Currently, India ranks 2nd in the world in terms of financially excluded households after China.But this position is in absolute numbers. The situation is not so bad in percentage terms. In percentage terms the majority of the African countries are behind India.
India’s regulator started focusing on financial inclusion only in last five years. That way, the progress made is remarkable by every standard. In 2010, the regulator chalked out a detailed plan to cover every habitat with a population of at least 2000 by the end of march, 2012.
But the fact is that India still needs to do a lot progress in financial inclusion. Recent data from the world bank also suggests that India ranks lower when compared with the OECD countries with regard to financial penetration.
When compared with select Asian peer group countries, the difference in financial access is less as far as access to bank branches is concerned; more prominent with regard to access to ATM’s; highly prominent while comparing in terms of private credit to GDP ratio. These trends underline the need for strengthening the financial inclusion process in India in the years to come.
At present our financial depth is much lower in comparison to other Asian countries. Despite the noticeable increase during current decade, the coverage is still very less. Deepening of the financial system and it’s widening reach is crucial for both accelerating growth and for equitable distribution given the present stage of development of our country.
Some of the general tendencies of formal financing channels which are common worldwide are:
• Formal financing channels tend to focus on the top 1% of the population and compete with each other to grab this business.
• If a product launched by one bank is successful then other banks have a tendency to emulate it.
• The best team is deployed in big business centers in urban areas.
• Societal schemes, like financial inclusion, launched by the government gets low priority.
• Some arbitrary prioritization creeps in through the distribution network depending upon the perception of things by the person at the top.
• Regulator is considered as a hurdle for profiteering.
• Priority in servicing existing customers and less receptive towards new customers.
• Initial apprehension about credit worthiness and entrepreneurial capabilities of one and all.