Financial Inclusion in India: A Case Study of Gubbi

69 Pages Posted: 26 May 2017

See all articles by Charan Singh

Charan Singh

Indian Institute of Management (IIMB), Bangalore

Gopal Naik

Indian Institute of Management (IIMB), Bangalore - Department of Economics and Social Sciences

Date Written: May 25, 2017

Abstract

Financial inclusion can play a key role in facilitating inclusive economic growth particularly in a developing economy. An inclusive finance must provide better banking services to all sections of society, especially low-income and weaker sections. The uniqueness of having a bank account is that it not only provides basic banking facility but also finance for investment/production purposes which opens opportunities for enhanced employment.

Since 2005, concerted efforts have been made by the Reserve Bank India (RBI) and National Bank for Agriculture and Rural Development (NABARD) to extend financial inclusion across India, especially to weaker sections of society, as they remained excluded from services offered by financial institutions. In 2003, a study revealed that only 27 per cent of total households had accessed credit from institutional sources including banks and cooperative institutions. In 2012, just about 40 per cent of adult population had bank accounts.

The present study based on a Survey of farmers and non-farmers undertaken in Gubbi in 2013 and early 2014, attempted to examine the impact of such measures by the RBI and NABARD in opening of accounts, availing of loans from formal institutions, ease of transactions, and factors hindering financial inclusion in rural areas. The results revealed that though credit from banks was improving, money lenders continued to be an important source of finance. The major factors that were hampering the banking system to extend credit was lack of awareness of government initiatives, distance from the bank, and long term relationship with money lenders.

The bankers who were also interviewed for the Survey stressed that financial literacy was lacking in the country, BC model was useful but not very successful as attrition rate was high, and technological issues in handsets, especially connectivity, were substantial which were impeding expansion of bank accounts.

Keywords: Financial Inclusion, Business Correspondents, Money Lenders, Mandi Merchants

Suggested Citation

Singh, Charan and Naik, Gopal, Financial Inclusion in India: A Case Study of Gubbi (May 25, 2017). IIM Bangalore Research Paper No. 549, Available at SSRN: https://ssrn.com/abstract=2973741 or http://dx.doi.org/10.2139/ssrn.2973741

Charan Singh (Contact Author)

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India
080-26993818 (Phone)

Gopal Naik

Indian Institute of Management (IIMB), Bangalore - Department of Economics and Social Sciences ( email )

Bannerghatta Road
Bangalore, Karnataka 560 076
India
2699-3194 (Phone)

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