Role of NBFC-MFIs in Financial Inclusion in India

Abstract

In a broader sense, financial inclusion involves providing banking-related services at a reasonable cost to lowincome and disadvantaged sections of society (Kumar, 2013). Reserve Bank of India (RBI) defines financial inclusion as “ensuring access to an array of basic formal financial services and products and scaling up awareness initiatives”.4 Financial inclusion objectives can be achieved by initiating banking facilities across different sections of the society, regions, gender, and income groups and encouraging the masses to embrace banking. The National Strategy for Financial Inclusion (NSFI) in their 2019-24 plan includes the vision of financial inclusion and how India can frame policies by aligning the actions of all stakeholders in the financial sector (RBI, 2020). The journey of financial inclusion in India evolved in the 1950s when initiatives were taken targeting the neglected sections of society. The initiatives involved properly channelizing credit and making it accessible to the neglected sections (Das, 2021). Initiatives such as the expansion of banking network through new branches in the rural areas, introduction of Priority Sector Lending (PSL), launching of Lead Bank Scheme, promoting Self-Help Groups (SHGs), implementation of Business Correspondents (BC) model, to name a few. The brickand-mortar branches, accompanied by the Business Correspondents model, have enhanced the presence of the banking system to the remotest corner of the country, thereby contributing towards financial inclusion in the early years post-independence. However, in recent years, we have witnessed the banking network contributing towards an exponential expansion of financial inclusion through major initiatives like the Jan Dhan, Aadhaar, and Mobile (JAM) trident bringing in a tectonic shift in its domain (Das, 2021).