Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to

sections of disadvantaged and low-income segments of society, in contrast to financial exclusion

where those services are not available or affordable.

A Study on Financial Inclusion Initiation by State Bank of India

Abstract: In a country like India due to huge population and socio-cultural diversities and also diverse
economic background it is quite difficult to attain inclusive growth across country. And to improve the
economic growth of country, inclusive growth is utmost important. The key device to attain inclusive growth
is financial inclusion. The aim of financial inclusion is including the excluded in the financial system of the
country, and to ensure that their financial & social security needs are taken care of through appropriate
financial service providers. SBI being the largest and the oldest public sector bank is considered in the
study.
Key words: inclusive growth, appropriate financial service providers, SBI, social security.
1. INTRODUCTION OF STATE BANK OF INDIA
State Bank of India is an Indian public sector bank and financial service company having its major
presence in country as well in various other nations across worldwide. It is primarily a government owned
corporation and its head quarter is in Mumbai, Maharashtra. The current statistics of 2013 report states
that the total assets owned by SBI is of US$388 billion and a widespread of almost 17,000 bank branches
including 190 foreign offices. This clearly makes this as one of the largest banking and financial service
provider in India by assets. It is also one among the big four banks of India i.e. Bank of Baroda, Punjab
National Bank and ICICI Bank.
2. MEANING OF FINANCIAL INCLUSION
Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to
sections of disadvantaged and low-income segments of society, in contrast to financial exclusion
where those services are not available or affordable. An estimated 2 billion working-age adults
globally have no access to the types of formal financial services delivered by regulated financial
institutions.

Rangarajan, former RBI Governor defines financial inclusion as the process of ensuring access to financial services
and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups
at an affordable cost." The financial services include savings, loans, insurance, credit, payments etc.
3. IMPORTANCE OF FINANCIAL INCLUSION
The purpose of financial inclusion is to broaden the availability of financial services to the financially excluded
population of the country to open its development prospective and in addition, it strives towards a more inclusive
growth of nation by making financing available to the poor and needful.
4. OBJECTIVE OF THE PAPER:
To study the role of SBI in financial inclusion Initiatives
5. REFERENCE PERIOD
The reference period for the field investigation while collecting the primary data is limited to the 12 months
proceeding to the date of interviews. However, the reference period, while collecting the secondary data was
restricted upto a period of thirteen years i.e. from 2000 2013, since it was thought appropriate to seek the references
within this period. The data of a decade will help us to gain proper insight in the study.
6. RESEARCH METHODOLOGY

The study being undertaken is descriptive and exploratory in nature. Secondary data is collected through manuals,
annual reports, books, periodicals, government documents, articles, research papers.
7. OVERVIEW OF FINANCIAL INCLUSION INITIATIVES IN INDIA
In the Indian context, the term financial inclusion was used for the first time in April 2005 in the Annual Policy
Statement presented by Y.Venugopal Reddy,the then Governor, Reserve Bank of India.[5] Later on, this concept
gained ground and came to be widely used in India and abroad. While recognizing the concerns in regard to the
banking practices that tend to exclude rather than attract vast sections of population, banks were urged to review their
existing practices to align them with the objective of financial inclusion.[5] The Report of the Internal Group to
Examine Issues relating to Rural Credit and Microfinance (Khan Committee) in July 2005 drew strength from this
announcement by Governor Y. Venugopal Reddy in the Annual Policy Statement for 2005-06 wherein he had
expressed deep concern on the exclusion of vast sections of the population from the formal financial system
The government of India recently announced Pradhan Mantri Jan Dhan Yojna,[8] a national financial inclusion
mission which aims to provide bank accounts to at least 75 million people by January 26, 2015. To achieve this
milestone, its important for both service providers and policy makers to have readily available information outlining
gaps in access and interactive tools that help better understand the context at the district level. MIX designed the
FINclusion Lab India FI workbook[9] to support these actors as they craft strategies to achieve these goals.
In India, RBI has initiated several measures to achieve greater financial inclusion, such as facilitating no-frills
accounts and GCCs for small deposits and credit. Some of these steps are:
Opening of no-frills accounts: Basic banking no-frills account is with nil or very low minimum balance as well as
charges that make such accounts accessible to vast sections of the population. Banks have been advised to provide
small overdrafts in such accounts.
Relaxation on know-your-customer (KYC) norms: KYC requirements for opening bank accounts were relaxed for
small accounts in August 2005, thereby simplifying procedures by stipulating that introduction by an account holder
who has been subjected to the full KYC drill would suffice for opening such accounts. The banks were also
permitted to take any evidence as to the identity and address of the customer to their satisfaction. It has now been
further relaxed to include the letters issued by the Unique Identification Authority of India containing details of
name, address and Aadhaar number.
Engaging business correspondents (BCs): In January 2006, RBI permitted banks to engage business facilitators
(BFs) and BCs as intermediaries for providing financial and banking services. The BC model allows banks to
provide doorstep delivery of services, especially cash in-cash out transactions, thus addressing the last-mile problem.
The list of eligible individuals and entities that can be engaged as BCs is being widened from time to time. With
effect from September 2010, for-profit companies have also been allowed to be engaged as BCs. India map of
Financial Inclusion by MIX provides more insights on this.[11] In the grass-root level, the Business correspondents
(BCs), with the help of Village Panchayat (local governing body), has set up an ecosystem of Common Service
Centres (CSC). CSC is a rural electronic hub with a computer connected to the internet that provides e-governance or
business services to rural citizens.[12]
Use of technology: Recognizing that technology has the potential to address the issues of outreach and credit
delivery in rural and remote areas in a viable manner,banks have been advised to make effective use of information
and communications technology (ICT), to provide doorstep banking services through the BC model where the
accounts can be operated by even illiterate customers by using biometrics, thus ensuring the security of transactions
and enhancing confidence in the banking system.[12]
Adoption of EBT: Banks have been advised to implement EBT by leveraging ICT-based banking through BCs to
transfer social benefits electronically to the bank account of the beneficiary and deliver government benefits to the
doorstep of the beneficiary, thus reducing dependence on cash and lowering transaction costs.
GCC: With a view to helping the poor and the disadvantaged with access to easy credit, banks have been asked to
consider introduction of a general purpose credit card facility up to `25,000 at their rural and semi-urban branches.
The objective of the scheme is to provide hassle-free credit to banks customers based on the assessment of cash flow
without insistence on security, purpose or end use of the credit. This is in the nature of revolving credit entitling the
holder to withdraw up to the limit sanctioned.

Simplified branch authorization: To address the issue of uneven spread of bank branches, in December 2009,
domestic scheduled commercial banks were permitted to freely open branches in tier III to tier VI centres with a
population of less than 50,000 under general permission, subject to reporting. In the north-eastern states and Sikkim,
domestic scheduled commercial banks can now open branches in rural,semi-urban and urban centres without the
need to take permission from RBI in each case, subject to reporting.
Opening of branches in unbanked rural centres: To further step up the opening of branches in rural areas so as to
improve banking penetration and financial inclusion rapidly, the need for the opening of more bricks and mortar
branches, besides the use of BCs, was felt. Accordingly, banks have been mandated in the April monetary policy
statement to allocate at least 25% of the total number of branches to be opened during a year to unbanked rural
centres.
Recent advancements in banking sectors have transformed the banking sector from traditional brick and mortar
infrastructure to technology driven body. Technically sound staffs supplemented with equally efficient technological
systems and process makes the banking sector more efficient and customer friendly. Various efficient customer
services like ATM, credit cards, internet banking and online money transfer facilities motivated and encouraged
customers towards opting for formal financial services. However the inclination towards technological offerings by
various banks as their service offerings remains restricted to certain segment of the society. There is a divide in the
society where these offerings have no importance as they are still deprived of basic banking facilities which is termed
as Financial Exclusion. This include particularly those segment of population who have low income, lack
preliminary bank account and are more detached from formal financial services. Financial Inclusion now is more
towards including these segments of society. It can be done through identifying the areas where the percentage of
exclusion is more and people lacks basic facilities that is provided to them as a goal of financial inclusion. As this
aspect may raise a concern on bankability, it became very important to make out and identify the steps that could be
implemented to make the claimants bankable or creditworthy. This would necessitate to relook into the existing
financial products and services provided through financial inclusion. The prime purpose of financial inclusion is to
ensure that appropriate financial services are available to every individual enabling them to understand and access
those services. The basic financial services under financial inclusion schemes includes no frill accounts, saving
products suited to household income, small loans, money transfer facilities, overdraft facilities for personal purpose
and insurance facilities. Financial inclusion in narrow sense can be achieved by providing any of these services
mentioned. But the purpose or objective of comprehensive financial inclusion will provide beneficiary a holistic set
of services encompassing each and every service. To enhance and provide holistic financial inclusion it is very
important to understand the extent of exclusion. With a view of understanding the same various sources were
encouraged to pursue the details of financial exclusion. The extent of financial exclusion as reported by different
sources is mentioned below.
8. EXTENT OF FINANCIAL EXCLUSION
As per the report of NSSO, 59th round in 2012 almost 51.4 percent of farm households are financially excluded from
both formal and informal sources. The survey also reports that only 27 percent of farm households have access to
formal source of credits. If we focus into region wise data base financial exclusion is more severe in Central, Eastern
and North Eastern regions. Almost 64 percent of the population is financially excluded in these three regions.
Analysis of the data provided by Reserve Bank of India through its Basic statistical return reveals that in terms of
credit critical exclusion is reported in 256 districts across 17 districts and one Union territory with a credit gap of
almost 95 per cent. As per the report of Centre for Monitoring Indian Economy, 2006 there are 11.56 crore land
holdings and 5.91 crores Kisan Credit Cards have been issued till end of March 2006 which approximately provides
a credit coverage of 51 percent by formal sources. Data from NABARD highlighted the fact that agricultural loan
disbursements happened for 3.97 crore accounts in 2006-07. Thus different sources accounts for different numbers of
financial inclusion and because of non-uniformity in the data set it becomes difficult to understand the extent and the
level of exclusion. Quantifying the extent of exclusion thus created some different impact. Thus to include the
financially excluded population various strategies were adopted. The challenge was not that huge in urban area, the
challenge was there in rural areas with weaker section of population in the society.
8.1 The steps taken at national level and envisaged as target to different banks across country were to:
a. Make effective improvements within the existing formal credit system.

b. Adopting various measures and initiatives to incorporate especially marginal, sub-marginal, poor non-cultivators
households in the formal banking services.
c. Adopting better model for maximum outreach.

9. FINANCIAL INCLUSIONS SCHEMES INITIATED BY SBI

As a part of financial inclusion initiatives as directed by Reserve Bank of India, every bank either it is public sector
or private sector bank has incorporated various initiatives to promote financial inclusion. The purpose behind
adoption of various financial inclusion schemes is to make people financially independent and help them to avail the
benefits provided by government through various schemes. The roadmaps directed by RBI to various banks were
mostly followed by each and every bank. Highlighted below were initiatives incorporated by SBI under Financial
Inclusion Plan.
As a part of Financial Inclusion initiative, State Bank of India has set up 45,487 Customer Service Points (CSPs)
through association at National and Regional level. The Bank offered various technological enabled products such as
savings, flexi RD, Remittance & Over draft facilities through Business Correspondent (BC).
As a part of Financial Inclusion Plans, State Bank of India achieved 100 percent coverage in almost 31,729 villages
during the financial year 2014. With this the cumulative coverage has gone upto 52,260.
A total of 11,423 Business Correspondent outlets have been set up in Urban & Metro centres to cater the need of
migrant labourers, vendors etc. who migrated from rural areas and need urgent banking facilities.
To promote the financial inclusion imitative, State Bank of India has opened 1.50 crore small accounts with
simplified KYC (Know Your Customer) process.
To facilitate hassle free and smooth transaction process, State Bank of India has issued 24 lac ATM Debit Cards to
customers while opening their bank account.
State Bank of India has taken initiative to link villages to various nearby branches through various Customer
Service Points (CSPs). This initiative has facilitated in linking so far 69,749 villages.
Facilities for depositing loan repayments at BC outlets have also been enabled to ensure trouble free process.
Under Direct Benefit Transfer Scheme, the bank handled and opened numerous account which increased the
penetration of bank in extremely rural locations where the percentage of financially excluded was more.
A sum of 4.46 lac Self Help Group credits were linked with the bank with deployment of
a market share of 22 percent.

5134 crore and holding

As per RBI guidelines, the Bank has set up Financial Literacy Centers (FLCs) to facilitate financial inclusion
through provision of two essentials i.e. Literacy and easy access and also to help the customer to do effective
financial planning. These are few initiatives taken by State Bank of India to promote financial inclusion across
country. Being largest public sector bank the penetration and coverage of SBI across country is huge. The chapter
over this highlighted very elaborately every aspects of financial inclusion starting from an initiative to spread and
reach of State Bank of India across country as well as in Pune, Maharashtra. The next section of the chapter shows
the initiatives and coverage of SBI in Maharashtra as well as in Pune region of Maharashtra as a part of financial
inclusion drive.
CONCLUSION:
The purpose of this study is to understand and analyze the initiatives taken by State of India. The researcher broadly
presented a view on the concept and emergence of financial inclusion in India subsequently progressing with the
perspective of financial inclusion. Further the research also highlighted the financial inclusion initiatives undertaken
by State Bank of India in India. A comprehensive exercise for understanding and validating the effectiveness of
financial inclusion of SBI on the basis of the secondary data

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