Financial Inclusion by Indian Public sector banks

In today’s world, where the main focus of private banks is to earn profits, it is important to understand the role and need for public-sector banks especially in a heavily populated country like India.

What are Public-sector banks?
Public sector banks are those banks in which the government has majority shareholding at least 51 percent.
In other words, we can say that the government controls such banks to protect the interests of the people and regulate the supply of money in the economy.

This article is based on one such role or function of Public-sector banks, i.e., financial inclusion. Financial inclusion is an effort to make every day financial services available to more of the world’s population at a reasonable cost. The objective is to make financial services or products accessible and affordable for all citizens irrespective of their professions, level of income, location etc.

Here are some strategies and initiatives taken by Indian public sector banks for Financial Inclusion:

  • SMALL ACCOUNTS: Those persons who do not have any of the ‘officially valid documents can open “Small Accounts” with banks. A “Small Account” can be opened on the basis of a self-attested photograph and putting his/her signatures or thumb print in the presence of an officials of the bank. 
  • BUSINESS CORRESPONDENT AGENTS (BANK MITRAS) are retail agents engaged by banks for providing banking services at locations where opening of a brick-and-mortar branch / ATM is not viable. Scope of activities of Business Correspondents / Bank Mitra are as under:
    a) Creating Awareness about savings and other products and
    education and advice on managing money and debt counselling.
    b) Identification of potential customers.
    c) Collection and preliminary processing of various forms for
    deposits including verification of primary information /data.
  • LOANS AND ADVANCES TO WEAKER SECTIONS: It offers advances to weaker sections, consisting of beneficiaries belonging to scheduled castes/scheduled tribes, small and marginal farmers, landless labourers, rural artisans, beneficiaries under Govt. Sponsored schemes.
    Women are assuming greater responsibilities and playing an active role in the economic growth of the nation but remain under-represented while receiving the credit delivery from the financial institutions of the
    country. So, for strengthening of credit flow to women, OBC has implemented 14-points action plan as advised by the government of India. Banks have designated 10 branches as specialized branches for women entrepreneurs. Credit schemes like Oriental Mahila Vikar Yojana, Loan scheme for Professional & Self-employed women, Loan scheme for Beauty parlour/Boutiques/Saloons/Tailoring, Oriental Swaran Yojana etc. are designed by the bank especially for women.
    The scheme is operative in rural areas of the country and covers the aspects of self-employment such as organisation of rural poor into Self- Help Groups (SHGs) training, Credit technology, infrastructure and marketing.
  • PRADHAN MANTRI JAN DHAN YOJANA: The Pradhan Mantri Jan Dhan Yojana under the National Mission Mode envisages provision of affordable financial services to all citizens within a reasonable distance. It comprises of the following six pillars: –

1.1 Universal access to banking facilities: – Mapping of each district into Sub Service Area (SSA) catering to 1000-1500
households in a manner that every habitation has access to banking services within 5 km.

1.2 Providing Basic Banking Accounts with overdraft facility and RuPay debit card to all households: – To all households, efforts should be made to first cover all uncovered household with banking facilities. Facility of an overdraft of Rs.10,000/- through RuPay debit card.

1.3 Financial Literacy Program: Financial literacy would be an integral part of the Mission in order to let the beneficiaries make best use of the financial services being made available to them.

1.4 Creation of Credit Guarantee Fund: Creation of Credit Guarantee Fund would be to cover the defaults in overdraft accounts.

1.5 Micro Insurance: To provide micro-insurance to all willing and eligible persons by 14th August, 2018, and then on an ongoing basis.

1.6 Unorganized sector Pension schemes like Swavlamban: By 14th August, 2018 and then on an ongoing basis.


We can say that Public-sector banks are playing an active role in making financial services and products available and
affordable for various groups/categories of people. These schemes and their implementation help in bridging economic
opportunities with outcomes in the following ways-

  • Access to credit enables businesses to expand, creating jobs and reducing inequality.
  • Providing access to financial services opens doors for families, allowing them to smooth out consumption and invest in their futures.
  • By increasing consumption level of households and investment level of private sector, it leads to increase in opportunities for economic growth.
  • Direct cash transfers to beneficiary bank accounts, instead of physical cash payments against subsidies will become possible.
  • This also ensures that the funds actually reach the intended recipients instead of being siphoned off along the way.
  • It also helps in bridging the wage gap between the rich and the poor and reducing poverty rates.

To conclude, these schemes and efforts by Public-sector banks and the government of India have led to a substantial increase in availability of various financial services for various people divided into categories like- farmers, small rural organisations and businesses, self-employed and working women (rural and urban areas), SCs, STs and the general public.

Categories: Economy

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