A sizable population of the world particularly poor, low income and vulnerable group remain excluded from most basic financial services provided by financial sector. It has been universally accepted that developing financial sector and improving access to financial services accelerate economic growth and helps to achieve inclusive growth. Inclusive growth is a little more than just the benefits growth distributed equitably and evenly. It is participation of all sections and regions of society in the history of growth and reaping fruits of growth.
The financial sector provides critical financial services to household and business enterprise which include
Safe savings and range of risk/return trade off services. It mobilizes savings into formal financial system. It helps accumulation of financial assets which can provide a cushion against unforeseen events.
Additional means beyond privately accumulated savings the help by way of credit and insurance to absorb shocks of unforeseen circumstances.
It reduces dependence on informal financial sources such as pawn shops, money lenders or informal groups relating to savings and credit associations by poor low income vulnerable group of society.
Facilitate payment between different parties and make them safer to a cash transaction.
A small loan, a savings bank account and an insurance policy can make a great difference to poor and low income family. These financial services enable the poor to have better nutrition, housing, education for children and better health care and improve standard of living. Thus financial Inclusion can act as an effective instrument to alleviate poverty in the world particularly in developing and underdeveloped countries. The financial inclusion therefore has become issue of world wide concern as large section of the population has no access to financial services and depends on own resources or informal sources of financial services. All the countries are making conscious efforts to bring vast segment of population especially under privileged section in rural and urban areas into the banking fold.
2. DEFINATION OF FINANCIAL INCLUSION:
There is no universally accepted definition of financial inclusion. The emphasis of financial inclusion varies across the courtiers and geographies depending upon level of social, economic & financial development, the structure & stake holding in financial institutions, socio-economic characteristics of the financially excluded segments and also the context of recognition of the problem by the authorities and governments. Similarly the measures applied to access to financial services vary. The access to financial services can be measured in the form of access to certain institutions such as banks, cooperatives, non-banking finance companies, credit unions, micro finance institutions, insurance companies or in terms of functions that institutions perform or services they provide such as payment services, savings or loans and credit. Yet another approach is to look to details in use of specific financial products viz. debit cards, credit cards, smart cards, life insurance etc. One of the popular benchmarks employed to access the degree of financial services to the population of the country is the quantum of deposit accounts held as ratio to the adult population.
Financial inclusion has been defined by United Nations and Asian Development Bank as under.
United Nations - "A financial sector that provides access for credit for all bankable people and firms and saving and payment services to every one. Inclusive finance does not require that every one is eligible to use each of services but they should be able to choose them if desired.
Asian Development Bank "provision of broad range of financial services such as deposits, loans, payment services, money transfer and insurance to poor and low income house holds and their micro enterprises"
The broadly covered products / services under financial inclusion and institutional structure in the world are given in the chart below:
Chart 1:
Insurance Companies
Financial Advice
Insurance
Commercial/co-operative banks/credit unions
Financial Inclusion. Access to financial products/services from the formal financial system
Loan/credit accounts
MFI/NGOs
Post Office
Savings accounts
Payment and remittance service
Postal Savings account
Small value loans/credit
Remittances
Indian Definition:
The Committee on Financial Inclusion (Chairman: Dr. C. Rangarajan) has provided a working definition for "Financial Inclusion" as
"the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as a weaker sections and low income groups at an affordable cost"
It is also termed as delivery of banking services at an affordable cost to the vast sections of disadvantaged and low income group.
3. FINACIAL EXCLUSION:
Measuring financial inclusion is perceived to be difficult it is defined in terms of exclusion from formal financial system. The working or operational purposes financial exclusion focus on ownership or access to particular product or service.
Chart 2: Financial Exclusion
Population
Non users of formal financial services
Users of formal financial services
No need
Voluntary self exclusion
Non availability/
Discrimination
Voluntary Exclusion
Ineligibility
Financial Illiteracy
Cultural/religious barriers indirect access
Non affordability/ others
In any society you have a proportion of population which (i) uses services from non-banking or other financial institutions but does not use services of banks (ii) uses services from informal sources of financial services (in view of convenience, easy approach less formalities) (iii) transacts through formal institutions / banks and financial instruments and also uses financial services. However higher share of the population particularly of below poverty line or low income hardly avails financial services from formal financial system. It exposes individual to inherent risk in holding and storing hard earned money operating solely on cash basis and increasing vulnerability. The financial exclusion is not restricted to rural or far flung areas but it is also taking place in urban areas as a result of increasing migration of rural poor to urban centers.
3.1 Causes for Financial Exclusion:
Although level of banking exclusion vary across the world it is the same group of people who are affected, people having low income or who have history of bad debt. Markets exclude them because they do not have sufficient income which can be translated into purchasing power or have assets or capabilities which are translatable in to labour and capable yielding income through wages.
The primary barriers in expansion of financial services are identified as
Non-availability of a bank branch with in near distance for physical access
High charges and penalties attached to banking products and services which make then unaffordable.
Perception of financial services as complicated.
Banks do not prefer low income people
Other factors include gender, age legal identity, illiteracy, place of living, physical and cultural barriers, type of occupation etc.
.
Chart 3: Dimensions of Access Problems
Low income house holds and their micro and small enterprises
Majority with no access to finance at all
A small majority with access to finance
ï‚·Clients have to pay high transaction cost
ï‚· Withdrawing funds is not always easy
ï‚· Transaction costs are high
Very small proportion with full access
Many have access to deposit services of state owned financial institutions and co-operatives
Very large proportion is undeserved
Significant member depends on services of unsustainable institutions
A significant proportion has access only to credit institutions
Access to insurance services is extremely limited
Proportion with access to banking services is very limited
ï‚· Poor credit quality
ï‚· Client transaction costs are high
ï‚· Long processing time
ï‚· High minimum loan
ï‚· High product incompatibility
ï‚·Low transparency
Source: Asian Development Bank 2007.
4. FACTORS AFFECTING ACCESS TO FINANACIAL SERVICES:
A number of factors affecting access to financial services have been identified in many countries. These are:
Gender Issue: Access to credit is often limited for women who do not have or cannot hold title to assets such as land and property and must seek male guarantees to borrow.
Age Factor: Financial service providers usually target the middle of the economically active population, often overlooking the design of appropriate products for older or younger potential customers.
Legal Identity: Lack of legal identities like identity cards, birth certificates or written records often exclude women, ethnic minorities, economical and political refugees and migrant workers from accessing financial services.
Limited Literacy: Limited literacy, particularly financial literacy i.e. basic mathematics, business finance skills as well as lacks of understanding often constrain demand for financial services.
Place of Living: Although effective distance is as much about transportation infrastructure as physical distance, factors like density of population, rural and remote areas, mobility of the population (i.e. highly mobile people with no fixed or formal addresses), insurgency in a location etc. also affect access to financial services.
Psychological and Cultural Barriers: The feeling that banks are not interested to look into their cause has led to self-exclusion for many of the low income groups. However, cultural and religious barriers to banking have also been observed in some of the countries.
Social Security Payments: In those countries where the social security payment is not linked to the banking system, banking exclusion has been higher.
Bank Charges: In most of the countries, transaction is free as long as the account has sufficient funds to cover the cost of transactions made. However, there are a range of other charges that have a disproportionate effect on people with low income.
Terms and Conditions: Terms and conditions attached to products such as minimum balance requirements and conditions relating to the uses of accounts often dissuade people from using such products / services.
Level of Income: Financial status of people is always important in gaining access to financial services. Extremely poor people find it difficult to access financial services even when the services are tailored for them. Perception barriers and income discrimination among potential members in group lending programmes may exclude the poorer of the community.
Type of Occupation: Many banks have not developed the capacity to evaluate loan applications of small borrowers and unorganized enterprises and hence tend to deny such loan request.
Attractiveness of the Product: Both the financial services / products (savings accounts, credit products, payment services and insurance) and how their availability is marketed are crucial in financial inclusion.
*References: World bank 200; Asian Development Bank 2007: and Kempson st al., 2004
5. INDICATORS OF BANKING OUTREACH:
The Policy Research Working Paper of October 2005 of the World Bank presents some indicators of banking sector penetration across 99 countries based on a survey of bank regulatory authorities. The sample of countries is comprised of financially and economically developed economies aw well as emerging markets and transition economies.
The indicators of banking sector out reach include:
Geographic branch penetration number of bank branches per 1000 km.
Demographic branch penetration number of branches per 100, 000 people.
Geographic ATMs per 1000 km.
Demographic ATM penetration number of ATMs per 100, 000 people.
Loan accounts per capita number of loans per 1000 people.
A larger number of branches and ATMs per square kilometer indicate small distances to the nearest physical bank outlets and easier geographical access. Similarly larger number of deposit / loan account per capita per account per capita per thousand people indicates greater reach of financial services.
Geographic and Demographic penetration of bank services of some countries is given in the following table:
Table 2: Geographic and Demographic penetration of bank services
Country
Geographical Penetration
Demographical Penetration
No. of bank branches per 1000 sq.km.
No. of ATMs per 1000 sq. km.
No. of branches per 100,000 people
No. of ATMs per 100,000 people
Korea
65.02
436.88
13.40
90.03
U.K.
45.16
104.46
18.35
42.45
India
22.57
#
6.30
--
Indonesia
10.00
5.73
8.44
4.84
USA
9.81
38.43
30.86
120.94
Mexico
4.09
8.91
7.63
16.63
Brazil
3.05
3.72
14.59
17.82
China
1.83
5.25
1.33
3.80
Russia
0.19
0.53
2.24
6.28
Source: Reaching out: Access to and use of banking services across countries, Thorsten Beck, Asli Demirguc-Kunt and Maria Soledad Martinez Peria, World Bank
Policy Research, WPS 3754, World Bank, 2005
6. TYPE OF GOVERNMENT INTERVENTIONS FOR INCLUSION:
Governments in many countries intervene on the supply side to address the financial services in various ways. Religious and other civil society organizations have also sought to broaden access to financial services for the poor and low income groups. These measures include,
Nationalizing private banks
Regulating opening of branches by banks
Promoting specialized banks including national saving banks
Directives on portfolio of composition of loan assets
Interest rate ceiling on credit to low income households and provision of credit at subsidized rates to priority sectors.
Voluntary charter or codes developed by banks themselves.
Enactment of regulations defining the right of access to formal banking services
Setting up empowered and dedicated agencies by governments
Running specialized and sponsored schemes including those sponsored by governments and banks themselves using a blend of innovations, reforms in the credit delivery mechanism and the existing infrastructure, post offices, passport accounts
Countering the operations of moneylenders and
Community based savings and credit societies and mutual saving banks.
7. USAGE OF FINANCIAL SERVICES IN DEVELOPED COUNTRIES:
While in developed countries the formal financial sector comprising mainly the banking system serves most of the population in developing countries the financial sectors serve small segment of low income group has little access to financial services either from formal or semi-formal. As a result, many people necessarily depend on their own resources or informal source of finance which are at high cost. In most developing countries formal sectors serve more often no more than 20 to 30 percent of the total population, the vast majority of whom are low income households in rural areas (ADB 2007)
The Financial Inclusion and Development indicators of some of the countries are given below:
Table 3: The Financial Inclusion and Development indicators
Country
Composite Index of Financial Inclusion
Poverty (%BPL Population)
Unemployment
India
48
28.6
4.3
Bangladesh
32
49.8
3.3
Brazil
43
22.0
9.7
China
42
4.6
4.0
Indonesia
40
27.1
9.9
Korean Republic
63
3.5
Malaysia
60
15.5
3.5
Phillippines
20
36.8
9.8
Sri Lanka
26
25.0
9.0
Thailand
50
13.1
1.5
(Source: World Bank 2006 and 2008* per cent of population with access to Financial Inclusion)
In developed countries it ranges from 70 to 90 per cent (99% Denmark, 96% France, 91% USA, 96% Germany)
The central question therefore is how to bring financial services to all people and accelerate economic development by making available safe savings, suitably designed loans for poor and low income house holds and appropriate insurance and payment services which can help themselves to increase income and improve their standard of living.
Some of the important legislative and voluntary measures taken by developed countries which enabled them to bring majority of the population into banking fold were as under.
8. POLICY RESPONSES IN DEVELOPED COUNTRIES:
There are limited data across countries on degree of usage of and access to financial services. Mostly data comes from surveys from World Bank or National agencies such as the US Federal Reserve Boards, UK Bank of England, EU etc. for International Department UK had commissioned a study in 2004 to provide a brief overview of policy level response to financial exclusion in a number of developed countries. The study indicated active programmes undertaken to bring disadvantaged groups into banking by USA, UK, Canada, Belgium, France, Germany, Sweden and South Africa. Policy initiatives for financial inclusion of these countries are given here under in brief.
United Kingdom:
Government identified three priority areas for the purpose of financial inclusion viz. access to banking services, access to affordable credit and an access to free face to face money advice.
Established Financial Inclusion Fund to promote financial inclusion and assigned responsibilities to banks and credit unions removing financial exclusion.
Enacted legislation for credit unions.
Introduction of No Frill Account.
Introduction of "Savings Gate Way" for those an low income employment. Under the arrangement for every British Pound (BP) 1 saved by those low income employment, the state will contribute up to BP 25.
A post office cared account was created for those who are unable or unwilling to access to bank account.
The banking code Standard Board, the body responsible to monitoring compliance.
Setup a Financial Inclusion Task Force to monitor the extent to which goal of financial inclusion has been achieved.
Community learning invitations were introduced with a view to promoting Financial Literacy among housing associations and tenants.
United States:
A civil rights legislation known as Community Reinvestment Act (CRA) enacted in 997. The CRA prohibits discrimination against law and moderate neighborhoods and obliges banks to serve the credit and banking service needs of all communities in which they are charted
Federal Bank Regulatory Agencies rate banks on their effectiveness at serving low income communities. Rating is also taken into account for regulatory ruling such as permission for merger with another bank.
Canada:
Bill C 8 was enacted in June 2001 and includes new rules designated to tackle banking exclusion which requires all banks to provide accounts without minimum balance for opening account to all Canadians regardless of employment, credit history with minimum identification requirements
The Financial Consumer Agency of Canada monitors whether the financial institutions adhere to their public commitment.
Canada has a well established structure for promoting financial education among its citizens. The onus of spreading financial education lies with the Canada Bankers Association (CBA) which is the representative body of all charted banks in Canada.
Belgium:
In Belgium code of Practice was introduced in July 1997 by Belgium Bankers' Association which provide for basic banking services for people on moderate income who lack bank accounts which include call deposit accounts and offers three basic types of transactions, money transfer, deposit and withdrawals and bank statement.
Belgium Banks Act was enacted on 24th March, 2001, setting out minimum standard basic bank account including ceiling on charges, minimum number of free face to face transaction.
The banks Act requires banks to contribute a compensation fund which is managed by the National Bank of Belgium to compensate the financial institution that operate more than their share of basic accounts.
Sweden:
In Sweden banks are not allowed to refuse to open saving or deposit account under Banking Business Act, 1987 Section 2.
France:
In France Articles of Banking Act, 1984 has recognized principal of right to bank account.
Voluntary charter were introduced in 1992 developed by French Bankers' Association to make banks committed to opening affordable account with facilities such as card, free access to cash medicines network, bank statements and negotiable number of cheques.
Australia:
Australian Bankers' Association in 2002 made to provide a generic account with no minimum balance to open account, unlimited deposits, free of charges and six free non-deposit transactions (three counter cash withdrawals).
Germany:
Voluntary Code was introduced by German Bankers' Association in 1996.
9. SAILENT FEATURES OF BASIC/No-FRILLS ACCOUNTS OF SELECT COUNTRIES ARE AS UNDER:
Country
Name of Account and year of Introduction
Main Features
India
No-frills Account,2005
1. Very low or no minimum balance.
2.5-10 free transactions per month.
3.ATM facility
United Kingdom
Basic Account
1. Affordable.
2. Free face-to-face money advice.
Passport Account (PA)
1. International debit-cum-ATM cards.
2. Shopping online, over the phone in UK and abroad.
3. Instrument of flexible savings account.
4. Low costs international money transfer.
5. Multi-lingual relocation advice.
6. SIM (Subscriber Identity Module) card.
United States of America
First Account,2002
1. Very low or minimum balance.
2. Low fees.
3.For people without deposit accounts
Individual Development Account (IDA)1991
1. University savings account.
2. Savings by the poor, matched by the Government.
3. Use of savings is restricted for investments in homes, education, business capitalization or other development purposes.
Electronic Transfer Account,1999
1. No minimum balance requirement.
2. ATM facility provided.
3. Goverment pays the obliging bank a one time subsidy of $12.60 for every account it opens.
4.No cheque book or direct debit payments.
Belgium
Basic Bank Account
1. Euro 12 a year on charges.
2.36 free face-to-face transactions with a debit card.
3. Compensation for banks that opens more account.
4. Independent dedicated extra-judiciary litigation service in case of dispute.
5. Banks to give reasons for refusal in writing.
South Africa
Mzansi Account 2004
1. No management fees.
2. One free cash deposit per month.
3. Only valid ID as identity proof.
4.Limited to deposits, withdrawals, transfers (anywhere in the country) .
5. Debit card payments.
Australia
Generic Account 2002
1. No keeping fees.
2. No minimum balance.
3. Unlimited deposits free of charge.
4. Six non deposit transactions (including tree over-the-counter cash withdrawals) free of charge each month.
France
La Poste Account
1. Savings Bank accounts and banking services,
2. Used extensively by people with low income.
3. A proposal to create full-fledged postal bank/credit institution was with the parliament.
Brazil
Livert A Account
1. No limit on over-the-counter withdrawals.
2.Tax free
Financial Inclusion - Initiatives in India
India is the second largest populated country after China in the world. More than 60 per cent population makes its living in villages. India has recognized since fifties that for long term sustainability of economic prosperity and social development and take benefit of growth to rural India is critical.
At the commencement of the process of planned economic development in 1950-51 it is defined the role of banks, financial institutions as they are vital link between various production elements of economic activity. It strengthened in sixties the foundations of Indian banking system by encouraging mergers among small banks and compulsory amalgamation to take banking to rural India.
Government of India and Reserve bank of India have taken series of measures and experimented various alternatives to take financial services to masses although the term Financial Inclusion was not in vogue then. The initiatives taken in this regard include
Building institutional frame work of credit institutions with the focus on cooperative institutions.
Nationalization of major domestic commercial banks.
Introduction of Lead Bank scheme to expand the outreach of banking facilities in rural and semi-urban areas.
Creation of Regional Rural Banks.
Setting of targets for lending to agriculture, small scale industries and other weaker sections defining them as priority sector for the purpose of lending by banks.
Introduction of Service Area Approach and Village Adoption Scheme to cover nearly 6 lakh villages of the country by banking system through rural and semi-urban branches of commercial banks..
Sponsoring schemes targeted at the poor, linking them to lending schemes of banks in the villages.
In India financially excluded class comprises largely of small / marginal farmers, landless labourers, oral lessees, self employed in unorganized sector enterprises, urban slum dwellers, migrants ethnic minorities, socially excluded groups, senior citizens and women.
The outreach of banking sector has been rapid growth since 1969. The population per office of commercial banks has came down from 65000 in June 1969 to 14000 in June 2009 with network of over 80369 (June 2009) branches of commercial banks of which 31,796 are in rural areas and 19119 are in semi-urban areas.
According to basic statistical returns of Scheduled Commercial Banks (SCBs) - 2008 including RRBs there were 581.6 million deposit accounts (rural 168 million, semi-urban 148.4 million, urban 128 million, metropolitan 137.2 million) and 106.99 borrowal accounts.
The following table gives the position of deposit accounts with various categories if institutions in March 2011.
Table 4: BANK GROUP-WISE DEPOSITS OF SCHEDULED COMMERCIAL BANKS
ACCORDING TO TYPE OF DEPOSITS MARCH 2011
(No. of Accounts in Thousand, Amount in ` Million)
BANK GROUP
CURRENT
SAVINGS
TERM
TOTAL
No. of Accounts
Amount
No. of Accounts
Amount
No. of Accounts
Amount
No. of Accounts
Amount
1
2
3
4
5
6
7
8
STATE BANK OF INDIA AND ITS ASSOCIATES
3,833
1218711
165,421
4033059
35,561
6288439
204,814
11540208
(1.9)
(10.6)
(80.8)
(34.9)
(17.4)
(54.5)
(100.0)
(100.0)
NATIONALISED BANKS
21,776
3168200
304,959
7037605
78,360
18443435
405,095
28649241
(5.4)
(11.1)
(75.3)
(24.6)
(19.3)
(64.4)
(100.0)
(100.0)
FOREIGN BANKS
302
710784.5
2,924
398147.4
730
1238673
3,956
2347605.1
(7.6)
(30.3)
(73.9)
(17.0)
(18.5)
(52.8)
(100.0)
(100.0)
REGIONAL RURAL BANKS
1,695
83422.1
92,855
902789.8
13,890
650733.3
108,441
1636945.3
(1.6)
(5.1)
(85.6)
(55.2)
(12.8)
(39.8)
(100.0)
(100.0)
PRIVATE SECTOR BANKS
11,555
1520148
57,838
2290516
18,430
5910850
87,823
9721514.5
(13.2)
(15.6)
(65.9)
(23.6)
(21.0)
(60.8)
(100.0)
(100.0)
ALL SCHEDULED COMMERCIAL BANKS
39,161
6701266.0
623,997
14662117
146,971
32532131
810,129
53895513
(4.8)
(12.4)
(77.0)
(27.2)
(18.1)
(60.4)
(100.0)
(100.0)
The coverage of rural and urban population by savings bank accounts is given in the following table:
Table 5: Savings Accounts with Scheduled Commercial Banks
Population
Group
Particulars
1971
1981
1991
2001
2006
2007
Rural
No. of Accounts (Million)
-
56.9
153.8
169.8
194.4
213.8
Accounts per 100 persons
-
10.9
24.5
22.9
24.2
26.2
Accounts per 100 adults
-
17.9
39.2
35.0
35.8
38.8
Urban
No. of Accounts (Million)
-
40.9
99.2
110.2
149.1
159.7
Accounts per 100 persons
-
25.7
45.6
38.5
48.1
50.7
Accounts per 100 adults
-
42.3
73.1
58.9
71.4
75.2
Total
No. of Accounts (Million)
23.6
97.8
253.0
280.0
343.4
373.5
Accounts per 100 persons
4.3
14.3
29.9
27.2
30.8
33.0
Accounts per 100 adults
7.1
22.9
46.8
41.5
45.9
48.9
* As at end - June
Source: Basic Statistical Returns of SCBs in India
The banking system has covered 26.2 per cent of rural population through savings deposit accounts. The un-banked segment is much higher at 61 per cent in rural areas.
Coverage of rural and urban borrowers per 100 persons is given in the following tables from 1971 to 2007. It is 9.6 in rural and 19.5 in urban per 100 adult population.
Table 6: Borrowal Accounts with Scheduled Commercial Banks
Population
Group
Particulars
1971
1981
1991
2001
2006
2007
Rural
No. of Accounts (Million)
-
16.4
49.9
36.6
50.5
53.1
Accounts per 100 persons
-
3.1
7.9
4.9
6.3
6.5
Accounts per 100 adults
-
5.2
12.7
7.5
9.3
9.6
Urban
No. of Accounts (Million)
-
4.4
12.1
15.8
34.9
41.3
Accounts per 100 persons
-
2.7
5.5
5.5
11.3
13.1
Accounts per 100 adults
-
4.5
8.9
8.4
16.7
19.5
Total
No. of Accounts (Million)
4.3
20.7
61.9
52.4
85.4
94.4
Accounts per 100 persons
0.8
3.0
7.3
5.1
7.7
8.3
Accounts per 100 adults
1.3
5.0
11.7
7.9
11.6
12.4
As at June End
Source: Basic Statistical Returns of SCBs in India.
The census population groups are rural and urban, where as the population groups used in BSR data are rural, semi-urban, urban and metropolitan. There is no unique relationship between the two. For comparison purpose and simplicity, therefore, rural and semi-urban are taken as 'rural' and urban and metropolitan are combined as 'urban'. Adult population in this section refers to the population in the age group of 15 years and above. Rural/Urban population for 2007 is estimated on the basis of rural/urban share in 2001 population. SCBs include RRBs unless stated otherwise given separately.
Out of 203 million households in the country 147 million are in rural area. As per NSSO data out of 89.3 million farmer households 45.9 million (51.4 per cent) do not access credit either from credit institutions or from non-institutional sources. (as per the NSSO survey of farmer households for 2003)
One of the bench marks employed to assess the degree of reach of financial services to the population of the country, is the quantum of deposit accounts (current and savings) held as a ratio of the adult population. Available data (March 2004) shows that 59 percent of adult population in the country has bank accounts. Thus 41 per cent of the adult population is financially excluded. The un-banked segment is much higher at 61 per cent in rural areas.
The exclusion is as high as above 75% in the states of Meghalaya., Arunachal Pradesh, Uttarakhand, Assam, Mizoram, Manipur and Jharkhand. It ranges from 25% To 50% in the states of Bihar, Chathisgarh, Himachal Pradesh, Jammu & Kashmir, Nagaland, Orrisa, Sikkim, Tripura and Uttar Pradesh. It is relatively low in southern statesand other states like Madhya Pradesh, Rajasthan, Punjab, Maharashtra, Haryana and West Bengal (see Table 7 for state wise position of financial inclusion on the basis of deposit accounts for adult population).
Financial exclusion of large section of population particularly in rural areas and slums in urban areas are attributed both from supply side and demand side factors.
The reasons from supply side are
Persons are unbankable in the perception of banker.
The deposit/loan account is too small.
