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Unit 2: Role of Banks in the Development of Economy

In many cases, institutions have successfully inducted experts on the Boards of assisted Notes
companies. As part of their project follow-up work and through their nominee directors,
institutions have also been able to bring about progressive adoption of modern
management techniques, such as corporate planning and performance budgeting in the
assisted units. The progressive professionalism of industrial management in India reflects
one of the major qualitative changes brought about by the institutions.

Task Search in your area and find out new entrepreneurs promoted by banks and write
an article on the services provided by banks to such entrepreneurs.

Self Assessment

Fill in the blanks:
5. Banks play a very useful and …………….. role in the economic life of every modern state.
6. Capital formation implies the diversion of the ……………………… capacity of the economy
to the making of capital goods which increases future productive capacity.
7. Bank credit enables entrepreneurs to ………………… and ………………….
8. ……………. capital and …………… capital schemes have been introduced to provide equity
type of assistance to new and technically skilled entrepreneurs who lack financial resources
of their own.
9. Promotional and development functions are as important to institutions as the ……………….
.

2.3 Financial Inclusion

Financial inclusion or inclusive financing is the delivery of financial services, at affordable
costs, to sections of disadvantaged and low income segments of society. Unrestrained access to
public goods and services is the sine qua non of an open and efficient society. It is argued that as
banking services are in the nature of public good; the availability of banking and payment
services to the entire population without discrimination is the prime objective of this public
policy. The term “financial inclusion” has gained importance since the early 2000s, and is a
result of findings about financial exclusion and its direct correlation to poverty.

2.3.1 Financial Inclusion in India

The Reserve Bank of India (RBI), which became an official member institution of the Alliance for
Financial Inclusion in 2012, set up the Khan Commission in 2004 to look into financial inclusion
and the recommendations of the commission were incorporated into the mid-term review of
the policy (2005–06). In the report RBI exhorted the banks with a view of achieving greater
financial inclusion to make available a basic “no-frills” banking account. In India, financial
inclusion first featured in 2005, when it was introduced by K C Chakraborthy, the chairman of
Indian Bank. Mangalam Village became the first village in India where all households were
provided banking facilities. Norms were relaxed for people intending to open accounts with
annual deposits of less than ` 50,000.

General Credit Cards (GCCs) were issued to the poor and the disadvantaged with a view to help
them access easy credit. In January 2006, the Reserve Bank permitted commercial banks to make
use of the services of Non-governmental Organizations (NGOs/SHGs), micro-finance institutions,

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