbanked rural centers.

5. Making effective use of technology to provide doorstep banking services.

6. The demand side of Financial Inclusion includes financial accessibility.

7. The supply side includes banking outlets in villages and coverage of locations through business correspondents (BCs), basic savings bank deposits account (BSBDAs), overdrafts (ODs), and the Kisan Credit Card (KCC) schemes.  

How NABARD has conducted a survey on Financial Inclusion?

1. National Bank for Agricultural and Rural Development (NABARD) is an apex development financial institution in India. It is active in developing financial inclusion policy.

2. NABARD launched the NABARD All India Rural Financial Inclusion Survey (NAFIS), which includes both:

a) The financial aspects (debt and investment) of households (rural and urban) which was earlier done by All India Debt and Investment Surveys (AIDIS) by National Sample Survey Office (NSSO) and

b) Livelihood aspects of agricultural households which were done by Situation Assessment Surveys (SAS) of NSSO

3. The NAFIS was conducted between January and June 2017 for the reference year July2015-June 2016 (NABARD 2018).

4. The NAFIS which is to be conducted every 3 years, is expected to be useful to policy-makers and analysts. The results will be useful to NABARD, other organizations and also the banking sector.

5. The survey covered over 40,000 rural households, with a sample of 2,016 villages.

What are the results and conclusions of NAFIS?

1. The financial inclusion drive in India has resulted in the proliferation of bank accounts in rural areas with 88.1% of households having a savings account.

2. The Incidence of Indebtedness (IOI), which is a proportion of households having outstanding debt on the date of the survey, was 52.5% and 42.8% of agricultural and non-agricultural households, respectively.

3. The average annual income of an agricultural household is Rs 1,07,012 compared to Rs 87,228 for families engaged in non-agricultural activities.

4. About 26% of agricultural households and 25% of non-agricultural households were found to be covered under insurance.

5. The increase in income of agricultural household underlines the enhanced income level of farmers which can result in the reduction of absolute poverty.

6. The farm income will further increase if marketing facilities are provided at the farm gate.

7. The survey points towards greater financial inclusion and increasing share of formal credit in the borrowings of the agricultural households.

Where to focus?

1. The NAFIS may be considered a pilot survey, and improvements may be affected in subsequent surveys.

2. The results can be used as inputs for the Central Statistics Office (CSO) and RBI.

3. The precisions and areas covered under the survey need to be looked upon and improved if necessary.

4. It would be necessary for other organizations to conduct a similar survey for the urban sector, as financial inclusion covers both sectors.