CONTRIBUTION OF REGIONAL RURAL BANKS IN THE PROCESS OF FINANCIAL INCLUSION IN ODISHA.

The Blue Book on inclusive finance, a UN publication of 2006, raises the question fundamental to financial inclusion Why are so many bankable people unbanked? What is financial inclusion? It is the process of ensuring access to financial services and timely adequate credit where needed, to vulnerable groups such as weaker sections and low income groups, at an affordable cost. ( Report of the Committee on FI,2008) Who are financialy excluded? The poorest and the most vulnerable sections of the society. These are poor, socially under-privileged, disabled old and children, women,uneducated ethnic minorities, unemployed, households in remote areas and so on. What is financial exclusion? Financial exclusion means No bank account, No affordable credit, No assets, No insurance, No access to monetary advice. What are the consequences of financial exclusion? It results in reduction of such groups and individuals to benefit from participation in productive process, realize their potential and cope with adversity. Financial exclusion reinforces the existence of these vulnerable groups of society and accentuates their vulnerability. In short financial exclusion leads to Finacial Exploitation, Financial discrimination, Financial Illliteracy. Why financial inclusion is important? Recent data show that countries with large proportion of population excluded from the formal financial system also show higher poverty ratios and high inequality. Country % of FI India 48 Bangladesh 32 Malaysia 60 Srilanka 59 Thailand 59 Source: World Bank 2006 & 2008 % People BPL 28.6(99-00) 49.8(2000) 15.5(1989) 25.0(95-96) 13.1(1992)

A well developed financial system can be an effective povert alleviation tool. A well developed financial system is able to allocate resources to efficient newcomers. It ensures that poor households and small entrepreneurs need not depend on middlemen. Financial depth plays a role in lowering inequality and increasing the income of the bottom 80% of the population. ( Li, Hongyi, Lyn Squire and Heng-fu Zou, 1998. Explaining International and Intertemporal Variations in Income Inequality, Economic journal, 108(1):26-43)

Why to study contribution of the Regional Rural Banks(RRBs) specifically? The formal financial system in rural India is dominated by commercial banks, regional rural banks and co-operatives. The contribution of commercial banks to the rural/semi-urban banking networks is far higher at 38% of total than the 28% contribution of RRBs to the total 94000 bank branches in India. Despite the apperent importance of commercial banks even in the rural areas however they are neither able nor willing to serve the poorest sections of the population.According to the M-CRIL Review of Rural Banking in India: Working Paper 1 in March 2006, in the credit categories of direct relevance to financial inclusion RRBs hold 26.2% of agricultural credit accounts and as many as 55.0% of all artisan/tiny industry loan accounts. This amounts to much lower propertions of overall credit available under these categories- just 10.9% and 11.0% respectively- since RRBs loan size average just Rs25,000 and Rs13,000 for those two categories, much smaller than those offered by the commercial banks. Yet, it is precisely this fact that shows the importance of the RRBs for otherwise financilly excluded sections of the population.The low income families have a much lower absolute and proportionate need for credit than better off sections of the population.

Name:- Jitendra Kumar Ram, Senior Manager, Baitarani Gramya Bank, Head Office, Baripada Date of birth:- 10th July, 1961 Nationality:- Indian Address:Baitarani Gramya Bank Staff Training Centre, Above SBI Evening Branch, Bhanjpur, Baripada- 757 002 jiten61@gmail.com 09437320720

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