Financial Inclusion and role of banks in rural development

India is one of the fastest growing economies in the world. We have 1.2 billion of population which creates a potential marketplace for national and multinational companies. It is important to note that the growth has not been uniform. In the year 2012 Agriculture contributed to only 13.72% to our GDP. Agriculture in our country employs almost 65% of workforce and is a prime occupation on rural workforce.

The urban economic development is at a good speed but development in rural areas has been sluggish. Nevertheless, it is gaining pace as our country is going under reforms in rural sector in rural banking specifically. The term Financial Inclusion is gaining a nation-wide scope because it is getting much needed support from apex bodies like RBI in recent years. The underprivileged sections need financial support in the form of a savings account, loan facilities with lower interest rates, insurance like services. These legal services by commercial banks keep the vulnerable away from illegal money-lenders. These money-lenders exploit the already poor and grief struck farmers. There is an urgent need to abolish these informal financial markets. To fulfil this objective, banks should stride into rural areas which are unaware and backward and teach them financial activities.

Our villages lack infrastructure facilities like road, internet, electricity, water reservoirs etc. And banks require resources like these right from first step of construction of offices to computer based services. Out of all these requirements construction of concrete roads gives a major fillip to rural growth. It connects the villages to major cities where banks, hospitals etc. are available.

Activities like farm mechanization, ware housing, agro-based industries, retail banking and education loans will increase the level of money management. It will prove to be a harbinger of economic stability in the untapped areas of India. The provision of ATM’s in rural areas is a very helpful tool in the exact same way urban people get the benefits of it. To increase the literacy rate, Education loans should be done rigorous marketing, acting on the roots of problem.

Today around 100 million rural households are away from the banking system. If tapped, it will generate almost two times the existing business of rural banks.  Banks need to create “High Volume – Low Margin” to cater to the needs of rural households.

The objective of financial inclusion creates a cycle of important processes. These are infrastructure development, increase in facilities, decrease in social evils like bonded labour, decrease of informal money-lenders, growth and awareness among the vulnerable and finally increase contribution of 70% of population in economy.