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Financial inclusion: meaning, tools and schemes
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Financial inclusion is the delivery of banking services, credit, insurance and pensions at an affordable cost to people who are left out of the formal system, mainly low-income households, rural families and small businesses. The Rangarajan Committee (2008) described it as ensuring access to financial services and timely, adequate credit to vulnerable groups at an affordable cost.
The usual building blocks
| Tool | What it does |
|---|---|
| Basic savings account | Low-cost or zero-balance account, such as under PMJDY |
| Business correspondents (BCs) | Agents who serve villages with a handheld device on behalf of banks |
| Branch and outlet expansion | Banks opening in unbanked areas, tracked under the lead bank scheme |
| Differentiated banks | Small finance banks, payments banks and regional rural banks |
| Priority lending | Priority sector lending targets and the Kisan Credit Card |
| Self-help groups | Group lending through the NABARD SHG-Bank Linkage Programme, started in 1992 |
| Digital rails | UPI, Aadhaar-enabled payments, direct benefit transfer |
| Insurance and pension | PMJJBY, PMSBY, Atal Pension Yojana |
The "JAM trinity" — Jan Dhan accounts, Aadhaar and mobile — is the policy shorthand for linking these tools to deliver subsidies directly.
How progress is measured
In August 2021 the RBI launched a Financial Inclusion Index, a composite score between 0 and 100 built from access, usage and quality of financial services. The RBI publishes it annually. The government's National Strategy for Financial Inclusion covered 2019-24.
Why the topic matters in exams
The RBI Grade B Phase II syllabus lists financial inclusion among its finance and management topics, and other bank exams ask about it in the General or Financial Awareness section. A typical stem is "which scheme aims at universal access to banking", or "The Financial Inclusion Index is released by", or "the committee that defined financial inclusion". Questions on the latest index value belong to current affairs; take it from the RBI. See banking awareness for the wider list.
Where to check
The Financial Inclusion Index and related reports are on rbi.org.in. Government schemes have their own sites, such as pmjdy.gov.in.
Frequently asked questions
What is the difference between financial inclusion and financial literacy?
Inclusion is about access to products and services. Literacy is about knowing how to use them well. The RBI and the government run both kinds of programmes.
Which banks were created mainly for financial inclusion?
Regional rural banks, small finance banks and payments banks, each in a different way.
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- PM Jan Dhan YojanaPMJDY gives households a zero-balance bank account with a RuPay card, accident cover and an overdraft. Launch, features, pillars and exam facts.
- Priority sector lendingPriority sector lending makes banks lend a set share of credit to farming, MSMEs, housing, education and more. Categories, targets and PSLCs.
- Regional Rural BankRegional Rural Banks are scheduled banks set up in 1975 to serve rural India. Ownership split, sponsor banks, regulation, consolidation and IBPS RRB link.
- Payments bankA payments bank accepts small deposits and offers payment services but cannot lend or issue credit cards. Features, balance cap, licensing and exam facts.
- Lead Bank SchemeUnder the Lead Bank Scheme each district is assigned to one bank that coordinates credit. Origin in 1969, SLBC, DCC, annual credit plan and exam facts.
- KYCKYC (Know Your Customer) is the identity and address check banks must do before opening an account. Meaning, officially valid documents, e-KYC, V-CIP and CKYC.
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