Financial “inclusion” is roping everyone into the economy. And to make this happen, India must start with the ones who need it the most, i.e. the rural population who don’t even have bank accounts.
A 2012 World Bank estimate shows that 65% of India’s population remains unbanked. Since then, we’ve seen a steady rise in financial infrastructure. Some states like Himachal Pradesh, Kerala, Karnataka and Punjab have a good bank density while others, like Bihar and Madhya Pradesh, don’t.
Opening a bank in every corner of the country may seem easier than it looks because genuine financial inclusion in a state requires political will and technical support from the Government, private companies AND the RBI.
Here’s a state that had all its ducks lined up: Odisha – the first state in India to have the highest banked population of 78%.
Odisha recognized that their vast majority of illiterate poor were being exploited by private money lenders who were charging them high rates of interest. By introducing financial institutions, they would be able to fight these lenders.
Over the years, and with the help of SHGs (Self-Help Groups), the state government was able to take bank services to remote areas of Odisha. By 2014, Odisha had 4,281 branches of banks including public sector, the private sector and regional rural banks. Several began opting for these loans over loans from familiar but nefarious money lenders.
Don’t clap yet, the problem has not completely been solved. While bank account penetration in Odisha is higher than any other state in India, 1 in 10 adults has an inactive bank account. This happens to a current or savings account that hasn’t had a transaction in a year.
But with India and respective state governments like Odisha prioritising financial inclusion every year, there’s a light at the end of the tunnel.