Broad overview of financial inclusion
This part of the study shows critical evaluations of viewpoints of various research scholars regarding Conceptual framework of financial inclusion and its impact on Indian banking system and economy. This will be covered by preparing themes the present findings of previous researchers in a systematic manner.
Concept of financial inclusion
Financial inclusion can be defined as the process of providing the financial services at the reasonable cost to the individuals and businesses. This approach make sure that the vulnerable section of the society receives the appropriate financial services and products at an affordable price in an impartial manner by the institutional players. In the secondary study, Garg and Agarwal, (2014) stated that for the development of the economy of a nation, finance has a very important role. The strong financial system is required not only for the developing country, but also it plays a significant role in the sustainable growth of the developed country.
The researcher stated that various Indian banks adopted and implemented many tactics for obtaining the final goal of financial inclusion for the growth of the Indian economy (Garg and Agarwal, 2014). To this note, the author collected useful information from various research journals, Articles, reports of RBI, reports of NABARD, and online resources for more finding for reliable and correct information. Finally, the researcher concluded financial inclusion is essential for the growth of the economy.
In the contrary to above study Dixit, and Ghosh., (2013) stated that in the world economy of India in one of the largest and fastest growing economy but the growth of the economy is not regular and consistent due to growth performance in certain sector is not equal along with distribution of the growth benefits is also not connected with each sector of the economy. Therefore Dixit and Ghosh. (2013) specified that there is a requirement for the inclusive growth of the economy which is possible by the financial inclusion.
The similar study by the Aggarwal, (2015) indicated that for the growth of the economy finance plays a significant role for the society as well as for the economy. Developing countries like India are tried to obtain the financial inclusion as a part of their comprehensive strategies by establishing the strong financial system which assists in achieving the consistent and inclusive growth. Further the author focus on the overall development of the society and economy through the understanding of the financial inclusion. For the above evaluation, the author collected the data from the various articles and report of the RBI and NABARD and stated that financial inclusion should be the part of the strategy.
However, in the opinion of the Singh & co-authors (2014) indicated that for the sustainable growth of any economy all the sections of the society should be included but in India majority of the rural population is still not participated for the inclusive growth, therefore, the financial inclusion becomes the challenge for the Indian economy. Moreover, Singh & et,al (2014) also stated that from the year 2005 RBI and the government of India started various methods for the financial inclusion, but the outcomes from the above method were not satisfactory. The author emphasis on the utilization of the existing resources and techniques like Mobile phones, Banking technologies, fair price shop, Post office services so that it will become effective for the concern of rural population as well as official sector.
Financial inclusion in Indian banking system
As per the studies by the Ambarkhane, Singh, and Venkataramani,(2016) stated that the financial inclusion is important for evaluating the impact of the various advantages by the participants so that the future course of action can be decided. Earlier only banking related initiative are considered for measuring the financial inclusion, however researcher focus on the inclusion of the other financial service like insurance, pension, financial learning etc. The author included banking related initiatives along with another initiative which is described above and also on the basis of the demand, supply and the infrastructure established the measure of the financial inclusion.
Further in the opinion of the Mehrotra and Yetman, (2015) that generally with the official support financial services are included in the financial inclusion are increasingly worldwide. The author discusses the implication for the central bank and state that more financial inclusion changes the performance of the firm as well as the consumers by which they could impact on the effectiveness of the fiscal policies. Moreover, the advancement in the financial access effect on the financial stability of the country since the more financial inclusion leads to fast credit growth by which the risk may arise.
However, studies by the Arun, and Kamath, (2015) indicated that financial inclusion is the major issue in the country. The government has been starting many policies to bridge the gap between financial inclusion and rural population. Pradhan Mantri Jan Dhan Yojna is the example of an initiative started by the state government towards the universal financial inclusion which is taken as mission mode. Moreover, banks and the employees of the bank are focused on the opening the number of accounts of the people residing in the remote area.
On the contrary study by the Chauvet, and Jacolin (2017) focus on the influence of the financial inclusion and bank initiative on the performance of the firm in the developing countries. The researcher collected the data from 79 countries of 55,596 firms for more reasonable assessment. Further, the author found that providing the financial services to the firms directly affects the growth of the firm. The more competitive banks provide the financial inclusion at the high level while the banks initiative favourable to foreign and state-owned firms by the low level of financial inclusion help to increase the growth of the firm.
On the basis of the study by the JAIN, NAZ, and Mathur, (2017) stated that for the economic growth and development financial inclusion is essential. In India, a large part of the population survives on the margin of the financial system of India. The authors described that only financial inclusion helps to provide the banking and financial services to the poor section of the society at a reasonable, transparent and consistent manner at the affordable price. It also assists to reduce the gap between the rich sector and poor sector of the society which is very important for the equitable development of the country. In addition with this by the financial inclusion money flow in the economy is also improved since the banks providing many services to the remote area people by whom the people who are not able to access the financial services earlier now access the financial services easily. In this study author used the data of Indian Banking Industry from 2011 to 2015 for analyzing the impact of the financial inclusion.
Importance of financial inclusion
On the contrary, the study by the Park and Mercado (2015) specified that poverty and income inequality are the major challenges for the expansion of the economic growth of the country. The researcher tested the impact of the financial inclusion with the other factors on the poverty and income inequality and identified that per capita income, the rule of law, demographic features are considerably affected by financial inclusion. However, the financial inclusion helps in the reduction of the poverty as well as decrease the income inequality. The study also suggested that financial inclusion is extended by the provision of the retirement pension plans, the better rule of law including the implementation of the financial contracts and financial regulatory bodies by which the poverty reduced and also lower the income inequality.
According to the study by the Chowhan, and Pande, (2014) stated that even after the wonderful growth of the Indian economy a major part of the population is still unbanked. However, the government and RBI have been insisting the concept of financial inclusion and with respect to this government of India announced the Pradhan Mantri Jan Dhan Yojana on 28th August 2014. Due to this many people opened their account in this scheme this will help in promoting the economic development, decreasing the poverty and assist in financial stability. Financial inclusion gives a platform to the lower income category group to save the income and also help for providing the adequate and transparent credit services through the banking channels. Moreover, the government also enforces for the direct cash transfer to the recipient through the bank account by which the fund directly reached to the concerned party.
Literature Conclusion
By considering this part of the study, viewpoints of various research scholars show that financial inclusion plays a significant role in the economic development. In addition to this, it provides financial services at affordable costs which reduces the impact of income inequality and poverty for the public. Further, their research shows that developing countries like India are trying to obtain the financial inclusion as a part of their comprehensive strategies by establishing the strong financial system which assists in achieving the consistent and inclusive growth.
References
Aggarwal, V.K., 2015. Financial inclusion in the India-An overview. ACADEMICIA: An International Multidisciplinary Research Journal, 5(1), pp.159-164.
Ambarkhane, D., Singh, A.S. and Venkataramani, B., 2016. Measuring financial inclusion of Indian states. International Journal of Rural Management, 12(1), pp.72-100.
Arun, T. and Kamath, R., 2015. Financial inclusion: Policies and practices. IIMB Mthe management Review, 27(4), pp.267-287.
Chauvet, L. and Jacolin, L., 2017. Financial inclusion, bank concentration, and firm performance. World Development, 97, pp.1-13.
Chowhan, S.S. and Pande, J.C., 2014. Pradhan Mantri Jan Dhan Yojana: A giant leap towards financial inclusion. International Journal of Research in Management & Business Studies, 1(4), pp.19-22.
Dixit, R. and Ghosh, M., 2013. Financial inclusion for inclusive growth of India-A study of Indian states. International Journal of Business Management & Research (IJBMR), 3(1), pp.147-156
Garg, S. and Agarwal, P., 2014. Financial inclusion in India–a Review of initiatives and achievements. IOSR Journal of Business and Management, 16(6), pp.52-61.
Jain, M., Naz, S.S. and Mathur, T.N., 2017. Financial Inclusion: It’s Impact On Indian Banking Industry. International Journal of Research in Commerce & Management, 8(5).
Mehrotra, A. and Yetman, J., 2015. Financial inclusion-issues for central banks.
Park, C.Y. and Mercado, R., 2015. Financial inclusion, poverty, and income inequality in developing Asia.
Singh, C., Mittal, A., Garg, R., Goenka, A., Goud, R., Ram, K., Suresh, R., Chandrakar, R. and Kumar, U., 2014. Financial inclusion in India: Select issues.
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