The lack of financial inclusion is costly to the individual as well as to society as a whole. Discuss along with the steps taken by the government to promote financial inclusion.

The lack of financial inclusion is costly to the individual as well as to society as a whole. Discuss along with the steps taken by the government to promote financial inclusion.


  • Introduce with financial inclusion
  • Explain how lack of it imposes costs on individual, society and the government
  • Discuss steps taken to secure financial inclusion
  • Conclude appropriately
Model Answer :

Financial inclusion is the way governments strive to take the common people along by bringing them into the formal channel of the economy. Through financial inclusion, the poor benefit by becoming a part of the mainstream economy, and are able to invest in various financial products and to borrow from formal channels.


Impact of lack of financial inclusion:

On the Individual: It forces the unbanked into informal banking sectors. The interest rates are higher and the amount of available funds much smaller. The informal banking structure is outside any legislative framework and any dispute between lenders and borrowers cannot be settled legally.

On the Society: Financial inclusion increases the amount of available savings, the rate of capital formation, efficiency of financial inter-mediation, and thereby allows the tapping of new business opportunities.

On the government: The government is not able to ensure that the subsidies it provides reach the people correctly resulting in gaps and leakages in public subsidies and welfare programmes

The scope of financial inclusion is not limited to banking services. It extends to other financial services like insurance, equity products, pension products etc.

Steps by government for Financial Inclusion:

  • Universal banking: Over the years, State sponsored universal banking (deposits, loans, insurance and savings instruments) has helped economic diversification in rural areas.
  • PradhanMantri Jan DhanYojna: Launches in 2014, it sought to ensure that all households have at least one bank account and brought crores of families into the formal system.
  • Rupay Cards:RuPay debit cards have been provided to the account holders of PMJDY.
  • White label ATMs: To expand the network of ATMs, the RBI has allowed non-bank entities to start white label ATMs.
  • Micro ATMs: Over 1 lakh micro ATMs have been deployed in rural areas.
  • Financial Literacy Centres: Financial Literacy Centres were started by commercial banks at the request of the RBI.
  • Life and Accident insurance: Schemes have been provided since a long time and recentlyPradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Jeevan Jyoti Bima Yojana were brought in with very low yearly premiums.
  • Pension:Various pension schemes are available and recently Atal Pension Yojana was launched with focus on the unorganised sector.

Financial inclusion enables the masses to get all the legitimate benefits arising out of the growth of the country, while the funds mobilised from them will give the economy an extra thrust on its path of growth.

Subjects : Editorials

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: