Financial Inclusion

New Financial Inclusion India Mission launched

The Government of India has announced that a revamped Financial Inclusion Mission would soon be launched in India with added facilities which includes savings, remittances, credit, insurance and pension.

Financial Inclusion India in Mission Mode

Last week, the Finance Minister Shri Arun Jaitley announced that the NDA Government is planning to launch a new Financial Inclusion Mission which will provide urban and rural households of India with savings, remittances, credit, insurance and pension facilities. He reiterated that this new financial inclusion drive would be different from the earlier drives which were focussed only on the opening of no-frills bank accounts in the rural ares of the country.

This announcement was made by the finance minister soon after he held a meeting with the CEO’s of public sector banks and different development financial institutions in the capital. The meeting was also attended by the Secretary, Department of Financial Services, Deputy Governor, Reserve Bank of India, Additional Secretary, Department of Financial Services.



Elaborating further on the changes in the new financial inclusion initiatives, the Finance Minister further said that the Government of India would this time target individual households instead of the entire village. There are an estimated 7.5 Crore households in India who do not yet have a bank account and these households will be focus of the financial inclusion mission.

The new Financial Inclusion Mission will have two phases with Phase-I starting from 15th August 2014 and extending up to 14th August 2015. Phase-II would then kick in and last until 14th August 2018. The bulk of the savings,credit and remittance services will be offered in Phase-I and insurance and pension would be covered in Phase-II.

The Finance Minister also elaborated that India has very low levels of financial literacy, which was hampering the financial inclusion drive and it was important for people to understand the importance of availing the different financial services which will in-turn help them participate in India’s growth story.

Digital Financial Inclusion in India

Technology has made rapid strides in the last few years and therefore the Government is planning to use technology especially – Mobile based services in a big way to fast track financial inclusion in the country. Till now the primary method for branchless banking has been through business correspondents and the government has begun work to make Business Correspondents a viable model in India.

The Finance Minister also added that in the past , the Know Your Customer (KYC) guidelines were hampering account opening and this has now been simplified with the e-KYC facility introduced in banks.

Comparison between Two Programs

Old Financil Inclusion Program New Financial Inclusion Program
 Village based approach for  villages where population greater than  2000 (Limited Geography)  Households in all villages
Only Rural Both Rural and Urban
Mobile BC Fixed Point BC in each SSA comprising of 3 to 4 villages. This visit other villages in the SSA on fixed days.
Focus on opening of Basic Savings Bank Deposit Accounts (BSBDA) Focus on Financial Literacy, opening of BSBDA Account, Convergence with other subsidy schemes& Micro Insurance/Pension, RuPay Debit Card, USSD Scheme, Kisan Credit Card
Monitoring by banks Monitoring Mechanism at Centre, State, District level. Active participation of state and district emphasized.
Operation of Accounts offline; separate server. Accounts on line ‘on CBS of banks. Provision of RuPay Card to each account holder giving him freedom to operate anywhere


Other important decisions which were also taken at last weeks meeting of CEO’s of PSB’s and FI’s are as follows :-

  • New emphasis on fixed point Business Correspondents (BCs) like
    • Common Service Centres (CSC’s)
    • Gramin Dak Sewak
    • PDS shops
    • NBFC’s
  • Banks to explore the possibilities of installing ATM’s in rural areas under the RBI subsidy scheme.
  • Convergence with the efforts of UIDAI to enroll beneficiaries for Aadhar number during account opening
  • Convergence with the efforts of other programmes for SHGs/JLGs
  • e-KYC to be used for opening of accounts in the camps where Aadhaar number is available
  • Financial Literacy material would be standardized by IBA
  • Logo / tagline of the plan to be used on all correspondence material for one year
  • Overdraft facilities would be after satisfactory operation.
  • Grievance redressal cell at State level by State Level Banker’s Committee(SLBC)
  • In order to ensure viability of BCs Banks would start a financing scheme
  • Banks would take Micro ATMs which are Aadhar enabled
  • All passbook based KCCs to be enabled on RuPay card
  • Mobile wallet cash points also to be used as BCs
  • Monitoring mechanism strengthened
  • State Governments requested to depute an officer to SLBC for monitoring purpose
Abhay N

Author : 

Abhay is the founder and managing editor of India Microfinance. He is passionate about microfinance, financial inclusion and social entrepreneurship in India.

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1 Comment

1 Comment

  1. B. Yerram Raju

    September 2, 2014 at 7:37 am

    The Mission, at the outset, is highly laudable. But questions deep remain.
    Trend and Progress Report of the RBI (p.84) says it all regarding the progress of Financial Inclusion: the number of accounts opened 73mn basic savings bank accounts since 2005 (the year of introduction) through all institutional arrangements and hold Rs.55bn in the accounts but had only transactions worth Rs.7bn or near one eighth. Post 2010 an average of 10mn SB accounts per annum were opened in an accelerated mode. But on a single day 1.3mn accounts were opened!!
    Like all other target oriented schemes that went through the public sector banks’ windows, this new Financial Inclusion Mission had surpassed the ten million accounts in single day by 3million. Whenever and whatever the Government of India ordains to the PSBs it shall be done and it shall be done with enthusiasm publicly displayed. What is the planning that has gone in for achieving this and how perfect it is, is not much of a bother now as much as impressing the FM and PM.
    The issues that need attention are:
    Politicians right from the village level, and some institutional and individual brokers should not lay seize of the opportunity. The way some well intentioned schemes went awry in the past was that such persons would introduce a group; have the accounts opened; and for each credit account get a commission from the bank; pay a balance out of credit generated in cash to the account holder and trade with the rest of the money. When the repayment is due, he would pay into the borrower’s account the amount he has actually used out of the loan leaving the original balance utilized by the borrower unpaid. Since this would constitute only 15-20 percent banks would gloss over and permit a roll over of the credit. The money circulation goes on till it reaches NPA level in the actual borrower’s account. Dispute resolution mechanism commences and the lucky would resolve. The same mechanism got repeated between the BCs and their agents vis-à-vis the account holders. The disputes between the BCs and Agents and the related Banks are still on, on such scores.
    We have a knack of potential misuse, if not abuse of facilities that are well intentioned. Only when systemic initiatives right from the beginning are put in place such eventualities can be avoided. After all Rs.5000×1.3mn and even half of it is big money for pursuing Ponzi schemes by the financial brokers.
    The best solution would be not to release cash by way of overdraft but only allow merchant outlets to liberally act on the Rupay and Kisan Credit Cards for all the consumption requirements as these cards are biometric. However, going by the credit card frauds in the country, which have only been on the rise, the banks have to be continuously on guard.
    ATMs should dispense only up to Rs.1000 in cash of Rs.100 denomination in a credit cycle covering Rs.5000 per month and the rest should be only through merchant outlets.
    We have a responsibility to ensure that the system does not derail due to overenthusiasm among the main stakeholders. half-yearly special audit and evaluation by independent agencies, specifically directed at financial inclusion efforts would go a long way.

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