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National Strategy for Financial Inclusion

Mains-GS3-Economic Development, Prelims-Economy

1. Reserve Bank of India (RBI) has released the ‘National Strategy for Financial Inclusion for India 2019-2024’.

2. The financial inclusion is increasingly is a key driver of growth and poverty alleviation the world over.

Financial Inclusion

1. Financial inclusion has been defined as the process of ensuring access to financial services, timely and adequate credit for vulnerable groups such as weaker sections and low-income groups at an affordable cost.

2. Access to formal finance can boost job creation, reduce vulnerability to economic shocks and increase investments in human capital.

3. It is increasingly being recognized as a key driver of economic growth and poverty alleviation the world over.

4. Seven of the seventeen United Nations Sustainable Development Goals (SDG) of 2030 view financial inclusion as a key enabler for achieving sustainable development worldwide.

5. An inclusive financial system supports stability, integrity and equitable growth. Therefore, financial exclusion needs to be eliminated.

6. Causes  of financial exclusion,

7. Financial exclusion leaves the disadvantaged and low- income segments of society with no choice other than informal options. It makes them vulnerable to financial distress, debt, and poverty.

About the strategy

1. The strategy aims to provide access to formal financial services in an affordable manner, deepening financial inclusion and promoting financial literacy and consumer protection.

2. It sets forth the vision and key objectives of the financial inclusion policies in India to help expand and sustain the financial inclusion process at the national level.

3. The strategy seeks to address the inherent barriers of access to a gamut of financial products and services.

4. The strategy has been prepared by the Reserve Bank of India under the aegis of the Financial Inclusion Advisory Committee. It is based on the inputs from Government of India, other Financial Sector Regulators such as SEBI, IRDAI, and PFRDA.

5. Recommendations

a) Financial entities such as banks etc. should provide banking access to every village within a 5 km radius of 500 households in hilly areas by March 2020.

b) Public credit registry is a database of credit information of borrowers. It should be made operational by March 2022 so that authorized financial entities can leverage.

c) The digital infrastructure in the country needs to be expanded through better networking of bank branches, BC outlets, Micro ATM, PoS terminals

d) The banks should undertake periodic review of their existing products and adopt a customer-centric approach while designing and developing financial products.

e) There should be a convergence of objectives of the National Rural Livelihood and Urban Livelihood Missions to deepen Financial inclusion through an integrated approach.

f) A robust customer grievance redressal mechanism at different levels helps banks in timely redressal of grievances.

Source- The Hindu, Livemint and RBI website