Financial Inclusion of North-East India

North-East India

Financial Inclusion refers to the provision of financial services to the people of the lower strata of society. India has a large disparity in socio-economic growth. To bridge the existing disparity, the Reserve Bank of India (RBI) set up the Khan Committee to look over the issue of financial inclusion. The recommendations of the Khan committee were incorporated in the RBI policy 2005-06.

RBI has directed all the banks to facilitate opening of no frills saving bank account with zero or nominal balance to lower income customers. This was done to ensure the financial inclusion to a greater extent in India.

In 2013, India’s first Financial Inclusion Index, called- CRISIL INCLUSIX was launched. The index is a scale of 0-100 with branch, deposit and credit penetration as the parameters of the index. CRISIL Inclusix used data from 2 lakh data points and 165 banks. The index has been started with banking services presently and has the provisions for extension to other services.

Status of North-East States in Financial Inclusion

The findings of the Crisil index provides that the north-eastern states lag behind all other states in India. The North-Eastern region scored only 28.5 in Inclusix in 2011 as against 26.5 in inclusix 2010.

The bottom five states in Inclusix 2011 are- Arunachal Pradesh, Chhattisgarh, Bihar, Nagaland and Manipur. While the top scoring states were- Puducherry, Chandigarh, Kerela, Goa and Delhi.

The performance in each of the three parameters- Branch, Deposit and Credit Penetration- shows that North-Eastern states are far below the rest of India.

There are various socio-economic factors responsible for the lack of financial inclusion in the North-East. On the demand side, there is a lack of financial awareness and on the supply side poor bank penetration are the major reasons that have lead to financial exclusion.

However, for the equitable development of the entire nation, financial inclusion is a prime necessity. Thus, Indian Government has made a mission to ensure financial inclusion. It is believed that financial inclusion would create positive externalities. It would lead to increase in savings, investments and, thereby, boost the economic growth.

This is also aimed at developing a habit of economic saving, especially among the poor sections that live under the shadow of financial distress.

Measures Taken

RBI has taken a number of measures. In the North-Eastern states and Sikkim, the Domestic Scheduled Commercial Banks can now open branches in the rural, semi-urban and urban centres without a need to take permission from RBI.

Also, the banks have also implemented the Financial Inclusion Plan 2012-13 throughout the country.

Some other initiatives of the RBI are-

RBI has relaxed and simplified the KYC (Know Your Customer) norms to help in the easy opening of bank accounts, particularly in small accounts with the balance not exceeding Rs. 50,000, and the average credit in the account not exceeding Rs. 1,00,0000.

Banks have also been directed to allocate at least 25% of the total number of branches proposed to be opened in the year in un-banked (Tier-5 and Tier-6) rural centers. The Public and Private sector banks have been advised to submit board approved Financial Inclusion Plan down to the branch level.

courtesy: Employment News (January 2014)

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