When include priority sector lending, followed by, co-operative lending,

When there are some efforts and lesser results, it calls for an introspection. This is the simple reason why we should look into the matter of lesser proportionate results or improvement in financial inclusion of India despite the colossal efforts.Since independence India is pushing itself towards financial inclusion in rural areas as the soul of India lies in rural India. There are several initiatives which include priority sector lending, followed by, co-operative lending, lead bank scheme, service area approach, microfinance, kisan credit cards, and business correspondence. Creation of National Bank for Agriculture and Rural development, the introduction of regional rural banks/ local area banks and Pradhan Mantri Jan-Dhan Yojana forms some notable and extensive initiatives.Financial inclusion is our nation’s priory. It is no longer an option, but a compulsion. The state of India today, where about three-fourths of the total population is surviving with under rupees 120 a day. It is probably a reflection of our collective mistake of believing all the pushing efforts would include every Indian under financial services or inclusion.If we closely observe, all these initiatives are supply driven. That is supplying financial services to the doorstep of people. Finance availability is not an end in itself, but a means to an end. Our ultimate aim is to get a constant source of income for poor. So that there will be demand for financial services. If banks do not take initiatives to penetrate into the rural market, there will be other players who are willing to, provided there is a demand for it. Here, supply driver financial inclusion doesn’t work.Cost factorThe results of most of the earlier initiatives were on the lower side. Based on NSSO reports, the share of institutional credit to farmers declined from a peak of 69.4 percent in 1991 to 56 percent in 2012. That is farmers dependence on non-institutional loans has gone from 30% to 44%. The availability of finance is needed, but not sufficient enough for the reduction of poverty. High-cost financial inclusions have rarely enthused rural households.According to Kamaljit Rastogi (Head of products, FINO, a key service provider in the micro-banking industry), opening a bank account itself is a huge challenge. It has taken around four to five years to make a noticeable impact on this respect. The biggest problem lies in the sustainability of these accounts. According to available data, nearly 70% of such accounts are inoperative after opening. Banks should not just stop at opening an account for the rural people. Banks should understand their needs, create awareness among them and help in their economic upliftment. How do they recover the costs? They need to offer multiple products like savings, remittances, insurance, and loans over this channel to make sufficient money to make the whole network sustainable.3 | P a g eIlliteracyIn India, the literacy rate is almost 73% only. If we take the states such as Bihar, Rajasthan, Utter Pradesh, Madhya Pradesh and Jharkhand, where the majority of financial inclusion has to be done, the literacy rate is around 60% only. Even though institutions are trying to give all the information through mobile messages, illiterate people need the help of other to get the meaning of it. This puts them into a threat of insecurity. This will, in turn, keep illiterate away from financial inclusion. Here the privacy of poor people is breached. Sometimes BCs are giving same PINs for all the customers to make his/her job easy. It is very important to note that not only big corporates are concerned about data breaches, even these people are concerned in their own way even though we estimate the cost of data loss is almost zero.Moneylender’s influenceDespite persistent efforts by institutions to implement financial inclusion, moneylenders are flourishing in the same sector. In India, 30% of total banking business is accounted by moneylenders. This leads to a question, does interest rate really matter in this segment?These questions lead to the need for grass root level research. That is, if interest rates matter, then why people are not shifting to banking rather than seeking from moneylenders. Not only banks, there is a well-structured financial network of cooperatives, MFIs, self-help groups. Is it only due to ease of doing business or some other factors influence the same?Failed Business Correspondent (BC) modelBC model was introduced in 2006. The aim was to provide banking services to poor at very reasonable cost. MC model played a very critical role in fetching a large number of Jan-Dhan accounts. But BC model was unable to provide various basic banking services for rural poor.Reserve Bank has asked banks to open at least one branch in every village with a population of 2000 or more. But according to 2011 census, almost 96% of villages have pollution less than 1000.The compensation given for BC agents in the form of the commission is very less compared to that of insurance and mutual fund agents. Lending activities of Banks through BCs are very less. The main activity of BC model is opening new accounts, but after a while, this opportunity is getting exhausted (particularly after implementation of Jan-Dhan scheme)