Assessing Role of Banking Sector in Financial Inclusion Process in

ASSESSING ROLE OF BANKING SECTOR IN FINANCIAL INCLUSION PROCESS IN INDIA

AUTHOR

T. RAVIKUMAR

ASSISTANT PROFESSOR

DEPT. OF MANAGEMENT STUDIES

CHRIST UNIVERSITY

BANGALORE – 560 029.

MOBILE: 09663120073

EMAIL: [email protected]


EXECUTIVE SUMMARY

Access to safe, easy and affordable credit and other financial services by the poor and vulnerable groups in

disadvantaged areas and lagging sectors is recognized as a pre-condition for accelerating growth and reducing

income disparities and poverty. Access to a well-functioning financial system, by creating equal opportunities,

enables economically and socially excluded people to integrate better into the economy and actively contribute to

development and protects themselves against economic shocks. Despite the broad international consensus regarding

the importance of access to finance as a crucial poverty alleviation tool, it is estimated that globally over two billion

people are currently excluded from access to financial services.

In order to expand the credit and financial services to the wider sections of the population, a wide network

of financial institutions has been established over the years in India. The organized financial system comprising

Commercial Banks, Regional Rural Banks (RRBs), Urban Co-operative Banks (UCBs), Primary Agricultural Credit

Societies (PACS) and post offices caters to the needs of financial services of the people. The initiatives taken by the

Reserve Bank and the Government of India towards promoting financial inclusion since the late 1960s have

considerably improved the access to the formal financial institutions.

Banking sector plays considerable role in bringing financially excluded people in to formal financial sector

as policies of the government and Reserve Bank towards financial inclusion are implemented through banking

sector.

This article makes an attempt to assess the role of banking sector in financial inclusion process in India.

Role of banks in financial inclusion process in India is examined on the basis data available from the institutional

sources such as Reserve Bank of India (RBI), National Bank for Agriculture and Rural Development (NABARD),

Scheduled Commercial Banks (SCBS), RRBs, UCBs and PACS from different viewpoints namely branch

penetration, ATM penetration, population per branch, distribution of banking branches, credits, including micro

finance, of SCBs and Co- operative banks, deposits of SCBs and Co- operative banks, credit-income ratio, deposit-

income ratio and cash-deposit ratio in India.

KEY WORDS: FINANCIAL INCLUSION, BANKING SECTOR, SCHEDULED COMMERCIAL BANKS,

SUPPLY, DEMAND, RESERVE BANK OF INDIA, INDIA


I. INTRODUCTION

India has a long history of banking development. After Independence, the major focus of the Government

and the Reserve Bank was to develop a sound banking system which could support planned economic development

through mobilization of resources/deposits and channel them into productive sectors.

Accordingly, the Government’s desire to use the banking system as an important agent of change was at the

core of most policies that were formulated after Independence. The planning strategy recognized the critical role of

the availability of credit and financial services to the public at large in the holistic development of the country with

the benefits of economic growth being distributed in a democratic manner. In recognition of this role, the authorities

modified the policy framework from time to time to ensure that the financial services needs of various segments of

the society were met at satisfactory level.

In order to expand the credit and financial services to the wider sections of the population, a wide network

of financial institutions has been established over the years. The organized financial system comprising Commercial

Banks, Regional Rural Banks (RRBs), Urban Co-operative Banks (UCBs), Primary Agricultural Credit Societies

(PACS) and post offices caters to the needs of financial services of the people.

The initiatives taken by the Reserve Bank and the Government of India towards promoting financial

inclusion since the late 1960s have considerably improved the access to the formal financial institutions.

Banking sector plays considerable role in bringing financially excluded people in to formal financial sector

as policies of the government and Reserve Bank towards financial inclusion are implemented through banking

sector.

This article makes an attempt to assess the role of banking sector in financial inclusion process in India.

Role of banks in financial inclusion process in India is examined on the basis data available from the institutional

sources such as Reserve Bank of India (RBI), National Bank for Agriculture and Rural Development (NABARD),

Scheduled Commercial Banks (SCBS), RRBs, UCBs and PACS from different viewpoints namely branch

penetration, ATM penetration, population per branch, distribution of banking branches, credits, including micro

finance, of SCBs and Co- operative banks, deposits of SCBs and Co- operative banks, credit-income ratio, deposit-

income ratio and cash-deposit ratio in India.

II. OBJECTIVES OF THE STUDY

The main objectives of the study are as follows

1. To study about role of Indian banking sector in bringing financially excluded people in to formal

financial sector.

2. To assess the role Indian banking sector in bringing financially excluded people in to formal financial

sector.

III. METHODOLOGY

The study is based on secondary data. Relevant data are availed from the sources of Reserve Bank of India

(RBI), National Bank for Agriculture and Rural Development (NABARD), National Federation of State co-

operative Banks (NAFSCOB) and other sources. Data for the minimum period of 10 years (2001-02 to 2011-12)

have been considered and analyzed. However, in few cases, data have been considered till the year 2010-11 as data

for the year 2011-12 is not available. Analysis has been done on the basis of well proven financial inclusion

indicators namely

1. Banking system penetration

2. Bank credit penetration

3. Size and depth of financial market

4. Bank savings penetration

5. Development of financial system

6. Number of basic accounts and

7. Implementation of financial inclusion initiatives

IV. ROLE OF SCHEDULED COMMERCIAL BANKS IN FINANCIAL INCLUSION PROCESS IN INDIA:

AN OVER VIEW

The number of commercial Banks in a country provides an opportunity for the people of that country to

participate in the formal financial system and to utilize financial services of formal financial system. Larger the

number of commercial banks, larger the scope for bringing people in to formal financial system provided if banks

provide suitable financial products and services.

Table – 1 shows number of commercial banks in India in different periods. In the year 1969, there were 89

commercial banks in India of which 73 were Scheduled Commercial Banks and the rest were non-scheduled

commercial banks. Regional rural banks were not started at that time. In the year 2001, number of commercial banks

in India reached 301 of which 296 were scheduled commercial banks and 5 were non-scheduled commercial banks.

Out of 296 scheduled commercial banks in the year 2001, Regional rural banks accounted for 196 banks. As on 31st

March 2011, there were 167 commercial banks in India of which 163 banks were scheduled commercial banks and 4

were non- scheduled commercial banks. Decrease in number of commercial banks in the year 2011 as compared to

2001 may mainly be due to sharp decline in number of RRBs in India.

TABLE – 1: NUMBER OF COMMERCIAL BANKS IN INDIA

1969* 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Number of commercial

banks

89

301

298

294

291

288

222

183

175

170

169

167

a) Scheduled commercial

banks

73

296

294

289

286

284

218

179

171

166

165

163

Of which

RRBs

-

196

196

196

196

196

133

96

91

86

82

82

b) Non-scheduled

commercial banks

16

5

4

5

5

4

4

4

4

4

4

4

Source: Basic Statistical Returns of Commercial Banks in India, RBI. * End – June.

TABLE – 2

POPULATION PER BANK BRANCH

End March Population per branch

1969* 64000

2001 15000

2002 16000

2003 16000

2004 16000

2005 16000

2006 16000

2007 15000

2008 15000

2009 14500

2010 13800

2011 13000

*As at end-June, Source: Basic Statistical Returns of Commercial Banks in India, RBI.

One of the indicators for measuring banking access is the population per branch. Following the

nationalization of banks in 1969, branch network of SCBs expanded rapidly. As a result, the population per branch

declined significantly between 1969 and 1991. The population per branch in the rural segment increased after 1991.

The population per branch, however, continued to decline in the urban areas (Table 2)1. One of the factors

responsible for increase in population per branch in rural areas between 1991 and 2007 was the reclassification of

953 rural centers, classified as rural as per 1991 census, which moved to higher population centers on account of

increase in population. Besides reclassification, there were also instances where certain centers, which were earlier

classified as rural, were brought into the jurisdiction of the adjoining municipality / municipal corporations and,

thus, classified as urban/metropolitan depending on the population of municipality / Municipal Corporation. As on

31st March 2011, population per branch was 13000.

TABLE – 3

NUMBER OF OFFICES OF SCHEDULED COMMERCIAL BANKS IN INDIA ACCORDING TO AREA

(AS ON 31st MARCH)

YEAR AREA

1969*

1991 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Rural 1833 35206 32562 32380 32303 32121 32082 30579 30551 31076 31667 32624 33495

Semi urban 3342 11344 14597 14747 14859 15091 15403 15556 16361 17675 18969 20740 22631

Urban 1584 8046 10293 10477 10693 11000 11500 12032 12970 14391 15733 17003 17712

Metropolitan 1503 5624 8467 8586 8680 8976 9370 11304 11957 12908 14178 15026 15784

Total 8262 60220 65919 66190 66535 67188 68355 69471 71839 76050 80547 85393 89622 *As at end-June Source: Basic Statistical Returns of Commercial Banks in India, RBI.

Distribution of banking system is another indicator of level of financial inclusion in a country. Banking

system should not be concentrated particular area or region in a country like India which has vast geographical area

and population. Table – 3 indicates distribution of SCBs’ branches in different areas of India at different periods of

time. In the year 1969, there were 1833 bank branches in rural areas, 3342 branches in semi urban areas, 1584

branches in urban areas and 1503 branches in metropolitan areas. Number of branches in rural areas declined

between 1991 and 2001. But, number of branches in semi urban, urban and metropolitan areas increased

significantly during the same period. This trend continued till the year 2007. Since the year 2008, number of

branches in all kinds of areas (rural, semi urban, urban and metropolitan) has been increasing in India. But,

percentage of increase in branches in rural areas is low as compared to other areas. As on 31st March 2011, there

were 33495 branches in rural areas, 22631 branches in semi urban areas, 17712 branches in urban areas and 15784

branches in Metropolitan areas. In total, there were 89622 branches of SCBs in India as on 31st March, 2011. Here, 1 The census population groups are 'rural' and 'urban', whereas the population groups used in BSR data are 'rural',

'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.

an important thing which is to be considered is number of branches in rural areas. The numbers of branches of SCBs

in rural areas as on 31st March, 2011 was 33495 which were lower than number of branches of SCBs in the year

1991 (35206).

TABLE – 4: GEOGRAPHIC BRANCH PENETRATION OF SCBS IN INDIA

End- March Total number of branches Geographic branch penetration

1991 60220 18.31

2001 65919 20.05

2011 89622 27.26

Source: Compiled on the basis of RBI data.

Note: India’s geographical area amounts to 32, 87,263 km2

Geographic branch and ATM penetrations have been used considerably as a proxy measure of financial

inclusion in the literature. Geographical branch penetration means number of bank branches per 1000 square

kilometers (km2). Geographic ATM penetration refers to number of ATMs per 1000 square kilometer (km2).

Penetration of geographic bank branches and ATMs measure availability of banking branches and ATMs to the

people in terms of geographical access. Higher geographic branch and ATM penetrations indicate smaller distance

and thus easier geographic access of the bank branches and ATMs and vice versa.

Beck et al. (2007) and Satya R. Chakravarty and Rupayan Pal (2010) used geographic branch and ATM

penetrations in their study to measure financial inclusion. Table – 4 shows geographic branch penetration of SCBs in

India at different periods of time. It is clear from the table that geographical branch penetration keeps on increasing

from the year 1991. In 1991, geographical branch penetration score of India was 18.31, in the year 2001 it was 20.05

and in the year 2011, it reached 27.26. Geographical branch penetration scores indicate that there were about 18

branches per 1000 km2 in the year 1991, 20 branches per 1000 km2 in the year 2001 and around 27 branches per

1000 km2. Geographical branch penetration score of SCBs in India as on 31st March 2011 indicates that people have

to travel considerable distance to avail banking services in India.

Table – 5 shows geographic ATM penetration in India at different periods of time. In this study, geographic

ATM penetration has been computed for six years up to the year 2011. The table indicates that geographic ATM

penetration score keeps on increasing every year in India. In the year 2005, geographic ATM penetration score was

5.4 and in the year 2010, it was 18.3. There had been more than 4 fold increase in geographic ATM penetration in

India over the period of seven years.

Demographic branch and ATM penetrations are also considerably used as a proxy measure in the literature

to measure financial inclusion. Demographic branch penetration refers to number of bank branches per 1, 00,000

persons. Demographic ATM penetration refers to number of bank branches per 1,00,000 persons. Penetration of

demographic bank branches and ATMs measure availability of banking branches and ATMS to the people in terms

of accessibility. Higher demographic branch and ATM penetrations indicate easier access because of fewer

potential clients per outlet and vice versa.

TABLE – 5

GEOGRAPHIC ATM PENETRATION OF SCBs IN INDIA

End- March Total number of ATMs Geographic ATM penetration

2005 17642 5.4

2006 21147 6.4

2007 27088 8.2

2008 34789 10.6

2009 43651 13.3

2010 60153 18.3

2011 74505 22.6

Source: Compiled on the basis of RBI data

Beck et al. (2007), Kiatchai Sophastienphong and Anoma Kulathunga (2009) and Satya R. Chakravarty and

Rupayan Pal (2010) used demographic branch and ATM penetrations in their study to measure financial inclusion.

For the indicators demographic branch and ATM penetrations, a country may be considered approaching full access,

if its outreach indicator lies above the mean value in developed countries (Beck and de la Torre 2006).

TABLE – 6

DEMOGRAPHIC BRANCH PENETRATION OF SCBs IN INDIA

End- March Total number of branches Demographic branch penetration

1991 60220 7.17

2001 65919 6.46

2011 89622 7.41


Table - 6 depicts demographic branch penetration of SCBs in India at different periods of time. From the

table – 5, it is evident that demographic branch penetration in India was 7.17 in the year 1991, then it declined to

6.46 in the year 2001 and it reached 7.41 in the year 2011. The demographic branch penetration scores of India

indicate that in the year 1991 and 2011, about 7 branches were available for every 1, 00,000 persons and about 6

branches were available for every 1, 00,000 persons in the year 2001.

Demographic branch penetration score for the year 2003 in India was 6.33. Demographic branch

penetration in India, on the basis of 2003 data, was lower than Malaysia (8.26) and Thailand (7.37). But,

Demographic branch penetration in India, on the basis of 2003 data, was higher than China (1.33) and Indonesia

(3.73). Further, India’s demographic branch penetration was much less than developed countries like Canada (28),

Australia (24), Japan (45), UK (23) and USA (26). It has been mentioned in the study conducted by Kiatchai

Sophastienphong and Anoma Kulathunga (2009) titled “Getting Finance in South Asia, (2009): Indicators and

Analysis of the Commercial Banking Sector”.

Demographic branch penetration score for the year 2010 in India was 7.13. It has been specified in the

Report on Trend and Progress of Banks in India, 2009 - 10. An important point which is to be noted here is that

geographic branch penetration in India in the year 2011 increased nearly two fold as compared to that of the year

1991 (Table – 4). But, demographic branch penetration in India for the same period increased slightly only (Table –

6). From this, it is evident that there has been considerable increase in bank branch expansion in India, but, it is not

in the proportion to increase in population in India.

Table – 7 shows demographic ATM penetration scores of SCBs in India at different periods of time. In the

year 2001, 3.5 ATMs were available for every 1, 00,000 persons in India. But, in the year 2011, it has gone to 6.1. It

means that only 6.1 ATMs were available for every 1, 00,000 persons in India. Here, it should be mentioned that

geographic ATM penetration in India has increased 3 fold over the period of six years (Table – 5). But, demographic

ATM penetration has increased moderately in India (Table – 7) over the period of ten years. This clearly indicates

that number of ATMs in India has increased considerably, but not in proportion to increase in population.

TABLE – 7

DEMOGRAPHIC ATM PENETRATION OF SCBs IN INDIA

End- March Total number of ATMs Demographic ATM penetration

2001 35724 3.5

2010 60153 5.2

2011 74505 6.1


To sum up, population per branch of SCBs over the years declined considerably. Penetration of bank

branches in different areas of India increased slightly except rural areas. In fact, number of bank branches in rural

areas in the year 2011 was less than number of bank branches in the rural areas in the 1991. Although RBI and GOI

have been taking number of measures to develop rural areas economically, it seems that such efforts are inadequate.

Geographic branch and ATM penetration had made considerable progress in India over the years. Despite

considerable increase in demographic branch and ATM penetrations in India, India still lacks far behind the goal of

“finance for all” because India’s demographic branch penetration score as on 31st March 2011 (7.41) and

demographic ATM penetration score as on 31st March 2011 (6.1) are much less than mean score of demographic

branch penetration of selected developed countries (29.2) and mean score of demographic ATM penetration of

selected developed countries (128).

V. ROLE OF BANKING SECTOR IN FINANCIAL INCLUSION PROCESS IN INDIA: CREDIT SIDE

ANALYSIS

V.A. CREDIT ACCOUNTS OF SCHEDULED COMMERCIAL BANKS

The number of total credit accounts per 1000 persons/adults, which is one of the indicators of the expansion

of credit delivery services, after declining between 1991 and 2001, increased significantly thereafter. At the

disaggregated level also, credit accounts per 1000 persons/adults in both the rural and urban areas improved between

2001 and 2010 (Table - 8).

The significant increase in credit accounts, particularly in the urban areas, in recent years was on account of

robust growth in retail, housing and consumer finance. This was mainly due to rise in the purchasing power,

changing consumer demographics and high potential for growth in consumption, technological innovations in

delivery of financial services/products, and recognition of retail business by the financial entities as an important

part of their business activities. At present, the retail banking sector is characterized by three basic elements:

multiple products (deposits, credit cards, insurance, investments and securities); multiple channels of distribution

(call centre, branch, internet and kiosk); and multiple customer groups (consumers, small businesses, and

corporate).The typical products offered in the Indian retail banking segment are housing loans, consumption loans

for purchase of durables, auto loans, credit cards and educational loans. Within the retail segment, housing credit

increased significantly over the last few years. A higher credit penetration indicates larger use of financial services

and vice versa.

TABLE – 8

CREDIT ACCOUNTS WITH SCHEDULED COMMERCIAL BANKS

Year

Area Particulars 1971* 1981 1991 2001

2010

Rural No. of accounts (Million) - 16.4 49.9 36.6

62.9

Accounts per 1000 Persons - 31 79 49

72

Accounts per 1000 Adults - 52 127 75

103

Urban No of accounts (Million) - 4.4 12.1 15.8

55.6

Accounts per 1000 Persons - 27 55 55

165

Accounts per 1000 Adults - 45 89 84

235

Total No of accounts (Million) 4.3 20.7 61.9 52.4

118.5

Accounts per1000 Persons 8 30 73 51

98

Accounts per 1000 Adults 13 50 117 79

154

*: As at end June. Source: Basic Statistical Returns of SCBs in India, RBI.

Note: The census population groups are rural and ‘urban’, whereas 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 year and above.

Table – 9 depicts credit accounts per 1000 persons with scheduled commercial banks in region wise at

different periods of time. For computation of credit accounts per 1000 persons, populations for the years 1991 and

2001 were taken from census of India for the respective years. Populations for the years 2007 and 2010 were taken

from estimated population used in Handbook of statistics on Indian economy 2009-10. Credit accounts per 1000

persons had been lowest one in eastern part of India in the year 2010 while the southern part of India had the highest

score for credit accounts per 1000 persons. It should be mentioned here that all regions of India except western and

southern regions had lesser credit accounts per 1000 persons than all India average of 98 credit accounts per 1000

persons. But, western and southern regions of India had much better credit accounts per 1000 persons than all India

average. It is an indicator of concentration of credit accounts in western and southern regions of India.

TABLE – 9

CREDIT ACCOUNTS WITH SCHEDULED COMMERCIAL BANKS –REGION WISE (Per 1000 persons)

Region/ End-March

Total Credit Accounts

1991 2001 2007 2010

Northern 64 56 71 70

North-Eastern 44 28 43 51

Eastern 66 37 48 48

Central 55 36 44 50

Western 57 44 105 166

Southern 118 88 168 189

All-India 73 51 83 98

Source: Compiled on the basis of RBI data.

Table – 10 shows number of credit accounts and outstanding credit with SCBs for the period 31st March

2005 to 31st March 2010 according to bank group wise. Bank group wise credit accounts and credit disbursement

analysis is useful to have a look in to share of different bank groups in total credit disbursement in the country. In

total, 118.6 million credit accounts were with all SCBs in India as on 31st March 2010 and amount outstanding in

those credit accounts amounted to Rs 33451.9632 billion. When compared to credit accounts and outstanding credit

in the year 2005, credit accounts in the year 2010 increased nearly 54% and outstanding credit in the year 2010 also

increased. Increase in outstanding credit was about 190%.

As far as bank group is concerned, nationalized banks had more number of credit accounts and outstanding

credit as on 31st March 2010 followed by private sector banks, SBI and its associates, RRBs and foreign banks.

Regarding the credit accounts growth in Private sector banks, in the year 2005, private sector banks had only about

10 million credit accounts, but, in the year 2010, credit accounts in private sector banks increased to more than 33

million. Outstanding credit in private sector banks also increased considerably during the same period.

TABLE – 10

CREDIT ACCOUNTS AND OUTSTANDING CREDIT WITH SCHEDULED COMMERCIAL BANKS -

BANK GROUP WISE

(End-March)

Bank Group

2005 2009 2010

No of Accounts in

million

Amount outstanding (in

lakh)

No of Accounts in

million


lakh)

No of Accounts in

million


lakh)

State bank of India and its associates

15.86

26602297

20.56

65725504

22.47

77352899

Nationalized banks

28.05 55132072 35.26 143676982 36.78 173792502

Foreign banks 08.92 7549137 08.01 16772166 06.93 16495539

Regional rural banks

14.16 3268883 17.01 6682891 18.63 8276176

Private sector banks

10.13

22694404

29.20

51913769

33.82

58599816

All scheduled commercial

banks

77.12 115246793 110.04 110056177 118.63 334516932

Source: Basic Statistical Returns of SCBs in India, RBI.

For the purpose of financial inclusion, progress in the small accounts is particularly relevant. The breakup

of credit accounts suggests that the share of number of credit accounts with credit limit up to Rs.25,000 in total

credit accounts and the amount outstanding in such accounts in total credit outstanding declined between 1991 and

2002 and further by 2009, but, little increased in the year 2010. The credit accounts with credit limit of Rs.25, 000-

Rs.2,00,000 and the amount outstanding in these accounts showed a consistent increase during 1991-2010, but,

amount outstanding in those accounts decreased in the year 2010 (Table 11). However, this pattern to a large extent

might have been on account of migration of some loans (which are in nominal terms) with credit limit up to Rs.25,

000 to the higher categories due to the impact of inflation.

TABLE – 11

NUMBER OF CREDIT ACCOUNTS AND OUTSTANDING CREDIT AS PER SIZE OF CREDIT LIMIT -

ALL SCBS

(Amount in Rupees crore) End-March Credit up to Rs 25000 Credit between Rs 25000 and Rs 200000 Total

Accounts (Million)

% to

Total Amount %

to Total Accounts (Million)

% to

Total Amount

% to

Total

Accounts (Million) Amount

1 2 3 4 5 6 7 8 9 10 11

1990 51.2 95.0 24, 147 23.1 2.3 4.2 14,351 13.8 53.9 104, 312

1991 58. 8 94.9 27,323 22.0 2.7 4.4 17,267 13.9 61.9 124, 203

1992 62.5 95.0 29,945 21.9 2.8 4.3 18,393 13.5 65.9 136, 706

1993 58 .5 94.2 32,091 19.8 3.1 5.0 20,217 12.4 62.1 162,467

1994 55.8 93.6 32,188 18.3 3.3 5.5 21,547 12.3 59.7 175,891

1995 53.9 92.8 34,060 16.1 3.5 6.1 23,882 11.3 58.1 210,939

1996 51.9 91.6 36,253 14 .2 4.0 7.0 28,085 11. 0 56.7 254,692

1997 50.1 90.1 37,446 13.2 4.6 8.3 32,227 11. 3 55.6 284,373

1998 46.8 87.4 41,095 12.5 5.7 10.7 39,457 12.0 53.6 329,944

1999 42.7 81.7 38,285 10.0 8.2 15.8 49,997 13.1 52.3 382,425

2000 39.3 72.2 36,409 7.9 13.6 25.0 66,336 14.4 54.4 460,081

2001 37.3 71.1 37,816 7.0 13.2 25.2 68,478 12.7 52.4 538,431 2002 37.3 66.2 38,501 5.9 16.8 29.8 87,148 13.3 56.4 655,993

2003 36.9 62.0 41,038 5.4 19.7 33.0 104,019 13.8 59.5 755,969

2004 36.8 55.4 38,555 4.4 25.1 37.9 124,144 14.1 66.4 880,312

2005 38.7 50.2 42,992 3.7 32.4 42.0 156,888 13.6 77.2 1,152,468

2006 38.4 45.0 45,217 3.0 38.7 45.3 203,281 13.4 85.4 1,513,468

2007 38.6 40.9 45,903 2.4 45.7 48.4 232,992 12.0 94.4 1,947,100

2008 38.2 35.7 46420 1.9 56.2 52.6 284601 11.8 106.9 2,417,006

2009 39.2 35.6 42936 1.5 56.5 51.3 306927 10.8 110.0 2,847,713

2010 45.2 38.1 43589 1.3 57.5 48.5 317156 9.5 118.6 3,345,169


The number of credit accounts with the RRBs also declined somewhat in the late 1990s, but increased

sharply during the current decade (Table - 12). In RRBs, most of the credit accounts were small borrowing accounts.

But, credit amount outstanding in small borrowing accounts kept on declining every year except the year 1999.

TABLE – 12

REGIONAL RURAL BANKS IN INDIA - CREDIT ACCOUNTS/AMOUNTS

(No of Accounts in ‘000, Amount in Rupees crore)

End March Credit Account Small Borrowing Accounts

Col 4 as % of Col.2 Col 5 as. % of Col.3 Accounts Amount Accounts Amount

1 2 3 4 5 6 7

1996 13,056 7,344 12,902 6,120 98.8 83.3

1997 12,102 8,655 11,885 6,845 98.2 79.1

1998 12,293 10,200 12,001 7,797 97.6 76.4

1999 11,138 11,279 11,098 10,194 99.6 90.4

2000 11,868 13,126 11,801 11,561 99.4 88.1

2001 12,203 16,352 12,132 14,360 99.4 87.8

2002 12, 627 18,869 12,543 16,435 99.3 87.1

2003 12,873 22,623 12,776 19,757 99.2 87.3

2004 12,715 26,020 12,593 22,310 99.0 85.7

2005 14,167 32,689 14,014 22,878 98.9 85.3

2006 13,394 36,644 13,195 30,163 98.5 82.3

2007 14,958 47,855 14,666 37,330 98.0 78.0

2008 16,127 57,886 15,753 45,689 97.6 78.9

2009 17,013 66,828 16,555 51,201 97.3 76.6

2010 18,630 82,761 18,015 60,696 96.7 73.3


The credit-income ratio has been used for measuring market concentration by Kiatchai Sophastienphong

and Anoma Kulathunga (2009). However, traditionally, private credit to GDP reflects the size and depth of the

financial markets; see “Measuring Banking Sector Development”, World Bank. Private credit to GDP here is

defined as claims of banking sector on the private sector as per cent of GDP. In this study, credit-income ratio has

been used to measure use of banking services by the people. The same approach was followed by Beck et al. (2007).

Credit-income ratio refers to average size of loans to GDP per capita. Table – 13 shows credit-income ratio of

Scheduled Commercial Banks in India. Credit income ratio in the year 1969 was 0.09. Credit income ratio of SCBs

in India kept on increasing till the year 2009 and decreased slightly in the year 2010. In the year 2010, credit income

ratio was 0.49. Higher credit-income ratio indicates that financial services may only be affordable to larger

enterprises or wealthier individuals and vice versa. The credit-income ratio is above 2% in rich countries, but above

8% in poor countries (Beck et al. 2006).

TABLE – 13

CREDIT-INCOME RATIO OF SCHEDULED COMMERCIAL BANKS

End-March

Year

Population (Million)

GDP at market prices (in

Crore)

Per capita GDP at market prices (Column 3 divided by column 2)

Per capita credit of SCBs

Credit-income ratio (Column 5 divided

by column 4)

1 2 3 4 5 6

1969* 518 39324 759 68 0.09

1992 856 654729 7049 1516 0.21

2001 1019 2102314 20631 5221 0.25

2002 1040 2278952 21913 5919 0.27

2003 1056 2454561 23244 7143 0.31

2004 1072 2754620 25696 8166 0.32

2005 1089 3149407 28920 10440 0.36

2006 1106 3692485 33386 13774 0.41

2007 1122 4293672 36268 17355 0.48

2008 1138 4986426 43817 20928 0.48

2009 1154 5582623 48376 24230 0.50

2010 1170 6550271 55985 27489 0.49

*End-June, Source: Compiled on the basis of data available in Hand book of Statistics on the Indian economy 2010-11 and Basic Statistical Returns of Commercial banks (Various issues).

Note:

1. Base year for computation of GDP at market prices for the years end-June 1969, end-March1992 and

end-March 2001 to end-March 2005 was 1999-00.

2. Base year for computation of GDP at market prices for the years end-March 2006 to end-March 2010

was 2004-05.

V.B. CO-OPERATIVE CREDIT

Rural credit co-operatives in India were envisaged as a mechanism for pooling the resources of people with

small means and providing them with access to different financial services.

TABLE – 14

PROGRESS OF PRIMARY AGRICULTURAL CREDIT SOCIETIES

(END-MARCH)

Particulars 1994 1995 2000

2001

2002 2003 2004 2005 2006 2007

2008

2009

2010

Sl.No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14

1 No. of PACS

(thousand) 91.6 91.1 101.5

98.8

98.2 112.3 105.7 108.8 106.4 97.2

94.5

95.6

94.6

2 Members (million) 89.0 90.6 108.6

99.9

102.1 123.6 135.4 127.4 125.2 125.8

131.5

132.3

126.4

3 Borrowers (million) 50.5 38.0 43.0

46.5

55.5 63.9 51.3 45.1 46.1 47.9

51.1

46.2

59.8

4 Owned

funds (Rs. crore)

2,694 3,412 5,338

5,593

6,855 8,198 8,337 9,197 9,292 11,039

10,984

11,806

12,479

5. Deposits (Rs. crore) 2,102 2,962 12,459

13,481

14,846 19,120 18,143 18,976 19,561 23,484

25,449

26,245

35,286

6. Borrowings (Rs. crore) 9,117 10,176 22,350

25890

29,475 30,278 34,257 40,249 41,018 43,714

47,847

48,938

51,764

7. Total

Resources (4+5+6)

13,913 16,550 40,147

44,964

51,176 57,596 60,797 68,422 69,871 78,237

84,380

86,989

99,529

8. Loans

Outstanding (Rs. crore)

10,534 12,141 28,546

34522

40,779 42,411 43,873 48,785 51,779 58,620

65,666

64,044

76,480

Source: Performance of Primary Agricultural Credit Societies (various issues) NAFSCOB.

The short-term rural co-operative credit structure (STCCS) provides mainly short-term credit and other

financial services, which are of particular relevance from the point of view of financial inclusion. At end-March

2006, the three-tier STCCS consisted of nearly 106,400 PACS at the village level, 370 district central co-operative

banks (DCCBs) at the district level with 12,991 branches and 30 state co-operative banks at the State level with 962

branches, but, in the year 2010, PACS declined to 94600. One PACS on an average, serves 6 villages. With a total

membership of more than 126 million rural people, PACS is possibly one of the largest rural financial systems in the

world. The number of borrowing members increased significantly between 1994 and 2003, before declining

thereafter till the year 2007, but, the number of borrowers increased considerably in the year 2010 (Table - 14).

Urban Co-operative Banks (UCBs) play an important role in meeting the growing credit needs of urban and

semi-urban areas of the country. They mobilize savings from the middle and lower income groups and purvey credit

to small borrowers, including weaker sections of the society. These banks in India are financial co-operatives akin to

credit unions found abroad, except that they can also accept deposits from non-members. UCBs also form a part of

the payment system.

In view of the special thrust on financial inclusion in recent years, co-operative banking has acquired

renewed significance in the Indian financial system. Being member-driven institutions working on a collective

principle, they facilitate the pooling of resources for the purpose of lending to their members who are also the banks'

shareholders and, therefore, have a crucial stake in the affairs of the bank. In some parts of the country such as

Maharashtra, Gujarat and Karnataka, UCBs play a significant role in extending banking services in the urban areas.

TABLE – 15

PERFORMANCE OF UCBS – DEPOSITS AND ADVANCES

As on March 31

No. of UCBs

Deposits (` Crore)

Advances (` Crore)

2001 1618 80840 54389 2002 1854 93069 62060 2003 1941 101546 64880 2004 1926 110256 67930 2005 1872 105021 66874 2006 1853 114060 71641 2007 1813 121391 79733 2008 1770 138496 88981 2009 1721 158733 97918 2010 1674 182862 110303 2011 1645 209949 135104

Source: RBI

Table – 15 shows performance of UCBs in India. As on 31st March 2007, there were 7,670 branches

(including extension counters) of 1,813 UCBs in India and UCBs provided credit to around 7 million borrowers

aggregating Rs.79,773 crore.

Consolidation of UCBs

After 2007, number of UCBs started to decline in India. Provisional estimates showed that number of

UCBs in India on 31st March, 2011 was 1645 and their deposits and advances amounted to Rs 209949 crore and Rs

135104 crore respectively.

Although number of UCBs declined, deposits and advances kept on increasing in India. Decrease in

number of UCBs from the year was mainly due to the consolidation of the urban co-operative banking sector

through the process of merger of weak banks with stronger ones.

During last six years, the Reserve Bank has received 158 proposals for merger. The Reserve Bank issued

no objection certificate (NOC) for 120 cases. Out of the 120 NOCs issued, 95 mergers had actually been effected

upon the issue of statutory orders by the Central Registrar of Co-operative Societies (CRCS)/Registrar of

Cooperative Societies (RCS) of the State concerned. Out of the 95 mergers, 59 UCBs had negative net worth. Profit

making UCBs were also permitted to merge with other financially strong UCBs with the aim of consolidation and

strengthening the sector.

VI. ROLE OF INDIAN BANKING SECTOR IN FINANCIAL INCLUSION PROCESS: DEPOSIT SIDE

ANALYSIS

Apart from the availability of credit, the facility of deposits is another key element of financial inclusion.

This is particularly important for the people with low and irregular income. Access to facility of safe deposits

enables such people to plan their expenditure with convenience. This also promotes thrift and develops the culture of

saving. In the absence of such facility, people may keep their savings in various informal forms such as cash at

home or deposit with relatives/moneylenders. The possibility of losing money in such cases is very high which

inflicts hardships to people and also discourage them to save more. A key to safe deposits is the ability to withdraw

money from accounts as and when required. Thus, the nature of products available in this regard could play an

important role in promoting financial inclusion.

In the Indian context, savings deposit accounts are provided by banks and post offices. However, this

section examines the progress made by the banking system in terms of providing savings accounts based on the BSR

data for banks. A limitation of this analysis is the multiple accounts held by one individual and the dormant accounts

that may not have been operated for a long time. Nevertheless, per capita deposit accounts can provide some

important insights into the progress made in promoting financial inclusion.

TABLE – 16

SAVINGS ACCOUNTS WITH SCHEDULED COMMERCIAL BANKS:

AREA WISE

(End-March)

Year 1971* 1981 1991 2001 2010

1 2 3 4 5 6 7

Rural No. of accounts (Million) - 56.9 153.8 169.8 334.1

Accounts per 1000 Persons - 109 245 242 382

Accounts per 1000 Adults - 179 392 350 547

Urban No. of accounts (Million) - 40.9 99.2 110.2 225.3

Accounts per 1000 Persons - 257 456 385 670

Accounts per 1000 Adults - 423 731 589 952

Total No. of accounts (Million) 23.6 97.8 253.0 280.0 559.4

Accounts per 1000 Persons 43 143 299 272 463

Accounts per 1000 Adults 71 229 468 415 658

*: As at end June.


The number of savings accounts opened by SCBs expanded significantly over the years, especially between

the early 1970s and the early 1990s. The expansion in savings accounts was much faster than the population growth,

resulting in a substantial improvement in savings account penetration (savings accounts per 1000 persons) (Table -

16). The improvement was observed both in the urban and rural areas. The number of savings accounts per 1000

persons/adults, which declined between 1991 and 2002, increased sharply thereafter. As a result, the number of

savings accounts per 1000 persons/adults at end-March 2010 was larger than that at end-March 1991. This reflects

rise in the income levels and the various initiatives taken by the Reserve Bank such as urging banks to open 'no

frills' accounts with 'nil' or low minimum balances.

The region-wise pattern indicates that savings accounts per 1000 persons declined between 1991 and 2001

in all the regions, barring North-Eastern and central regions in which the number of savings accounts per 1000

persons increased. This pattern was observed broadly in both the rural and urban areas. However, savings account

penetration increased sharply between 2001 and 2010 in both the rural and urban areas in all the regions (Table -

17). The access to savings accounts was more evenly spread in comparison with credit accounts. Credit accounts

showed a greater concentration in the Southern region and Western region, while savings accounts were more or less

evenly spread in the Northern, Southern and Western regions. However, penetration of both savings accounts and

credit accounts was low in the North-Eastern, Eastern and Central regions.

TABLE - 17

SAVINGS ACCOUNTS OF SCHEDULED COMMERCIAL BANKS – REGION WISE

(Per 1000 persons)

REGION 1991 2001 2010

1 2 3 4

Northern 400 350 590

North-Eastern 178 183 330

Eastern 218 202 321

Central 238 239 395

Western 355 301 464

Southern 370 332 638

All-India 299 272 462

Source: Basic statistical Returns of SCBs in India.

The number of savings accounts with RRBs, which are included in scheduled commercial banks data in

Table 3.20, increased significantly between 1991 and 2010. In tandem with the growth in the number of accounts,

the deposits with RRBs also increased (Table - 18).

Deposit accounts per capita and Deposit-income ratio or deposit-GDP ratio have been significant indicators

of financial inclusion in the literature. They are alternative measures of deposit penetration in an economy. These

indicator have been used in the study of “access to finance” in few foreign countries. But, almost no study in India

used deposit accounts per capita and Deposit-income ratio to study about financial inclusion in India. This study has

employed deposit accounts per capita and Deposit-income ratio to have an in depth analysis of financial inclusion in

India.

TABLE - 18

SAVINGS ACCOUNTS WITH REGIONAL RURAL BANKS

Year No of Accounts

(million)

Deposits

(Rs crore)

1 2 3

1991 26.5 2,552

1992 28.5 2,899

1993 29.7 3.059

1994 30.5 4,016

1995 31.2 5,246

1996 31.4 6,006

1997 32.7 7,354

1998 34.4 9,242

1999 34.4 10,902

2000 35.4 12,777

2001 36.7 14,732

2002 36.7 17.507

2003 40.1 20,803

2004 42.9 25,670

2005 44.9 30.390

2006 47.5 37.559

2007 52.7 45,014

2008 60.8 52834

2009 74.5 63383

2010 85.2 75718

Source: Basic Statistical Returns of SCBs in India.

Table – 19 shows deposit accounts per capita of SCBs in India at different periods of time especially after

the globalization of Indian economy. Deposit accounts per capita mean number of deposit accounts per 1000

persons. Deposit per capita declined between the years 1992 and 2001. Thereafter, it kept on increasing barring the

year 2003 till the year 2010. As on 31st March, 2010, deposits per capita of SCBs in India were 628. It means that

628 persons have deposit accounts out of every 1000 persons in India. This, higher score of deposit accounts per

capita, indicates better access to and use of bank accounts in India. Higher deposit penetration indicates that larger

use of financial services and vice versa.

TABLE – 19

DEPOSIT ACCOUNTS PER CAPITA OF SCHEDULED COMMERCIAL BANKS

Year

End-March

Population

(Million)

Total number of deposit accounts in

SCBs

(In thousands)

Deposit account per capita

1 2 3 4

1992 856 369759 432

2001 1019 428029 420

2002 1040 439991 423

2003 1056 446080 422

2004 1072 457158 426

2005 1089 466792 429

2006 1106 485098 439

2007 1122 519199 463

2008 1138 581657 511

2009 1154 662303 574

2010 1170 734869 628

Source: Compiled based on RBI data.

Deposit – income ratio refers to average size of deposits to GDP per capita. Table – 20 displays deposit-

income ratio of SCBs in India at different periods of time. The table indicates that deposit income ratio in India has

been increasing since 1969 except the year 2010 in which deposit-income ratio declined slightly. Deposit-income

ratio has also been used as a measure of development of financial system. According to Peachy and Roe (2006), an

economy has reached full access, if the deposit-GDP ratio is 100 per cent. Higher deposit-income ratio signals that

these services may only be affordable to larger enterprises or wealthier individuals and vice versa.

TABLE – 20

DEPOSIT-INCOME RATIO OR DEPOSIT-GDP RATIO OF SCBS IN INDIA

End-March

Year

Population (Million)

GDP at market prices (in Crore)

Per capita GDP at market prices

(Column 3 divided by column 2)

Per capita deposit of SCBs

Credit-income ratio (Column 5 divided

by column 4)

1 2 3 4 5 6

1969* 518 39324 759 88 0.11

1992 856 654729 7049 2738 0.39

2001 1019 2102314 20631 9758 0.47

2002 1040 2278952 21913 10994 0.50

2003 1056 2454561 23244 12554 0.54

2004 1072 2754620 25696 14550 0.57

2005 1089 3149407 28920 16091 0.56

2006 1106 3692485 33386 19276 0.58

2007 1122 4293672 36268 23468 0.65

2008 1138 4986426 43817 28327 0.65

2009 1154 5582623 48376 33471 0.70

2010 1170 6550271 55985 38062 0.68

* End-June, Source: Compiled on the basis of data in Hand book of Statistics on Indian economy 2010-11 and Basic

Statistical Returns of Commercial banks, RBI.

Notes:

1. Base year for computation of GDP at market prices for the years end-June 1969 and end-

March 2001 to end-March 2005 was 1999-00.

2. Base year for computation of GDP at market prices for the years end-March 2006 to end-

March 2010 was 2004-05.

Cash-deposit ratio has been one of the measures of development of financial system of a country.

According to Peachy and Roe (2006), an economy has reached full access, if the Cash-Deposit ratio is below 20 per

cent or 0.2. Table – 21 shows cash-deposit ratio of SCBs in India. Cash-deposit ratio in India had been more than 0.2

from the year 1969 to 2010. This is an indicator of status of Indian financial system. Indian financial system has to

travel long distance to reach the dream of full access.

TABLE – 21

CASH-DEPOSIT RATIO OF SCBS IN INDIA

End-March

Year

Cash-deposit ratio

1 2

1969* 8.2

1992 18.2

2001 8.4

2002 7.1

2003 6.3

2004 5.6

2005 6.9

2006 6.6

2007 7.5

2008 8.6

2009 6.7

2010 7.7

Source: Basic Statistical Returns of Commercial Banks in India

With a view to providing financial inclusion, the Reserve Bank had advised all banks to make available a

basic banking 'no-frills' account either with 'nil' or low minimum balances as well as charges. There has been a

significant progress in the number of 'no frills' accounts opened by banks in India (Table - 22 ). As on 31st March,

2010, there were 50.6 million no-frills accounts in the Indian banking system. As on 31st March, 2009, public sector

banks opened more than 90% of no-frills accounts in India.

TABLE - 22

NUMBER OF 'NO-FRILLS' ACCOUNTS OPENED IN INDIA

(Number of Accounts)

Category End-March End-March End-March End-March End-March

2006 2007 2008 2009 2010

1 2 3 4 5 6

Public Sector Banks 332,878 5,865,419 13,909,935 29,859,178 NA

Private Sector Banks 156,388 860,997 1,845,869 3,124,101 NA

Foreign banks 231 5,919 33,115 41,482 NA

Total 489,497 6,732,335 15,788,919 33,024,761 50, 62,833*

Source: Reserve Bank of India.

*Provisional figure

VII. FINANCIAL INCLUSION INITIATIVES AND PLANS OF SCBs IN RECENT YEARS IN INDIA

In an effort by RBI to achieve sustained, planned and structured financial inclusion, in January 2010, all

public and private sector banks were advised to put in place a Board approved three year Financial Inclusion Plan

(FIP) and submit the same to the Reserve Bank by March 2010. These banks prepared and submitted their FIPs

containing targets for March 2011, 2012 and 2013. These plans broadly include self-determined targets in respect of

rural brick and mortar branches to be opened; business correspondents (BC) to be employed; coverage of unbanked

villages with population above 2000 as also other unbanked villages with population below 2000 through

branches/BCs/other modes; no-frill accounts opened including through BC-ICT; Kisan Credit Cards (KCC) and

General Credit Cards (GCC); and other specific products designed by them to cater to the financially excluded

segments.

Banks were advised to integrate Board approved FIPs with their business plans and to include the criteria

on financial inclusion as a parameter in the performance evaluation of their staff. The implementation of these plans

is being closely monitored by the Reserve Bank. Table – 23 shows financial inclusion initiatives and plans of SCBs

in recent years in India.

TABLE – 23

FINANCIAL INCLUSION INITIATIVES AND PLANS OF SCBs IN RECENT YEARS IN INDIA

S.N Particulars Mar 2010 - Actual

Mar 2011 - Actual

June 2011 - Actual

Mar 2012-Target

Mar 2013 -Target

1 Villages Covered - Grand Total ( 2+3+4 = 5+6)

54258 100183 107604 218574 352269

2 Villages Covered - Total Branches

21475 22662 22870 24995 26440

3 Villages Covered - Total BCs

32684 77138 84274 192249 323699

4 Villages Covered - Total Other Modes

99 383 460 1330 2130

5 Villages Covered >2000

27353 54246 59640 86806 91440

6 Villages Covered <2000

26905 45937 47964 131768 260829

7 Urban Locations covered through BCs

433 3757 4524 6068 8614

8 No Frill A/Cs (No. in Lakh)

493.27 739.36 790.86 1125.06 1582.93

9 Amount in No Frill A/Cs (Amt in Crore)

4257.07 5702.94 5944.73 7449.86 8871.55

10 No Frill A/Cs with OD (No. in Lakh)

1.31 6.32 9.34 183.61 286.54

11 No Frill A/Cs with OD (Amt In Crore)

8.34 21.48 37.42 1008.04 1636.32

12 KCCs-Total-No. in Lakh

176.30 201.91 202.89 276.59 350.36

13 KCCs-Total-Amt In Crore

98749.5 132352.3 136122.3 144685.5 172775.0

14 GCC-Total-No. in Lakh 4.73 10.83 10.70 37.34 61.23 15 GCC-Total-Amt In

Crore 753.49 2328.36 2356.25 4266.13 6715.07

16 ICT Based A/Cs-through BCs (No. in Lakh)

125.42 295.41 338.36 641.73 1014.74

17 EBT A/Cs-through BCs (No. in Lakh)

74.81 146.51 164.60 249.07 368.96

Source: Reserve Bank of India

Coverage of villages

Banks have, up to June 2011, opened banking outlets in 1.07 lakh villages up from just 54,258 as on March

2010. Out of these, 22,870 villages have been covered through brick & mortar branches, 84,274 through BC outlets

and 460 through other modes like mobile vans, etc.

Opening of No-frills accounts

Basic banking 'no-frills' account, with 'nil' or very low minimum balance requirement as well as no charges

for not maintaining such minimum balance, were introduced as per RBI directive in 2005. As on June 2011, 7.91

crore No-frills accounts have been opened by banks with outstanding balance of Rs.5, 944.73 crore. These figures,

respectively, were 4.93 crore and Rs 4257.07 crore in March 2010.

Small Overdrafts in No-frills accounts

Banks have been advised to provide small ODs in such accounts. Up to June 2011, banks had provided 9.34

lakh ODs amounting to Rs.37.42 crore. The figures, respectively, were 1.31 lakh and Rs 8.34 crore in March 2010.

General Credit Cards

Banks have been asked to consider introduction of a General Purpose Credit Card (GCC) facility up to Rs.

25,000/- at their rural and semi-urban braches. The credit facility is in the nature of revolving credit entitling the

holder to withdraw up to the limit sanctioned. Based on assessment of household cash flows, the limits are

sanctioned without insistence on security or purpose. Interest rate on the facility is completely deregulated. As on

June 2011, banks had provided credit aggregating Rs.2, 356.25 crore in 10.70 lakh General Credit Card (GCC)

accounts.

Kisan Credit Cards

Kisan Credit Cards to small time farmers have been issued by banks. As on June 30, 2011, the total number

of KCCs issued has been reported as 202.89 lakh with a total amount outstanding to the tune of 1, 36,122.32 crore.

To sum up, savings account penetration had made substantial improvement over the years in India. India’s

over all savings account penetration per 1000 persons and per 1000 adults as on 31st March, 2010 were 483 and

658. Further, savings account per adult in India was 0.658, in rural areas of India, it was 0.547 and in urban areas of

India, it was 0.952 as on 31st March, 2010. Full access may be reached, if the number of accounts per adult is above

0.5 (Peachy/Roe 2006). So that, it can be said that India has been in virtue of reaching full access in terms of savings

account per adult. At the same time, region wise savings account penetration indicates that southern and northern

regions of India enjoyed higher amount of savings account penetration rather than rest of regions of India as on 31st

March, 2010. RRBs have been playing significant role in the process of savings account penetration in India.

Deposit penetration ratio of India as on 31st March, 2010 was 628. It was neither higher score nor least score, but, it

was moderate one. It implies that moderate use of financial services by people of India.

VIII. CONCLUSION

Now a day, there is a significant national as well as global focus on inclusive growth. The Financial Stability

and Development Council (FSDC) headed by the Finance Minister is mandated to focus on financial inclusion and

financial literacy. All financial sector regulators including the Reserve Bank of India are committed to the mission

and directing the banking sector and other financial sector entities. If government is advocating any kind of

sustained development and stability whether financial, economic, political or social and inclusive growth with

stability, it is not possible to attain these goals without achieving financial inclusion. Financial inclusion promotes

thrift and develops culture of saving, improves access to credit both entrepreneurial and personal emergency and

also enables efficient payment mechanism, thus strengthening the resource base of the financial institution which

benefits the economy as resources become available for efficient payment mechanism and allocation. Empirical

evidence shows that countries with large proportion of population excluded from the formal financial system also

show higher poverty ratios and higher inequality. Thus, financial inclusion is no longer a policy choice today but a

policy compulsion. And, banking is a key driver for financial inclusion/inclusive growth.

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Documents

Assessing Role of Banking Sector in Financial Inclusion Process in