Independent Research and Policy Advocacy

Deepening Financial Access in India – A Blue Print for Commercial Banks

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While endeavouring to deepen financial access in India, the enormity of the problem, that is, the vast number of financially excluded people to be reached, has been emphasised time and again. The Reserve Bank of India, for instance, has recently notified 292 districts in India as “underbanked” with poor microfinance penetration, meagre bank branch network, and a low credit deposit ratio. The Rangarajan Committee on Financial Inclusion (January 2008) estimates that 111.5 million households have no access to formal credit; and 17 million households are in debt trap with money lenders. Data from the 59th Round of NSS (2008) shows that 73% of the 89 million farmer households have no access to formal source of credit. The Arjun Sengupta Report on Financing Enterprises in the Unorganized Sector (August 2007) estimates that 95.86% of the units (with investment of less than Rs. 25,000) have no access to credit from the formal system. According to Dr. K.C. Chakrabarthy, Deputy Governor, RBI, only 13 per cent of people with annual income less than Rs. 50,000 are availing loans; and 53 per cent of people are still taking loans from institutional and non-institutional sources only for emergency purposes.

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