BEHAVIOURAL BARRIERS TO FINANCIAL INCLUSION: A STUDY OF SAVINGS AND BORROWING BEHAVIOUR IN RURAL INDIA

This paper explores the Behavioural barriers to financial inclusion in rural India, with a specific focus on savings and borrowing Behaviours. Despite numerous initiatives aimed at promoting financial inclusion, a significant gap persists between rural and urban India in terms of access to formal financial services. Behavioural factors, including trust in formal financial institutions, financial literacy, risk aversion, and social norms, play a pivotal role in shaping the financial decisions of rural households. The study identifies that rural populations often prefer informal financial channels, such as borrowing from family and friends or saving in cash, due to perceived convenience, flexibility, and trust. Additionally, low levels of financial literacy and the high degree of risk aversion among rural households hinder the adoption of formal financial products. Social and cultural factors, such as community-based borrowing practices, also influence borrowing Behaviour, with informal lenders being preferred over formal institutions. The research provides insights into how these Behavioural barriers limit the effectiveness of financial inclusion programs and offers recommendations for policymakers and financial institutions to address these challenges. The findings suggest that improving trust in formal financial services, enhancing financial literacy, developing risk-sensitive financial products, and aligning financial services with social norms are crucial for achieving greater financial inclusion in rural India. Keywords: Financial Inclusion, Behavioural Barriers, Rural India, Financial Literacy, Risk Aversion.