MARWARI COLLEGE, RANCHI

PROJECT REPORT
ON

A STUDY OF FINANCIAL INCLUSION BY

COMMERCIAL BANK IN JHARKHAND

SUBMITTED TO
MARWARI COLLEGE RANCHI
MASTERS OF COMMERCE
2021-23

Project Report submitted in partial fulfilment of requirement for the

award of M.com (Hons.) Degree under Ranchi University, Ranchi of
Marwari College, Ranchi

Submitted by: Under the Supervision of:

Name : RAHUL JAIN DR.ABHA KUMARI

Class Roll No. : 65 Asst. Professor
Regd. No. : MCR2021004181 Department of Commerce and
Exam Roll No. : 21MCRMC910195 Management Studies,
Session : 2021-2023 Marwari College, Ranchi

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ABSTRACT

There is growing evidence that appropriate financial services have substantial

benefits for consumers, especially women and poor adults. This paper provides an
overview of financial inclusion around the world and reviews the recent empirical
evidence on how the use of financial products—such as payments services, savings
accounts, loans, and insurance— can contribute to inclusive growth and economic
development. This paper also discusses some of the challenges to achieving greater
financial inclusion and directions for future research, It is empirically argued that
economic development largely depends on an increased productivity, the
mitigation of income inequality, reduction of dependency on natural resources,
improvement of health outcomes, quality enhanced environmental settings, and
most importantly a sustained economic growth. It is further established that all the
above stated developmental indicators within a market economy do require a
quality financial system, which collects information to facilitate an ex-ante
evaluation as well as ex-post monitoring of investment opportunities, to ease
information asymmetry, which is a known market problem. Furthermore, to
facilitate an efficient allocation of resources to drive innovative projects, which
will produce quality products and services. The postulation presented herein is
empirically established to derive its success from a sustainable financial inclusion,
which the paper is to advance a conceptual proposition towards an effective and
efficient financial inclusion of a fragile economic setting, and its underlying policy
architecture to sustain performance effects, in both medium and long term purpos.
Financial inclusion has become one amongst the vital aspects within the context of
inclusive growth and sustainable development. It helps to scale back the income
disparity and poverty alleviation. Financial Inclusion is the process of ensuring
access to appropriate financial products and services needed by vulnerable groups
like fragile sections and low-income groups at a reasonable charge in a just and
pellucid manner by mainstream institutional players. In India, Reserve Bank of
India formulates various financial inclusion programs with a view to supply
financial services to the deprived class of the nation. Commercial banks play key
role in implementation of financial inclusion plans under the guidance of RBI. The
present study focuses on financial inclusion through commercial banks namely
Canara bank and Corporation bank. The paper discuses basics of financial inclusion
and financial inclusion policy initiatives in India. The study attempts to collate the
contributions of Canara bank and Corporation bank in financial inclusion.
Objectives of the study are to know the financial inclusion policy initiatives in
India and to compare the contributions of Canara bank and Corporation bank in
achieving financial inclusion

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DECLARATION

I Rahul Jain hereby declare that the project report title “A STUDY OF
FINANCIAL INCLUSION BY COMMERCIAL BANK IN
JHARKHAND ” has been done by me under B.Com Curriculum and
authentic to the best of my knowledge.

I also declare that this project report has neither been submitted to any
other board nor published at any time by me in the past.

Full Signature of the Candidate

Name : Rahul Jain
Class Roll No. : 65
Regd. No. : MCR2021004181
Exam Roll No.:21MCRMC910195
Session : 2021-2023

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MARWARI COLLEGE
NAAC Accredited Autonomous College with Potential For Excellence
Under Ranchi University

CERTIFICATE

This is to certify that this project has been submitted by Rahul Jain of
M.Com (Hons.) semester IV , session 2021-2023 bearing Examination
topic “A STUDY OF FINANCIAL INCLUSION BY
COMMERCIAL BANK IN JHARKHAND“ under my
guidance. This is for partial fulfilment of award of M.Com (Hons.)
degree under Ranchi University, Ranchi.

This work is done by her is appreciable of an outstanding level.

Internal Guide ` Head and Dean External Guide

Department of Commerce Department of Commerce
and Management Studies and Management Studies

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ACKNOWLEDGEMENT

The Satisfaction that a company successful accompany of any task would be

incomplete without the mention of people whose cooperation made it possible
whose constant guidance and encouragement that all effect with success.

I am grateful to Prof. (Dr.) MANOJ KUMAR (Principal), Dr. Baidyanath

Kumar (Controller of Exams) and Dr. RR Sharma (Head & Dean) Department
of Commerce and Management Studies of Marwari College Ranchi who gave me
the golden opportunity to do this wonderful project in the best way.

I would like to express my special thanks to my teacher DR, ABHA KUMARI

(Assistant Professor) Department of Commerce and Management Studies,
Marwari College, Ranchi who helped me in completing my project.

I thank them for acting as a guiding spirit behind the compiling of the project.

I wish to acknowledge my thanks to Dr ABHA KUMARI, (Assistant Professor),

Department of Commerce and Management Studies, Marwari College, Ranchi
who from their busy schedule managed to spare their time in preparing the type
script of the Dissertation.

Last but not Least, I would also thank to my parents and friends who helped me
a lot in finalizing this project within the limited time.

(Rahul Jain)

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SI. NO. DESCRIPTION PAGE NO.

1. Introduction 7-13
a. Significance of the Study 10
11-13
b. Objective of the Study
2. Review of Literature 14-19
a. Research Methodology 15
16-19
b. Research Question
3. Body of topic 20-36
a. Meaning of financial inclusion 21
22-23
b. History of financial inclusion
c. Need for financial inclusion in Jharkhand 24-25
26-28
d. Government policies strategies
e. Strategic objective in financial inclusion 29
f. Challenges in financial inclusion
30-32
g. Achievement of Bank of India in Jharkhand 33
h. Achievement And failure of SHG ‘s
34-36

4. Financial inclusion in Jharkhand 37-45

5. Methodology 46-48
6. Finding and suggestions 49-52
7. Conclusion and future Scope 53-55
8. References 56-58
9. Bibliography 59-60

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INTRODUCTION

Financial inclusion means that adults have access to and can effectively
use a range of appropriate financial services. Such services must be
provided responsibly and safely to the consumer and sustainably to the
provider in a well regulated environment. At its most basic level,
financial inclusion starts with having a deposit or transaction account at
a bank or other financial institution or through a mobile money service
provider, which can be used to make and receive payments and to store
or save money. Yet 2 billion or 38 percent of adults reported not having
an account in 2014 (Demirguc-Kunt et al., 2015). Financial inclusion
also encompasses access to credit from formal financial institutions that
allow adults to invest in educational and business opportunities, as well
as the use of formal insurance products that allow people to better
manage financial risks. This paper provides a brief overview of financial
inclusion around the world and discusses the benefits of financial
inclusion and how they can contribute to inclusive growth and economic
development, summarizing related empirical evidence.1 It concludes by
outlining some of the challenges to realizing the benefits of financial
inclusion and directions for future research. Financial inclusion can help
reduce poverty and inequality by helping people invest in the future,
smooth their consumption, and manage financial risks. Adults around
the world and in all income groups use an array of different financial
services. However, many low-income adults rely on informal financial
services (Collins et al., 2009). Access to formal financial services allows
people to make financial transactions more efficiently and safely and
helps poor people climb out of poverty by making it possible to invest in
education and business. By providing ways to manage income shocks
like unemployment or the loss of a breadwinner, financial inclusion can
also prevent people from falling into poverty in the first place. This is
especially relevant for people living in the poorest households. Financial
inclusion also benefits society more broadly. Shifting payments from
cash into accounts allows for more efficient and more transparent
payments from governments or businesses to individuals
– and from individuals to government or businesses. Although no
conclusive evidence exists at this point, access to the formal financial
system and appropriate credit can potentially facilitate in investment.
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that could, in the long term, boost economic growth and productivity.
Most of the attention and research on household finance and economic
development in the past two decades has been on the impact of
microcredit. Celebrated by many as an effective development tool,
microcredit was the basis for the 2006 Nobel Peace Prize. But as
rigorous evaluations of the development impacts of microcredit became
more common and evidence started to accumulate of the more mixed
effects of access to microcredit for low-income individuals, there has
been a shift in focus in recent years towards account ownership and the
savings and payments services accounts can provide. Similarly, there
has also been an increased focus on insurance, especially agricultural
insurance. There is some evidence that financial depth – a concept
related to but distinct from financial inclusion – also can contribute to
shared economic growth and development. While financial inclusion is
typically measured by ownership of an account by individuals, financial
development is measured by macro-level indicators, such as market
capitalization of the stock market or a country’s ratio of credit to gross
domestic product (GDP). Many factors influence both a country’s level
of financial inclusion and financial development, including income per
capita, good governance, the quality of institutions, availability of
information, and the regulatory environment (Allen et al. 2016; Rojas-
Suarez 2010; Karlan et al. 2014; Park and Mercado 2015). Research has
empirically linked measures of financial depth with greater economic
growth and lower income inequality (King and Levine 1993; Beck et al.
2000; Clark et al. 2006; Beck et al. 2007; Demirguc-Kunt and Levine,
2009). However, the relationship between financial inclusion,
inequality, and macroeconomic growth is not yet well understood, and
there is relatively limited research on the topic. In their study of towns
in Mexico where bank branches were rapidly opened, Bruhn and Love
(2014) use a natural experiment to argue that increased access to
financial services leads to an increase in income for low-income
individuals by allowing informal business owners to keep their
businesses open and creating an overall increase in employment.
Similarly, Burgess and Pande 4 (2005) have documented a decrease in
rural poverty in India due to an expansion of bank branches in rural
areas, although these findings have been questioned (Panagariya 2006
and Kochar 2011). Within the limitations of country level data, the IMF
has related financial inclusion.
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SIGNIFICANCE OF THE STUDY:-

Emerging economy like china, Indonesia, the Philippines, India and

Malaysia are expected to grow by double digits annually by the year
2030(PR Newswire, 6th September 2000)2 . The present scenario of
Indian economy is growing, and the rate of growth is more than
many other developed countries, but what we need is a uniform
growth; the condition of the poor people in our country should also
be improved at a faster rate. Commercial banks play a vital role in
the economic development of our country. According to the RBI
guidelines, banks in India should implement financial inclusion
policy to enter vulnerable groups, by providing adequate financial
services and by mobilizing their small savings. Thus the present
paper aims to throw lights on the role of commercial banks in the
financial inclusion programme.
It will increase the lending power of
financial institutions since more funds will be available. More
businesses will be set up and expanded. People will have
better access to financial education and planning. It will create
an economically advanced society and help mobilize financial
resources for practical purposes.
While it is recognized that not all
Individuals need or want financial services, the goal of financial
inclusion is to remove all barriers, both supply side and demand
side. Supply side barriers stem from financial institutions
themselves. They often indicate poor financial infrastructure, and
include lack of nearby financial institutions, high costs to opening
accounts, or documentation requirements. Demand side barriers
refer to aspects of the individual seeking financial services and
include poor financial literacy, lack of financial capability, or
cultural or religious beliefs that impact their financial decisions.

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OBJECTIVE OF THE STUDY

 Financial inclusion intends to help people secure financial

services and products at economical prices such as deposits,
fund transfer services, loans, insurance, payment services, etc.
 It aims to establish proper financial institutions to cater to the
needs of the poor people. These institutions should have clear-
cut regulations and should maintain high standards that are
existent in the financial industry.
 Financial inclusion aims to build and maintain financial
sustainability so that the less fortunate people have a certainty
of funds which they struggle to have.
 Financial inclusion also intends to have numerous institutions
that offer affordable financial assistance so that there is
sufficient competition so that clients have a lot of options to
choose from. There are traditional banking options in the
market. However, the number of institutions that offer
inexpensive financial products and services is very minimal.
 Financial inclusion intends to increase awareness about the
benefits of financial services among the economically
underprivileged sections of the society.
 The process of financial inclusion works towards creating
financial products that are suitable for the less fortunate people
of the society.
 Financial inclusion intends to improve financial literacy and
financial awareness in the nation.
 Financial inclusion aims to bring in digital financial solutions for
the economically underprivileged people of the nation.
 It also intends to bring in mobile banking or financial services in
order to reach the poorest people living in extremely remote
areas of the country.
 It aims to provide tailor-made and custom-made financial
solutions to poor people as per their individual financial
conditions, household needs, preferences, and income levels.

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 There are many governmental agencies and non-governmental

organisations that are dedicated to bringing in financial
inclusion.
 These agencies are focussed on improving the access to
receiving government-approved documents. Many poor people
are unable to open bank accounts or apply for a loan as they do
not have any identity proof. There are so many people who live
in rural areas or tribal villages who do not have knowledge
about documents such as PAN, Aadhaar, Driver’s License, or
Electoral ID. Hence, they cannot avail many of the services
offered by governmental or private institutions. Due to lack of
these documents, they are unable to avail any form of subsidies
offered by the government that they are actually entitled to
Jharkhand.

Goals of Financial Inclusion

for Women Empowerment
Financial inclusion is very particular about including women in financial
management activities of a household. Financial inclusion believes that
women are more capable of handling finances efficiently when compared
to men of a house. Hence, financial inclusion activities target women by
helping them get started engaging in financial management. There are
many houses where women are not permitted to be involved in managing
money. They are controlled by the men of the house and are asked to take
care of only the domestic chores.
Many conservative people in India believe that women are not capable of
handling money. With the help of financial inclusion, the government, as
well as non-governmental agencies, intend to get rid of this mentality.
Financial inclusion is encouraging women to take up more employment
opportunities and be financially independent. It also explains that women
will not have to rely on men for money. They also do not have to wait for
men’s permission to do anything.
Financial inclusion intends to empower women belonging to low-income
groups by increasing financial awareness among them.
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Women are also taught in simple ways to save their money for future
purposes. They are provided with exposure to multiple affordable savings
instruments. They are also taught about the various forms of credit
available in the market. These forms of credit will help them start up a new
small business venture or take up a training course to apply for a new
occupation. This will also increase their monthly income.

Financial inclusion in Jharkhand is also making many women get mobile

phones for their own usage. In several parts of the nation, only men had
their own mobile phones and women had to depend on these men. Over
the past few years, women have started to own mobile phones and have
started to use them for work purposes, business purposes, and financial
requirements. Many of them have started to utilise digital modes of
payment and other financial operations with the help of mobile phones.
This has simplified and quickened their transactions.

The idea of financial inclusion is encouraging banks and other financial

institutions to assist the unbanked sections of the society. Many of these
institutions are also focussing on making women financially independent by
providing special rates and exclusive discounts or other benefits. Many
banks charge subsidised or discounted interest rates to women for their
loan products. For savings accounts offered by certain banks and non-
banking financial corporations, women depositors gain more interest on
their deposits when compared to men.

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REVIEW OF LITERATURE
In recent times financial inclusion has appeared as a major global agendum. At
aggregate level, the common measure of financial inclusion are the number of bank
account per adult, geographic branch penetration, demographic branch penetration,
geographic ATM penetration, demographic ATM penetration, demographic
deposit penetration, demographic credit penetration, deposit income ratio, credit
income ratio and cash deposit ratio (Beck, et al. 2006, Peachy, et al., 2006 Conrad,
et al., 2008 cited in Chattopadhyay (2011). However, these studies did not develop
any composite index of financial inclusion. Sarma, (2007) first computed the
financial inclusion indices of 45 countries for the year 2004. She has constructed
the index considering the indicators - the number of bank accounts per hundred
populations, the number of bank branches per thousand population and the ratio of
savings and credit to GDP of the country. Considering the almost similar indicators
Chattopadhyay (2011) has developed the financial inclusion index for the major
states in India and for all the districts in West Bengal. Karmakar, et al. (2011) have
constructed the financial inclusion for rural areas of the major twenty states in
India. They have considered number of rural outlets, number of accounts per outlet,
per outlet deposit amount, per outlet credit amount and per account deposit amount
as indicator of financial inclusion. In order to assess the performance of the public
sector banks the Finance Minister of India has introduced Financial Inclusion Index
based on two criteria, namely, the number of additional branches covered and the
number of new no-frill account opened (Government of India, 2011). All the
studies have followed the similar methodology used for computation of Human
Development Index and considered the dimensions equally important. But each
dimension may not be equally important to determine financial inclusion. So to
develop a comprehensive index of financial inclusion first, researchers RIJEB
Volume 1, Issue 8(Aug. 2012) ISSN: 2277 – 1018 Journal of Radix International
Educational and Research Consortium www.rierc.org should derive the relative
importance (weight) of the indicators then compute the weighted average of the
dimensional indices. Besides, the indicators used by the studies are not adequate
for gauging all possible dimensions of financial inclusion. There may be other
indicators such as participation in SHG, per capita loan outstanding etc. Varman P
(2005) has found that the SHGs in Tamil Nadu have inculcated the banking habits
in the rural people. Several empirical studies (Adhikary and Bagli, 2010, 2011,)
conducted in West Bengal have shown that SHGs create a smooth path of financial
inclusion for the rural poor. The number of total deposit accounts has increased to
734.8 million and credit account to 118.6 million in 2010 for all banks and the
number of no-frill accounts in all public and private banks has increased to 33

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million in 2009 from seven million in 2006 (RBI, 2010). Besides, KCC scheme
has brought 95 million farmers under the purview of the banking system in 2010
as against 84.6 million farmers in 2009 and the SHG bank linkage programme has
helped seven million rural people to have access to formal savings and formal
credit (Government of India, 2011). Against this backdrop, this study has set the
objectives as follows.  First, this study studies the relative importance of the
indicators of financial inclusion.  Second, we develop a composite index of
financial inclusion for each state in India.  Third, it has examined the degree of
association between human development and research.

RESEARCH METHODOLOGY:-
Definition of financial inclusion and measuring financial access: To condition the
empirical evidence that links access to financial services to development
outcomes, developing a contextually relevant definition of financial inclusion and
analyzing its components will be critical which can provide helpful direction not
only by guiding what variables to measure, also in identifying the benchmarks of
aspects and impact of financial inclusion. Financial inclusion is timely delivery of
financial services at an affordable cost to the vast sections of the disadvantaged
and low-income groups. The various financial services include credit, savings,
insurance and payments and remittance facilities. The objective here is to extend
the scope of activities of the organized financial system to include within its ambit
people with low incomes. This is an attempt to lift the poor from one level to
another so that they come out of poverty. This can be achieved through state
driven intervention or through voluntary effort by the banking community to bring
within the ambit of the banking sector the large strata of society. The above
definition encompasses the two dimensions of financial inclusion, viz., access to a
range of formal financial services and availability of competitive options. This also
indicates the obstacles that could lead to financial exclusion like topography and
distance, regulations, psychology, information asymmetry and low financial
acumen among others (United Nations, 2006). In the Indian context, financial
inclusion, according to the Finance Minister’s 2006- 07 budget speech, was
defined as “the process of ensuring access to timely and adequate credit and
financial services by vulnerable groups at an affordable cost” (Union Budget,
2007-2008). In a similar vein, the Committee on Financial Inclusion defines
financial inclusion as “…the process of ensuring access to financial services and
timely, adequate credit where needed, to vulnerable groups such as weaker
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sections and low income groups, at an affordable cost”.6 2. Parameters of financial

inclusion: a. Access to formal financial services: Access – full or partial – is
nothing but the ability to use available financial services and products from formal
institutions. This requires an insight and analysis of potential barriers to opening
and using a bank account such as cost, physical proximity of bank branches etc.,
proportion of the population with an account can be a proxy for measuring the
access component and data can be extracted through the information provided by

financial institutions. Partial and full access, in turn is determined by factors such
as scope, institutional structure, quantity, price, quality gender, age etc. b. Quality
of financial services: This is a measure of the relevance of the financial service to
the lifestyle needs of the consumer. This component encompasses the experience
of the consumer, his attitudes and opinion towards the financial products available
etc. This measure would be used to gauge the nature and depth of the relationship
between the financial service provider and the consumer as well as the choices
available and their implications. Data will be gathered through demand side
survey. Quality dimension becomes crucial in cases where 6 Report of the
Committee for Financial Inclusion, RBI India 2008 7 disparity in service deliver is
sharp and exact feedback from users is difficult to obtain. c. Usage of financial
services: This component will focus on the depth and extent of financial service or
product. This is about the regularity, frequency and duration of use over time
which also involves measuring what combination of financial products is used by
household. Data will be gathered through demand side survey. d. Welfare
component: This component will measure the impact of a financial service which
had on the lives of the consumers. This will focus on the changes in consumption,
total assets of the household, household expenditure, empowerment of women etc.
This is nothing but capturing an improvement in wellbeing resulting from Data can
be gathered through demand side survey. 3. Data required for the measurement of
access to financial services and its impact: Researcher has to understand the
design, sources of information and variables needed to measure the access and
impact of financial services on the households of vulnerable sections of the
society. Relevant and meaningful data on poverty levels, population-BPL,
bankable activities and their financial size, the excluded-included segments of
population, the clientele who still face various constraints in access of financial
services (say, infrastructural, technological etc), have to be gathered and analyzed.
Both quantitative and qualitative data (e.g. psychology of the borrower) are
necessary to gauge the reach and impact of financial inclusion. Data should be put
to rigorous tests before they are considered as results or findings fit for policy
action. A study of financial inclusion has to be multivariate.

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Financial inclusion by its very nature is multi-dimensional in objectives, types and

functions: credit, money-advice, investment, insurance etc. Among experts there
seems to be no consensus as to which set of attributes/variables are important to
measure financial inclusion. While measuring access to credit from banks, for
instance, there are a number of indicators available to a researcher, viz geographic-
branch penetration, demographic-branch penetration, geographic-ATM
penetration, demographic-ATM penetration, credit accounts per capita, credit-
income ratio, etc. The indicators broadly fall into two categories – those measure
the outreach of the financial sector in terms of access to banks’ physical outlets,
and those that measure the use of banking services. If take into account the
occupational pattern or nature of activities of the beneficiaries some more
indicators can be added. Similarly, taking into account the political/democratic
dimensions of financial

development via governments and NGOs (e.g. SHGs) additional indicators may
find place – autonomy, ownership, distribution, etc – which however may vary
across countries, across states within a country, across districts within a state and
so on. Heterogeneous elements may then pose problems, both statistical and non
statistical. It is with these constraints, nay challenges that researchers in recent
times are engaged in devising indices of financial inclusion. In a recent article
Chakravarty and Pal (2010) have demonstrated that the axiomatic measurement
approach developed in the human development literature can be usefully applied to
the measurement of financial inclusion. They have developed a conceptual
framework for aggregating data on financial services in different dimensions. The
suggested index of financial inclusion allows calculation of percentage
contributions 8 of different dimensions to the overall achievement. This in turn
enables the researchers to identify the dimensions of inclusion that are more/less
susceptible to overall inclusion and hence to isolate the dimensions that deserve
attention from a policy perspective. The actual research problem we face here is
that certain parts of the population are systematically excluded from the reach of
formal financial sector or some parts of the population are over included. This
problem may be confounded when time dimension is added: as Hulme opines, in
studies of financial inclusion, fungibility and casuality are also to be taken into
account; as income data alone may not resolve the problem, rigorous data
collection over a long period becomes important. The corollary is that one should
spell clearly if the study is meant to understand the economic and social ‘benefits;
of the inclusion program or ‘impact’. The latter requires rigorous study. Thus,
appropriate policy response which is based on the data that is available in various
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primary and secondary sources is pertinent. After analyzing this data the inference
that is arrived at will play a deciding role in designing the policy of financial
inclusion. In this regard researcher has to explore different levels of investigative
research questions which are critical in designing different survey designs which
will be used in the process of measuring the access and impact of financial
services. The first level of questions will focus on to explore the current status of
financial inclusion. A one time cross-sectional survey designed could be used in
this direction. The second level of questions will focus on the level of
improvement in financial inclusion. A repeated cross section survey design would
provide necessary input in this direction. Level third questions are designed to
measure impact of financial inclusion which has complex sampling considerations.
Surveys need to be conducted over time, at the same time having a control group
which is not affected by the policy required in this regard. 9 4.Sources of data on
financial inclusion: Financial inclusion data may be distinguished based on data
source, namely: supply-side and demand side. Both play important roles in
measuring extent and impact of financial inclusion (Honohan, 2005). The roles, in
turn depend on the nature and magnitude (value) of the ascribed variables.

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MEANING OF FINANCIAL INCLUSION :

Financial inclusion is defined as the availability and equality of
opportunities to access financial services. It refers to a process by
which individuals and businesses can access appropriate,
affordable, and timely financial products and services. These
include banking, loan, equity, and insurance products. Financial
inclusion efforts typically target those who
are unbanked and underbanked, and directs sustainable financial
services to them.Financial inclusion is understood to go beyond
merely opening a bank account. It is possible for banked
individuals to be excluded from financial services. Having more
inclusive financial systems has been linked to stronger and more
sustainable economic growth and development and thus
achieving financial inclusion has become a priority for many
countries across the globe.
In 2018, it was estimated that about 1.7 billion adults lacked a
bank account.[ Among those who are un-banked a significant
number were women and poor people in rural areas and often
those who are excluded from financial institutions, face
discrimination and belong to vulnerable or marginalized
populations.
Due to the lack of financial infrastructure many under-served and
low-income communities suffer. Specifically, the lack of proper
information can be detrimental to low-income communities and
expose them to financial risks. For instance, payday loans target
low-income persons who are not adequately informed about
interest rates and compound interest. They become trapped and
indebted to these predatory institutions.
The public sector spearheads outreach and education for adults
to receive free financial services such as education, tax
preparation, and welfare assistance. Non-profit organizations
dedicate themselves to serving underprivileged communities
through private resources and state funding. Within California,
state legislation allows for grants to be disbursed during the fiscal
year and non-profits can apply for additional funding.

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Bill AB-423 is an example of the state recognizing the lack of financial

inclusion of young adults.
the bill encourages pupil instruction and financial literacy lessons to begin
as early as grade 9.
While it is recognized that not all individuals need or want financial
services, the goal of financial inclusion is to remove all barriers, both
supply side and demand side. Supply side barriers stem from financial
institutions themselves. They often indicate poor financial infrastructure,
and include lack of nearby financial institutions, high costs to opening
accounts, or documentation requirements. Demand side barriers refer to
aspects of the individual seeking financial services and include poor
financial literacy, lack of financial capability, or cultural or religious beliefs
that impact their financial decisions.
There is some skepticism from some experts about the effectiveness of
financial inclusion initiatives.Research on microfinance initiatives indicates
that wide availability of credit for micro-entrepreneurs can produce informal
inter-mediation, an unintended form of entrepreneurship.

History :-
The term "financial inclusion" has gained importance since the early 2000s,
a result of identifying financial exclusion and it is a direct correlation to
poverty according to the World Bank.[10] The United Nations defines the
goals[11] of financial inclusion as follows:

 Access at a reasonable cost for all households to a full range of

financial services, including savings or deposit services, payment and
transfer services, credit and insurance.
 Sound and safe institutions governed by clear regulation and industry
performance standards.
 Financial and institutional sustainability, to ensure continuity and
certainty of investment.

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 Competition to ensure choice and affordability for clients.

Former United Nations Secretary-General Kofi Annan, on 29 December
2003, said: "The stark reality is that most poor people in the world still lack
access to sustainable financial services, whether it is savings, credit or
insurance. The great challenge is to address the constraints that exclude
people from full participation in the financial sector. Together, we can build
inclusive financial sectors that help people improve their lives."
In 2009, former United Nations Secretary-General Ban Ki-
Moon appointed Queen Máxima of the Netherlands as the United Nations
Secretary-General’s Special Advocate for Inclusive Finance for
Development (UNSGSA), housed in the United Nations Development
Programme (UNDP). As the UN Secretary-General's Special Advocate,
Queen Máxima is a leading global voice on advancing universal access to
and responsible usage of affordable, effective and safe financial services.
Since 2011, more than 1.2 billion people have gained access to financial
services—and therefore have a better chance to transform their lives.
Leading up to the adoption of the Sustainable Development Goals
(SDGs) in 2015, the UNSGSA and UN member-state partners worked to
ensure financial inclusion’s strong presence within the agenda. As a result
financial inclusion is now referenced in seven of the 17 goals as a key
enabler for fulfilling the SDGs, and the General Assembly has passed a
resolution stressing its importance.
Over the last five years financial inclusion has made strong strides forward:
515 million more people gained access to financial services between 2014
and 2017;[12] 50+ countries have adopted financial inclusion plans and
strategies; the major global regulators—the standard-setting bodies
(SSBs)—now regularly meet for the purpose of addressing financial
inclusion; and, growing research is showing strong links between financial
inclusion and major development goals.[13]

In 2005, UNCDF made a strategic shift

to focus its interventions on financial inclusion more broadly.

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The new approach is supporting a market development approach to make

financial sectors more inclusive. It was designed to create enabling
environments for a wide range of retail financial service providers and to
address gaps in the policy, legal, and regulatory constraints that prevent a
financial sector from being inclusive. UNCDF has been continuously
assessed and recognized as a leader in the SmartAid Index by the
Consultative Group to Assist the Poor (CGAP) since 2007. The SmartAid
Index measures an organization’s effectiveness in supporting financial
inclusion.

Today, UNCDF’s “last mile” financing models support microfinance

institutions, banks, cooperatives, money transfer companies and mobile
network operators to extend the reach of financial markets where they may
not go without our demonstration value. In so doing, UNCDF ensures that
suitable financial products - savings, credit, insurance, payments, and
remittances - are available to individuals – notably the ‘unbanked’ – and
micro, small, and medium enterprises, at a reasonable cost, and on a
sustainable basis.

UNCDF also supports digital finance innovations to reach unbanked, poor

and remote populations who have been excluded from traditional financial
networks. These services are often seen as safer than carrying cash, and
they promote transparency by creating audit trails and reducing fraud.

NEED FOR FINANCIAL INCLUSION IN JHARKHAND

A survey conducted by the RBI in India (All India Rural Credit Survey-1947)
revealed that financial inclusion of rural marginalised people was dependant on
informal sources and that the money lenders met more than 90 percent of the rural
credit needs. (Jayasheela et al 2008). The need for promoting financial inclusion in
the state can also be corroborated by the level of poverty existing in the state.
Table : 1 Distribution of poverty in the state of Jharkhand BPL % DISTRICTS
80% and above Gumla, Simdega, W.Simbhum, Latehar 70% to 80% Lohardaga,
Saraikela, Kharsawan 60% to 70% Ranchi, Dumka, Jamtara 50% to 60% Deoghar,
Pakur, Sahebgunj, Garwah 40% to 50% Giridih, Koderma, Godda, Hazaribagh
Below 40% Bokaro, Dhanbad Source : Annual report 2004-05, Department of
Food, Civil supplies & Commerce, Govt. of Jharkhand, pp.50 Poverty in rural
India especially Jharkhand is a prolonged chain which can only be broken by
providing financial assistance. Most of the Central or State sponsored schemes of
financial welfare would also not serve the purpose if proper banking and risk
management facilities are not available to the margin to the extent
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for the rural and marginalised sections of the society is necessary and the
importance lies in the fact that banking facilities have to be complemented by the
investment and risk management activities. (Ravichandran & Alkhathlan, 2009).
The senior level executives of RBI have expressed concerns on the issue of
extremely low performance in the process of financial inclusion in the rural areas
of Jharkhand and hence the branch of RBI was set up in Ranchi (Capital of
Jharkhand) in Nov’2007. This actually indicates the non performance of the
financial institutions working in the state and also the serious concern of the apex
bank on the issue of financial inclusion in Jharkhand where barter system is still
prevalent. (Das, 2008). Census (1991)shows that the population density of
Jharkhand was 274 persons per square kilometre which now has increased to more
than 441 persons per square k.m. which is higher than the national average of 364
persons per square kilometre. (Census 2011). Jharkhand also has a relatively high
number of people living below poverty line. The national average people below
the poverty line in rural areas of India is 17.13% compared to the alarming figure
of Jharkhand at 40.2%. (Government of India, Press Information Bureau-2007).
Moreover, due to absence of sustainable industrialisation the role of agriculture
and allied activities has become more emphatic in Jharkhand. This sector
contributes around 13 percent to NSDP (Net State Domestic Product) and is
responsible for the livelihood of around 80% of the state’s population. (Das, 2008).
These estimates call for a high level and efficient system of financial inclusion in
the state of Jharkhand. The above findings of the researchers highlight the fact that
there is a vital need for quick and steady actions to promote financial inclusion in
the state of Jharkhand. III. THE DEMAND AND COST FACTOR : The
commercial banks operating in India have been found to be reluctant in opening of
branches in the rural area. The same phenomena also exist in the state of
Jharkhand owing to the demand and cost factor for operation of branches. There
are examples where, the banks have opened branches in the rural areas of
Jharkhand with insufficient manpower and technology. State Bank of India had
105 single officer branches out of 382 branches in Jharkhand. (Das, 2008). At the
same time most of the branches are found in areas with thick population density,
thereby denying the facility to many people who reside in remote areas. The
number of branches that the banks have, is an indicator of the capacity of the bank
to promote financial inclusion. Extreme poverty has lowered the demand for
financial inclusion thereby making the commercial banks, especially the private
sector banks very cautious in launching new branches. The distribution of
branches of the private sector banks are in contrast to the distribution of population
in Jharkhand as well as India.

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Although, a major part of the population lives in the rural Jharkhand the private
sector banks have only 13% of the total number of branches in the rural India.
However, it may be noted that with the increase in the number of bank accounts
opened and operated in the rural areas of Jharkhand, the incidence of cost per unit
of bank account / bank transaction would automatically decrease. According to the
consulting giant Boston Consulting Group’s (BCG) report “The Next Billion
Consumers” (Sinha & Subramanian,2007) the emergence of more and more
profitable business models would lead to a reduction in the cost of manpower,
usage of technology for distribution and collaboration across industry models.
Financial inclusion is closely related to the development of other physical facilities
and infrastructure in the state .

Government policy strategies:-

The Mahatma Gandhi National Rural Employment Guarantee
Act (MGNREGA) is meant to provide supplemental employment at a
guaranteed minimum wage and facilitate financial inclusion to empower
women and rural laborers. While achieving financial inclusion is not its
main goal, the program directly deposits wages into bank accounts as a
way to limit corruption, speed delivery of benefits, and connect wage
laborers to bank accounts.
The Pradhan Mantri Jan Dhan Yojana policy scheme was announced by
Prime Minister Narendra Modi in his 2014 Independence Day Speech and
launched in August 2014 in an effort to provide "universal access" to
banking through the creation of basic banking accounts that come with
other basic financial sintegrating citizens into a cashless and taxable
economy and banking system.] While India has seen new bank accounts
continue to open in the wake of this policy change, and an overall increase
in use of digital payment systems and

other financial services, the policy change caused an extreme disruption to

the financial system and debate continues on its efficacy
To achieve the vision of ensuring access to an array of basic formal
financial services, a set of guiding objectives have been formulated with
special relevance in the Indian context.

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1. Universal Access to Financial Services : Every village to have

access to a formal financial service provider within a reasonable
distance of 5 KM radius. The customers may be on boarded through
an easy and hassle-free digital process and processes should be
geared towards a less-paper ecosystem.
2. Providing Basic Bouquet of Financial Services : Every adult who
is willing and eligible needs to be provided with a basic bouquet of
financial services that include a Basic Savings Bank Deposit
Account, credit, a micro life and non-life insurance product, a pension
product and a suitable investment product.
3. Access to Livelihood and Skill Development : The new entrant to
the financial system, if eligible and willing to undergo any livelihood/
skill development programme, may be given the relevant information
about the ongoing Government livelihood programmes thus helping
them to augment their skills and engage in meaningful economic
activity and improve income generation.

4. Customer Protection and Grievance Redressal : Customers shall

be made aware of the recourses available for resolution of their
grievances. About storing and sharing of customer’s biometric and
demographic data, adequate safeguards need to be ensured to
protect the customer’s Right to Privacy.
5. Effective Co-ordination : There needs to be a focused and
continuous coordination between the key stakeholders viz.
Government, the Regulators, financial service providers, Telecom
Service Regulators, Skills Training institutes etc. to make sure that
the customers are able to use the services in a sustained manner.
The focus shall be to consolidate gains from previous efforts through
focus on improvement of quality of service of last mile delivery viz.,
capacity building of Business Correspondents, creating payments
system ecosystems at village levels to deepen the culture of digital
finance leading to ease of use and delivery.

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Strategic objectives for financial inclusion:

RBI identified six strategic objectives of a national strategy for
financial inclusion: (i) universal access to financial services, (ii)
providing basic bouquet of financial services, (iii) access to
livelihood and skill development, (iv) financial literacy and
education, (v) customer protection and grievance redressal, and
(vi) effective coordination. To achieve this vision, it identified
certain milestones such as: (a) providing banking access to every
village (or hamlet of 500 households in hilly areas) within a five
km radius by March 2020, (b) strengthening digital financial
services to create infrastructure to move towards a cash less
society by March 2022, and (c) ensuring that every adult has
access to a financial service provider through a mobile device by
March 2024.

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Challenges to Financial Inclusion

It is generally accepted among financial experts that by giving people access

to banking facilities and services, this can uplift the economic welfare of their

lives. However despite the obvious benefits of financial inclusion and the

technological advancements that we have achieved over the last hundred

years, according to a 2014 World Economic Forum report, around 2 billion

people in the world still do not have access to basic banking services. While

concerted efforts are being made to bring basic financial services to these

unbanked individuals, policymakers are faced with several hurdles to which

they must first overcome for their goals of financial inclusion to successful.some

points are as follows:-

The main hurdles for policymakers to achieve a higher rate of

financial inclusion include:

1. The Need to Improve Financial Literacy

Based on studies on remittance services among migrants and surveys
conducted by the World Bank Group in Morocco and Mozambique, it has
been found that the lack of awareness among the study group prevented
them from utilizing the right products and services that suited their
particular needs. By improving the financial literacy rate among these
individuals, this will lead to better financial decisions and the selection of the
right products that best suits the needs of these individuals. It will also lead
to knowing how to better utilize the various channels that are available for
their banking needs. In other words, more effective and lower cost
measures can be utilized to improve the uptake of new bank accounts which
will ultimately result in increased savings.

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2. Lack of Formal Identification Documents

One of the key factors which prevent the unbanked from getting access to
basic banking services is the lack of formal identification documents. In
most countries, a proper ID is required before an individual can open a bank
account. IDs are also needed for claiming social benefits and the transfers of
funds. Hence in order to improve access to banking services for the
unbanked, authorities need to simplify and streamline the process for
obtaining a formal ID card.

Why are people unbanked?

3. Consumer Protection
Although there has been a proliferation of financial services such as mobile
money and virtual currencies designed to expand financial inclusion, there is
a lack of trust among consumers as to the security and reliability of these
newly established platforms. In order to promote confidence in these new
methods of payment services, authorities must release clear guidelines and
regulations that will ensure that the consumers are adequately protected
and have access to key product information to allow them make informed
decisions.

4. The Rural Poor and Gender Inequality

According the latest data from Findex, approximately 1.1 billion of the 2
billion unbanked individuals around the world are women. In developing
countries, the rural poor and women in general face unique obstacles when
trying to access financial services. Based on researche conducted by the
World Bank, even though women form a larger share of the self employed
category in developing countries, they have a lower chance of securing
credit from banks. IFC research has shown that this is largely due to a lack
of collateral or poor credit history which leads to more women being denied
credit by the financial institutions.

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Other measures can include more investment into financial awareness

programs to help reinforce the ability of the women and the rural poor to
make better-informed financial decisions.

5. Promoting the Use of the Transaction Account

Most initiatives by policymakers have been targeted to increase the uptake
of new bank accounts among the unbanked. However, it should be
remembered that opening an account is just the first step rather than the
ultimate objective. It has been noted that of the 355 million adults in
developing countries that reported having a bank account, still resort to
remitting money by cash or over the counter. For a bank account to be
relevant in these people lives, it must be useful and function as a gateway
to other financial services which can improve their overall economic welfare.

Smartphone penetration and Financial Inclusion in the Developing World

To help accelerate the use of a bank account, the private sector and
governments can play a key role by depositing their workers’ wages into the
bank accounts rather than paying them in cash. A good example of this
initiative is India’s Pradhan Mantri Jan-Dhan Yojana (PMJDY) program where
social benefits and subsidies of the recipients are paid directly to their
transaction accounts.

Kosta Peric, is the Deputy Director of the Gates Foundation’s

Financial Services for the Poor team, which manages a number of
diverse projects dedicated to bringing digital financial services to
everyone around the world. In an interview to Ripple, Kosta
Peric says that platforms are the tool that can help the
unbanked.

Peric is the leader of the project Level One, which is an initiative

to create inclusive, interoperable digital economies in every
country. The central theme is the creation of a national payments
infrastructure that connects the existing financial system to a
new digital payment platform, ultimately fostering the higher use
of both systems and increasing the levels of financial inclusion
(the “level” and “one” in the name reflect the level playing field
brought by one infrastructure connecting all the providers).

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ACHEIVEMENT OF BANK OF INDIA IN JHARKHAND :-

Being a lead
bank Bank
of India (BOI) being one of the major lead banks covers the highest
number of districts (15 districts) in Jharkhand. It is considered as the
back bone of the public sector banks in the light of financial inclusion
in Jharkhand. BOI has around 4000 branches all over India out of
which 385 branches are located in Jharkhand. However, the
distribution of branches of BOI across India is not the same. The
following table highlights the position of BOI in Jharkhand in
comparison with other states of India. BOI has opened 385 branches
in Jharkhand giving the state the second position in the country in
terms of number of branches. 75.95% of the population of Jharkhand
belongs to the rural area standing fourth in the country in terms of
rural population, after Bihar, Orissa and Uttar Pradesh. The average
number of BOI branches available per square km. Is 0.0048928,
which is the second highest in the country standing second after
Delhi. Average number of BOI branches available per person is
0.00001168, which is the highest in the country. The density of
population of Jharkhand is 414 per sq.km, thus making the job of
financial inclusion even more difficult as compared to states like
Punjab, Tamilnadu, Uttarpradesh, West Bengal, Bihar and Delhi.
Hence, it can be observed that BOI has done a commendable job in
Jharkhand in terms of number of branches that it has created. The
products intended to be offered by BOI for promoting financial
inclusion are Savings bank No-Frills accounts, Kisan Credit Card
(KCC) up to one lakh without mortgage, General Credit Card (GCC)
up to Rs.25,000/- without any collateral, Other loans to start or run
micro enterprises, Remittance facilities through hand held devices.
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ACHEIVEMENT AND FAILURE OF (SHG’s):-

In Jharkhand : The commercial banks have been empowering the SHG’s

and NGO’s financially. However, technical empowerment of these
small entities could be enabled by the commercial banks through
training and development programmes of modern practices of banking
(eg.tele-banking), insurance and financial risk management. The SHG’s
and NGO’s are themselves small entities, many of which are not
financially and technically sound. This could be one of the most
emphatic reasons for the huge gap between the percentages of rural
people living below the poverty line in these two states. Andhra Pradesh
– 7.5%, Jharkhand – 40.2%. The commercial banks being large entities
should take up the natural responsibility of, not only to upgrade and
make more user friendly systems of financial inclusion but at the same
time provide necessary guidance, financial and technical assistance, to
the SHG’s and NGO’s to upgrade their systems. The activity level of
SHG’s in Jharkhand has definitely

improved the situation of financial inclusion in the state. However, the

average number of households participating in SHG’s run programmes
in Andhra Pradesh was 279 per 1000 whereas in case of Jharkhand it
was only 32 per 1000 during the year 2007.(Fouillet & Augsburg,
2007). The working of SHG’s in Jharkhand if generally found not being
influenced by modern technology. The use of technology brings
transparency in to the systems and serves the requirement of
maintaining and nurturing the faith and trust of the poor and
marginalised. (Hans, 2009). It has been observed that the financial loans
provided by such institutions generally do not graduate to larger
individual loans while 10 to 20% of the NGO’s fail to take off.(Tankha,
2002). Nevertheless, SHGs linked to banks are emerging as a low cost
option to mainstream delivery systems of financial services for the poor.
Hence, better empowerment of the SHG’s would serve to be a milestone
in the process of financial inclusion. Although there is growing
importance of SHG’s as a source of credit to the poor and marginalised
there little evidence of systematic internal functioning.

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According to an estimate more than one billion people in the world have
access to mobile phones, however more than 2.6 billion people do not
have access to financial services. Development of mobile banking
services can go a long way in improving the condition of financial
inclusion in the state. (Dermish et al 2011).The literacy rate in
Jharkhand compared to the national average of 65.4% is quite low at
53.6%. In case of females it is even more low standing at 39.38%.(Das,
2008). This phenomenon makes the job of financial inclusion even more
difficult. The difficulty arises from the fact that a big chunk of
population living in the rural areas of Jharkhand does not understand
English language. Even many of them do not understand Hindi and are
not able to read or write. In such situations technology based devises
like ATM machines do not serve the purpose. Hence, instruments
designed to promote financial inclusion should be in vernacular
languages and understandable by the poor mass. (Mehta,2012). It is only
technology and innovations which can make possible, the process of
financial inclusion in the remote areas of Jharkhand. The banks should
modify their products and ATMs in a way so as to make them more user
friendly for the people who are illiterate or semi literate.(Leeladhar,
2006). Branchless banking has the potential to go a long way in this
regard. Innovative application of mind may suggest a partnership of the
banks with the mobile operators and thus reducing costs of banking for
the poor in remote areas. The Regional rural banks (RRB’s) have the
natural niche for micro finance programmes and financial inclusion.
They actually have been performing well in the SHG-Bank linkage
programme. However, the RRB’s have a limited capacity and requires
financial and technical assistance from the Government and NABARD
should take up the matter seriously.(Rangrajan,2008). Due to the over
dependency on agriculture and related occupations, the default rate and
irregularity of income is very high in Jharkhand. This makes the
situation extremely vulnerable in the years when agriculture and related
businesses do not perform well (eg. a year with drought) and all steps
taken to promote financial inclusion in the state may not serve the
purpose. In order to cope up with such situations innovative financial
derivative products could be put to good use.

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From a banker’s point of view, the interest they are allowed to charge,
would be too low, as compared to the risks associated with agriculture.
A nice example related to this could be the idea of “Monsoon indexed
lending and insurance for small and marginal farmers”. (Gupta’2011).
The idea is to transfer the systematic risk of the bank connected with
defaulting farmers to the insurance markets, thus creating avenues for
the insurance trade to participate in the process of financial inclusion.
The farmer has to pay a high interest rate (inclusive of insurance
premium) in the years with good monsoon and in case of a year of
drought, very low interest rates or no interest will be charged on the
loan. Hence, in the years of trouble, the farmer is not burdened with
interest and the risk of the bank of default on the part of the farmer is
safely guarded by the insurance market, creating a win-win situation.
Hence, the poor farmer is still bankable even in the years Of drought.

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FINANCIAL INCLUSION

IN
JHARKHAND

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FINANCIAL INCLUSION IN JHARKHAND:-

Financial inclusion or inclusive financing in JHARKHAND is the delivery of

financial services at affordable costs to sections of disadvantaged and low-
income segments of society, in contrast to financial exclusion where those
services are not available or affordable.

Government of India has launched an innovative scheme of Jan Dhan Yojna

for Financial Inclusion to provide the financial services to millions out of the
regulated banking sector.

Various program’s for financial inclusion are:-

 Swabhimaan Scheme:under the Swabhimaan campaign, the Banks

were advised to provide appropriate banking facilities to habitations
having a population in excess of 2000 (as per 2001 census) by March
2012.
 Extention of the banking networkin unbanked areas,
 Expansion of Business Correspondent Agent (BCA)Network
 Direct Benefit Transfer(DBT) and Direct Benefit Transfer for
LPG (DBTL)
 RuPay, a new card payment scheme has been conceived by NPCI to
offer a domestic, open-loop, multilateral card payment system which
will allow all Indian banks and financial Institutions in India to
participate in electronic payments.
 Pradhan Mantri Jan-Dhan Yojana (PMJDY)was formally launched on
28th August, 2014. The Yojana envisages universal access to banking
facilities with at least one basic banking account for every household,
financial literacy, access to credit, insurance and pension. The
beneficiaries would get a RuPay Debit Card having inbuilt accident
insurance cover of Rs.1.00 lakh. In addition there is a life insurance
cover of Rs.30000/- to those people who opened their bank accounts
for the first time between 15.08.2014 to 26.01.2015 and meet other
eligibility conditions of the Y

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STRATEGIES OF FINANCIAL INCLUSION IN JHARKHAND :

In Jharkhand , several measures financial sector are tyaken by the govt.

No frills accounts (NFAs), now known as basic savings bank deposit
accounts (BSBDAs) can be opened with zero or minimal balances,
removing a cost barrier to banking. Banks are also meant to charge
minimal overdraft fees on NFAs.[34] The RBI continues to change and relax
policies regarding these accounts in an effort to better serve bank
customers.[35]
Know-your-customer (KYC) requirements for opening bank accounts were
relaxed for small accounts in August 2005, eliminating a documentation
barrier to banking. The new procedure only requires an introduction by an
account holder who has been subjected to the full KYC
screening.[36] Additionally, banks were permitted to accept more easily
produced forms of documentation for proof of identity and address.
The business correspondents (BC) model was launched in January 2006,
when the RBI permitted banks to engage intermediaries in the banking
process.
This model enables banks to service neglected areas by allowing
intermediaries to facilitate transactions and deliver other banking services
directly. Originally, a fairly limited number of entities, including NGO's and
certain microfinance institutions were eligible to act as BCs, however in
2010 the list was expanded to include for-profit companies In 2018,
operators of Common Service Centers(CSCs) who work with local
governing gram panchayats also began working as BCs to further improve
penetration of banking services.
Expanding financial technology, or fintech, has been proposed as an
effective strategy to achieve financial inclusion. While incorporation of
technology does pose some risks, it is being used to deliver banking
services to those in rural and remote areas who are typically unserved. The
United Nation 2030 Agenda for Sustainable Development (UN-2030-ASD)
and the G20 High-Level Principles for Digital Financial Inclusion (G20-HLP-
DFI) describes the importance of using Fintech to reduce financial
exclusion and income inequality which means that the financial inclusion
through Fintech may shows significant signs on the reduction of
inequality.Banks have been advised to make effective use of information
and communications technology (ICT), to provide banking services to
people directly through the BC model where the accounts can be operated
by even illiterate customers by using biometrics, thus ensuring the security
of transactions and enhancing confidence in the banking system.

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 MARWARI COLLEGE, RANCHI

In 2018 the World Bank and International Monetary Fund (IMF) launched
the Bali Fintech Agenda to provide a framework for domestic policy
discussions around deepening access to financial services in a variety of
different contexts.
Unique credit cards are now offered by banks, the most popular being
general purpose credit cards (GCCs), and Kisan credit cards. These
unique cards offer credit to those in rural and semi-urban areas, farmers,
and others with adjusted collateral and security requirements with the
objective of providing hassle-free credit.
Electronic benefit transfer (EBT) is being implemented by banks at the
advice of the RBI with the goal of reducing dependence on cash, lowering
transaction costs, and address corruption.

Increasing the number of rural banks remains a priority for the RBI. In
2009, the RBI relaxed previous policies requiring authorization before
opening new branches in the hopes that simplified authorization would
increase branches in underserved areas. Beginning in 2011 the RBI
required 25% of new branches opened in a given year be in unbanked
rural areas centers to ensure a more even spread of banking facilities.

The self-help group (SHG) linkage model has also been proposed to
improve financial inclusion by linking community groups to the formal
banking sector through government programs, credit cooperatives, NGOs,
or other microfinance institutions. Group-based models in which members
pool their savings have also been seen as tools for social and economic
empowerment, particularly when women are leaders and participants.

FINANCIAL INCLUSION DATA OF JHARKHAND

These data surveys are complementary to each other, and for better
policymaking, should be used in combination. Ideally, countries can
measure and monitor financial inclusion by combining frequently collected
supply-side data, with more detailed demand-side information. Demand-
side data can help guide policies toward financially excluded groups,

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 MARWARI COLLEGE, RANCHI

or identify which population groups concentrate the use of financial

products and services. (or identify which population groups use most
financial products and services.) The World Bank Group, IMF and other
international organizations collect a broad range of financial inclusion data:
The index, is a public database that measures people’s use of financial
products across economies and over time. The data are based on
interviews with more than 150,000 nationally representative and randomly
selected adults in 148 economies, covering over 97% of the world's adult
population. It was developed by the World Bank and Gallup, and funded by
the Bill and Melinda Gates Foundation.
The Global Partnership for Financial Inclusion (GPFI) has the
following G20 Basic Set of Financial Inclusion Indicators to help
countries set financial inclusion targets and monitor progress. This
information is derived from country-led data gathering, including financial
institution data collected by financial regulators, and household/firm
surveys, and need not be dependent on the global surveys.

 Formally banked adults: Percentage of adults with an account at a

formal financial institution
 Adults with credit from regulated institutions: Percentage of adults
with at least one loan outstanding from a financial institution
 Formally banked enterprises: Number or percentage of SMEs with
accounts
 Enterprises with outstanding loan from a regulated financial
institution: Number or percentage of SMEs with outstanding loan
 Points of service: Number of branches per 100,000 adults
The first four indicators measure the usage and are best obtained from
demand-side data. The fifth indicator measures geographical access of
formal financial providers. It can be obtained from supply-side data
collected by the central bank or ministry of finance. These indicators can
be further tailored through sub-indicators to monitor specific issues, such
as the fraction of women with financial accounts, the proportion of female-
owned firms with a bank loan, or the fraction of adults from rural areas
using formal credit.
Countries that don’t collect data to develop these indicators can use
Findex, World Bank Group’s Enterprise Surveys, or IMF’s Financial Access
Survey data, or can include questions from these surveys in their national
surveys.
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MARWARI COLLEGE, RANCHI

COMPUTATION OF FINANCIAL INDEX FOR JHARKHAND:-

Since banks are the gateway to the most basic form of financial services,
it is only the extent of accessibility, availability and usability of banking
services, that has been treated as equivalent to financial inclusion for the
purpose of present research work. The Index of Financial Inclusion score
and ranking discussed are based on the analysis and calculation for the
year ending information provided by the office of Gramin Bank of
Jharkhand in support of the selected fifteen districts for the period of five
years from 2011 to 2015. The following tables shows district wise and year
wise Financial Inclusion Index computed on the basis of three dimension-
banking penetration, availability of banking facility and usage of banking
services by the citizen of Jharkhand.

Some graphs and tables were presented for better u

nderstanding of this project. following are the data of some cities of

Jharkhand which show the district wise index of financial inclusion are as
follows:-

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 MARWARI COLLEGE, RANCHI

Statement showing year wise district wise Index of Financial Inclusion:-

S. District/year  2011 2012 2013 2014 2015

No.
1. Bokaro 0.17 0.14 0.11 0.13 0.13
2. Chatra 0.48 0.40 0.25 0.44 0.44
3. Dhanbad 0.00 0.00 0.02 0.00 0.00
4. Giridih 0.44 0.39 0.26 0.40 0.41
5. Gumla 0.59 0.56 0.29 0.57 0.54
6. Hazaribag 0.42 0.39 0.28 0.45 0.44
7. Khunti 0.41 0.37 0.18 0.38 0.38
8. Kodarma 0.10 0.10 0.06 0.11 0.11
9. Lohardaga 0.46 0.42 0.22 0.43 0.42
10. West Singhbhum 0.68 0.66 0.32 0.64 0.63
11. East singhbhum 0.79 0.72 0.38 0.74 0.73
12. Ramgarh 0.13 0.14 0.09 0.14 0.13
13. Ranchi 0.67 0.62 0.41 0.66 0.65
14. Saraikela-Kharsawan 0.69 0.66 0.37 0.68 0.66
15. Simdega 0.49 0.51 0.26 0.44 0.44

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 District wise diagram of Jharkhand to show Financial Inclusion:-

The overall state of the above diagram is that from districts of Jharkhand
the selected 15 districts are showing with their level of financial inclusion
which has been computed by using data on 3 dimensions of financial
inclusion, through this calculation selected districts may know their Index
of Financial Inclusion values. On the basis of financial inclusion index the
districts selected for the study can be provided ranking as follow to
facilitate the convenience in analysis

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Coefficient of variation in financial inclusion across districts

To analyse variation within the region or across districts co efficient of variation for various
regions have been calculated. Singhbhum region demonstrated least variability across
districts, which is followed by Ranchi and Hazaribagh region. Variation within the districthas
also the least in Singhbhum, as indicated by the coefficient of variation of 0.07622 (Table
-5 for the year 2015. The highest variation continues in Giridih region from 2011 to 2015.

YEAR WISE COEFICIENT OF VARIATION ACROSS DISTRICT :

Region 2011 2012 201 2014 2015

0.19998 0.20492 0.32199 0.23278 0.22428
Ranchi
0.08449 0.05094 0.09013 0.07329 0.07622
Singhbhum
1.09144 1.11811 0.93262 1.15473 1.16400
Giridih
0.69147 0.62004 0.65329 0.64982 0.66046
Hazaribagh

The above table shows a significant variation across districts which is less
or more in various region, one point is very interesting that in all the
districts under study there is increase in deposit amounts and also in
advance amount. Jharkhand Gramin bank is competing with the
performance of collective schedule commercial bank branches.

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 METHODOLOGY

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 MARWARI COLLEGE, RANCHI

Methodology:-
As an inclusive financial system should be judged from several
dimensions, we follow a multidimensional approach while constructing the
Index of Financial Inclusion (IFI). Our approach is similar to that used by
UNDP for computation of some well known development indexes such as
the HDI, the HPI, and the GDI and so on. As in the case of these indices,
our selected IFI is computed by first calculating a dimension index for each
chosen dimension of financial inclusion. The dimension index for the i-th
dimension, di, is computed by the following formula,
di = (Ai -mi) / (Mi -mi ) (1)

Where, Ai = Actual value of

dimension i mi = minimum value
of dimension i
Mi = maximum value of dimension i

Formula (1) ensures that 0 ≤ di ≤ 1. Higher the value of di, implies higher
district‟s achievementin dimension i. If n dimensions of financial
inclusion are considered, then, a district i will be represented by a point Di
= (d1, d2, d3, ….dn) on n-dimensional Cartesian space. In the n-
dimensional space, the point O = (0,0,0,…0) represents the point
indicating the worst situationwhile the point I = (1,1,1,…,1) represents the
highest achievement in all dimensions.

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 MARWARI COLLEGE, RANCHI

The Index of Financial Inclusion, IFIi for the ith district, then, is
measured by the normalized
inverse Euclidean distance of the point Di from the ideal
point I= (1,1,1,….1). The exact formula
is as below:

IFIi = 1- √ {(1-d1)2 + (1-d2)2 + ……+ (1-dn)2 }/ √n ------ (2)

------------------------

In formula (2), the numerator of the second component is the

Euclidean distance of Di from the ideal point I, normalizing it by
n and subtracting by 1 gives the inverse normalized distance. The
normalization is done in order to make the value lie between 0
and 1 and the inverse distance is considered so that higher value
of the IFI corresponds to higher financial inclusion.

The present index

In the Index of Financial Inclusion presented here, we have taken into

account three basic dimensions of an inclusive financial system:
Banking Penetration (BP), Availability of the banking Services (BS)
and Usage of the Banking System (BU). These dimensions are largely
motivated by two factors data availability for different districts of state
and recent developmentin the literature. Apart from these three
dimensions, one can think of many other dimensions of an inclusive
financial system. For example, “Affordability” and “Timeliness” can be
very important aspects of an inclusive financial system, as pointed out
by the Rangarajan Committee Report on Financial Inclusion in India

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FINDINGS AND SUGGESTIONS:-

Today would be a red letter day in the history of financial inclusion (FI)
because a mission is being launched to ensure that financial services from
formal sources are accessible to every household in India. The new
government needs to be congratulated for having taken up this important
task on assuming office and though the task is gigantic; roadmap set out
by the government undoubtedly inspires confidence. The nation is hopeful
that the mission will be successfully accomplished given the commitment
and zeal of the Prime Minister.

However, this is indeed going to be an onerous task given the historical

background that nearly half of India’s population remains unbanked even
after 67 years of independence. The Government of India and the Reserve
Bank of India (RBI) have been making concerted efforts for more than six
decades to increase banking penetration. A number of initiatives were
undertaken, like nationalization of State Bank of India in 1955, commercial
banks in 1969 and 1980; setting up of Regional Rural Banks; encouraging
urban and rural cooperative banks; and instituting priority sector lending
scheme. Since July 1982, National Bank for Agriculture and Rural
Development (NABARD) has also made significant efforts to increase FI.
The situation has marginally improved since 2008, with the introduction of
business correspondents (BCs), provision of no-frill accounts, and easing
of know-your-customer (KYC) norms, and support extended to self-help
groups (SHGs) and other microfinance institutions (MFIs).

The reasons identified for slow progress of FI are many and can be divided
into technological and others. The technological issues like frequent
machine breakdowns, frequent problems with connectivity, lack of uniform
application of technology across banks hampers the seamless experience
and impacts confidence of the customers in formal banking. Amongst non-
technological reasons, important ones are lack of confidence in salesman-
like BCs and their high attrition rate disrupting banking services; limits on
daily transaction deterring big ticket customers from using BCS, kiosks and
ultra-small branches imposing restrictions on earnings and commission;
and time taken, typically seven to10 days in rural areas, in administrative
formalities for account opening, credit appraisal, KYC, loan disbursal etc.

To achieve success in achieving financial inclusion, the government would

need to consider out-of-the box ideas to make a difference.

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 MARWARI COLLEGE, RANCHI

SUGESSTION :-

There are some suggestions which has to be taken by regional rural

Bank of Jharkhand for the expansion of the financial inclusion:-

Steps taken by RRBs to PROMOTE Financial Inclusion in Jharkhand -

1) Identify the financial needs of people especially in rural areas.

2) To enhance banking and financial facilities in backward and unbanked

areas.

3) To provide finance to the weaker section of society like small farmers,

rural artisans, small producers, rural laborers etc.

3) Enhance and improve banking facilities to semi-urban, rural and other

untapped market.

Need of RRBs to give Importance of Financial

Inclusion in Jharkhand

1) Financial Exclusion:
It has been found that financial services are used only by a section of the
population in Jharkhand. There is demand for these services, but it has not
been provided. The excluded regions are rural, poor regions and also those
living in harsh climatic condition where it is difficult to provide these financial
services. The excluded population then has to rely on informal sector
(money lenders) for availing finance that is usually at exorbitant rates.
These leads to vicious cycle. First, high cost of finance impels that first poor
person has to earn more than someone who has access to lower cost of
finance. Second, the major portion of the earning is paid to the moneylender
and the person can never come out of poverty.

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 MARWARI COLLEGE, RANCHI

2) High cost:
It has also been seen that poor living in rural and urban areas in Jharkhand
don‟t utilize the financial services as they find financial services costly and
thus unaffordable. Hence, even if financial services are available, the high
costs deter the poor from accessing them. For example, opening a saving
account in RRBs or any other nationalized bank with cheque facility require
a minimum balance of Rs 500 and with cheque facility it is Rs 1000.

3) Non price barriers:

Access to formal financial services also requires documents of proof
regarding persons, identity, income etc. The poor people do not have these
documents and thus are excluded from these services. They may also
subscribe to the services initially, but may not use them as actively as other
because of high distance between the RRBs branches and residence, poor
infrastructure etc.

4) 4) Behavioral aspects:
Research in behavioural economics has shown that many people in
Jharkhand are not comfortable using formal financial services. These
reasons are difficulty in understanding language, various documents and
conditions that comes with financial services etc. Further rural people in
Jharkhand are mostly illiterate and ignorant; hence it is essential for RRBs
to educate the rural people about benefits of being associated with banking
services

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 MARWARI COLLEGE, RANCHI

CONCLUSION & FUTURE SCOPE:-

Financial inclusion has become one amongst the vital aspects within the context of
inclusive growth and sustainable development. It helps to scale back the income
disparity and poverty alleviation. There are various factors which lead the
unbanked people from knocking the door steps of banks. In this regard government
of India is implementing various schemes with the intension of inclusion of
unbanked sector of society. Commercial banks play significant role by opening
new branches especially in rural areas, increasing the number of ATMs, FLCs,
ease of opening accounts, technology-based banking products etc. to attract more
people towards banking system. Just framing the policy will not give fruitful
results rather government has to supervise its effective implementation. To
increase the efficiency of banks in lending, take advantage of economies of scale
and cope up with the global competition Government of India announced big bank
merger which consolidates 10 public sector banks in to 4 bigger banks. Canara
Bank will absorb Syndicate Bank and Union Bank of India will amalgamate with
Andhra Bank and Corporation Bank. Let’s hope these merged banks evolve as
next generation banks which support the Indian economy to reach $5 trillion by
2024 and greater financial inclusion.

We know that financial inclusion contributes to country development and

sustainability. However, up to our best knowledge, there is no evidence in the
literature on linking financial inclusion with banks profitability, especially in
emerging economies. Financial inclusion is essential to improve the ways of
groups unable to reach financially and drive the sustainable economy. Here, there
must be joint strategies between financial and non-financial institutions from the
private and public sectors and the CBJ to develop criteria, foundations and
indicators for financial inclusion, while creating a supportive implementation
framework for this strategy with policies in place. And appropriate financial
regulations and infrastructure. Given the various efforts by the CBJ to adopt global
standard practices for financial inclusion, these will be successful only if supported
by reliable data, actual indicators, and a realistic strategy based on a review and
monitoring of progress achieved in achieving improvements in indicators of
inclusion and financial success. In addition, given the correlation between the
indicators of financial inclusion and the financial performance of banks, these
financial institutions must have major trends towards increasing innovative access
to financial services, and developing financial services infrastructure in order to
raise the level of digital financial services relatively low compared to middle-
income countries.

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 MARWARI COLLEGE, RANCHI

In the present investigation by using an alternative approach through

primary data we were able to empirically establish that financial inclusion
has a significant direct and indirect impact on disposable income. One of
the main contributions of our research is that we combine financial
inclusion with opportunity effect, growth effect, and distribution effect as
mediators through the lens of inclusive growth. However, the distribution
effect is proven to be a significant but negative mediator in the aforesaid
relation. Evidence confirms that financial inclusion with opportunity and
growth effects provides a better model for explaining the scope of financial
inclusion for low-income urban households from the perspective of
developing countries, focusing mainly on Pakistan. The study presents
sufficient evidence to conclude that the opportunity effect and the growth
effect increase the disposable income of low-income households. This
implies that through an inclusive financial system, the disposable income of
households tends to rise, especially in communities with strong
opportunity and growth effects.

Since we have applied a more robust technique to get results, therefore the
findings of this research are more compatible as compared to previous
contradictory findings. Also, in this study, financial inclusion is empirically
proven to be a significant contributor to enhancing disposable income.
Therefore, we were able to substantiate that government and the SBP are
on the right track to boost financial inclusion among the general
population to combat poverty.

The findings of this research can serve as a guiding principle for

policymakers and financial institutions. Moreover, the findings highlight
that the banking sector should take necessary efforts to improve the level
of financial inclusion and avoid if any constraints in the inclusion of low-
income households. This could tend to increase the disposable income of
low-income and underprivileged populations.

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 MARWARI COLLEGE, RANCHI

REFERENCES:-

DFS, Ministry of Finance. (2018, October 09). PMSBY. Retrieved

from Department of Financial Services, Ministry of Finance,
Government of India:

1. DFS, Ministry of Finance, GoI. (2014, August). Mission Document-

PMJDY. Retrieved from PMJDY

2. Giridhar, G., James, K., Kumar, S., Sivaraju, S., Alam, M., Gangadharan, K. ... Gupta, N.
(2017). Caring for Our Elders: India Ageing Report 2017. New Delhi, India:
UnitedNationsPopulation Fund. Retrieved October 09, 2018,

3. Home-Sustainable Development Goals. (2018, August 09). Retrieved from UNDP

4. RBI. (2015, December 28). Report of the Committee on Medium Term Path
on FinancialInclusion.

5. RBI. (2018, October 09). Chapter IV-Credit Delivery and Financial

Inclusion; AnnualReport of RBI 2017-18.

6. SIDBI. (2018, October 09). Certified Credit Counsellors. Retrieved from

SIDBI UdyamiMitra.

7. Social Protection Advisory Service, World Bank. (2018, October 09). world
BankPension

8. Alexius Meinong (1902). “On Assumption”. The School of Franz Brentano. pp.131-159

9. 2. Armstrong, B. P. (2005). “Phenomenology”. Retrieved from

https://liguide.press.jhu.edu

10. Bachas, P.,Gertler, P, Higgins, S., and Siera, E., (2017), “How Debit Cards enable the
poor to save more”. Working Paper 23252. National Bureau of Economic Research.

11. . Berger, A. N., Sadok, E., Omrune, G. and Raluca, A. R. (2015). “Internationalization
and Bank Risk”. SSRN Scholarly paper, ID 2249048. Rochester, NY.

12. . Danisman O. G. and Tarazi, A. (2020), “Financial Inclusion and Bank Stability:
Evidences from Europe”. Retrieved from https:
www.researchgate.net/publication/341626777

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 MARWARI COLLEGE, RANCHI

13.Srivastava P.K: Banking Theory and Practice, Himalaya Publising House,

2007, Mumbai.

14.State Levels Bankers Committee Report of different years.

15.State Focus Paper, Jharkhand 2010-11, NABARD.

16.Varshney P.N: Banking Law and Practice, Sultan Chand and Sons, 1999 New
Delhi

17.Yadav Beena: Swabhimaan, A Unique Financia

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 MARWARI COLLEGE, RANCHI

Websites :-
 www.rbi.org.in

 www.nabard.in

 http://vikaspedia.in/social-welfare/financial-inclusion/financial-inclusion-in-India

 https://www.researchgate.net/

BOOKS:-

 Financial inclusion &management – By Nishikant Jha

 Financial inclusion in India - By Dr SV Sindhe

 Financial inclusion and women empowerment- By Dr. Sujit

Ghosh

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