Impact of Financial Inclusion on Indian Economic Development

In the Indian context, financial inclusion was defined as “the process of ensuring timely and adequate access to affordable credit and financial services for vulnerable groups” (Union Budget 2007-08). The Financial Inclusion Committee also defines financial inclusion as a mechanism for ensuring access to financial services and, where possible, adequate credit at an affordable cost to vulnerable groups, such as the poor and low-income groups (Financial Inclusion Committee Report, 2008). While these two meanings apply to a number of financial services, there is a strong bias in credit. It is therefore not surprising that until a few years ago, the discussion on financial inclusion in policy and academic circles revolved around increasing organized institutional credit to the detriment of savings, given sufficient evidence to save poor people (Basu, 2005; Dev, 2006; Mohan, 2006). Even after years of implementing mass banking in India, through committed and extended services of financial intermediaries to the poorest of the poor and the downtrodden, a vast majority of rural households are still in the grip of non-formal agencies. Due to lack of financial literacy in the backward and rural areas, financial services are yet to reach a vast majority of the population in rural and backward areas. Hence the proposed study will make an attempt to identify the constraints in application of digital finance for financial inclusion. The study will have significant impact on societal development as it tries to identify the level of awareness on financial inclusion among the rural masses and find reasons for financial exclusion. It will also throw light on Bankers and other financial stake holders approach in implementing financial inclusion in rural areas and factors influencing accessibility of funding. Hence the study leads to rectify the problems in make use of formal financial services by rural masses and bring them in to the fold of formal financial services in turn led the economic development.