ABSTRACT
Financial inclusion refers to the process of ensuring access to timely, adequate and affordable credit and other financial services (savings, insurance, remittance etc.) for the excluded and vulnerable sections of society by bringing them within the fold of formal financial system. The Report of the Committee on Financial Inclusion (hereafter CFI) 1 defined financial inclusion 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’ (2008: 1). Over the years, the term has come to be used interchangeably with ‘mainstreaming’, ‘integration’ and ‘outreach’ by bankers, economists and academicians. Despite their widespread presence in the financial landscape of the country and despite making significant improvements in financial viability, profitability and competitiveness, the contribution of the institutional credit agencies is the least among the underprivileged sections of the society, those who need their services the most (Leeladhar 2006). For instance, the Rural Finance Access Survey (RFAS) conducted in two major states of India, Andhra Pradesh and Uttar Pradesh revealed that only 21 per cent of the rural households accessed formal credit (Basu and Verma 2004). The proportion was only 13 per cent for landless households and households with less than one acre of land. Another estimate for the country for the year 2005 showed that only 14 per cent of all adult population has a loan account (Thorat 2007). There are significant rural-urban and inter-regional differences in access to saving services by households too. About 39 per cent of the rural adult population has savings accounts, as against 60 per cent of the urban population (ibid.).
