A Step Ahead towards Financial Inclusion


Since Independence, the Government of India has taken copious initiatives to create financial awareness amongst its citizens. These initiatives were aimed to impart knowledge towards the banking and insurance sector. Ironically, it seems that despite a lot of efforts, a large section of the Indian population is still not linked to the banking system. This melancholy has resulted in financial instability of the lower income group. According to a study conducted by the World Bank in April 2012, in India, only 35 percent of the population has formal savings bank account versus an average of 41 percent in developing economies.

Nevertheless, the Indian Government and Reserve Bank of India, for the past few years have been introducing numerous plans to attain financial inclusion. In simple words, financial inclusion refers to delivering financial services at a reasonable cost to various sections of individuals, especially the people of the lower income group.

There are various commendable initiatives that strive to achieve financial inclusion. The Pradhan Mantri Jan-Dhan Yojana (PMJDY) was launched on August 28, 2014. This scheme was initiated with an aim to include every family under the banking roof. As on July 29, 2015, 17.29 crore bank accounts had been opened under this scheme. Through this, the Government has rolled out the Direct Benefits Transfer (DBT) by transferring subsidies under 34 welfare schemes to the individuals.

Seeing the stupendous success of the PMJDY, the Government subsequently rolled out the Jan Suraksha Yojana with respect to insurance and pension schemes. The Jan Suraksha Yojana tries to cover the individuals working in the unorganized sector who are neither covered by any form of insurance nor eligible for pension. Some of the schemes under the Jan Suraksha Yojana include the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), and pension scheme referred as Atal Pension Yojana (APY). These schemes were launched to enable the lower income group to enroll themselves in life insurance and pension plans.

Important features of these schemes are:

  • The PMJJBY is a life insurance scheme, which is renewable from year to year and offers insurance cover on account of death of an individual. It is available to people in the age group between 18 and 50 years (life cover up to 55 years of age) who have a savings bank account. Under this scheme, the beneficiary is insured for a period of one year and a life-cover of Rs.2 lakhs by paying a premium of Rs.330/- per annum per individual.
  • The PMSBY aims to cover the lower income group of the population under the accidental insurance scheme, at an affordable premium of Rs.12 per annum. This scheme is applicable to people who fall within the age bracket of 18 to 70 years and have a savings bank account. This scheme provides a coverage of Rs.2 lakhs for accidental death or for permanent total disability while, the coverage for permanent partial disability is Rs.1 lakh.
  • The APY focuses on providing the enrolled members a monthly pension amount ranging between Rs.1,000 and Rs.5,000 starting at the age of 60. The Central Government also co-contributes 50 percent of the total contribution or Rs.1000 per annum. The pension amount to be received depends upon the contribution amount exercised at the time of entering the scheme. This scheme is applicable for individuals between the age group of 18 to 40 years.

Considering the fact that a large proportion of the population has no accidental or insurance cover, and pension, these schemes have helped the lower income group population to get involved in the banking system. It has also helped to increase the gross enrolment of individuals, as shown by the official report below.

Financial Literacy

Source: http://www.jansuraksha.gov.in/Files/Reports/12.08.2015.pdf

Financial inclusion helps to reduce subsidy leakage and build a base for a cashless society in the long run. In order to create awareness about financial inclusion, people need to be educated and trained. Seeing the mounting interest of people to master the nuances of finance and other professional spheres, various educational institutions such as ITM University Online have launched MBA programs where they can seek knowledge and gain a competitive edge in their career.