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Unit 2: Role of Banks in the Development of Economy

Notes
mobile phones, access to a mobile money agent, and a sensitization campaign on mobile
money. As a result of these simple interventions, the research found that rural populations’
interest in adopting mobile money was extremely high.
Jenny Aker, Assistant Professor of Economics, the Fletcher School, Tufts University, said:
“Whilst these early findings are limited, the research suggests that simple interventions to alleviate
the barriers to mobile money adoption can help to encourage its use for receiving remittances and as
a saving mechanism. If further research supports these conclusions, mobile money could be an
important mechanism for promoting financial inclusion.”
Peter Ware, Head of the SWIFT Institute, said:
“This first working paper from the SWIFT Institute is a perfect example of what the Institute was set
up to achieve. It demonstrates that we can be the catalyst to bring the SWIFT community and
academics together to explore ideas and extend understanding. Research results could have positive
ramifications for the financial industry and policy makers.”
The SWIFT Institute was founded in April 2012, with the core objectives of extending
understanding of the current practice and future needs in global financial services, fostering
independent research by giving grants and access to research data.

Source: http://www.citifmonline.com/index.php?id=1.1285440
2.3.2 Economic Growth – Role of Financial Inclusion

While over the years, reform process has widely transformed the economic landscape of India.
The benefits of economic growth have not equitably reached different parts of our society. The
rural and agricultural sector, in particular, has not gained the desired momentum of growth and
development. Further, within cities, the inequality is on the rise and demographic pressure is
leading to growth of slums. Economic growth in India has to be inclusive in order to make it
sustainable. Inclusiveness is an essential element in a democracy. If policies that bring about
economic growth do not benefit the people in a wide and inclusive manner, they will not be
sustainable. Equally, inclusive growth is essential to grow the market size, which alone will
sustain growth momentum. Above all, inclusive growth is the only just and equitable way that
any society can grow.

The Indian Scenario

In India, the Government and the RBI have been promoting the necessity of inclusive banking,
and the banking sector, as a collective body, has been taking several initiatives in this regard. In
regard to rural sector the available data depicts the exclusion obtaining in this sector. The
Situation Assessment Survey of Farmers was conducted in the year 2003 which indicated that the
rural households were at 147.90 million and out of it 89.35 million were farmer households.
Data indicated that 51.4% of the farmer households were financially excluded.
Though banks have made significant strides in all areas of their performance, vast segments of
population, particularly the underprivileged, are yet to be brought on to the canvas of banking
services. It is in this context that all efforts are required to bring about financial inclusion and
bring those segments of population into the mainstream of life. This would not only enable the
banks to expand their market share but expand the overall market, in the process of tapping the
Bottom of Pyramid (BoP) i.e. the customers from the lower income segments.

In the Draft Approach Paper to the Eleventh Five Year Plan, the Planning Commission has
emphasized the need for faster and greater inclusive growth during the Eleventh Five Year Plan
period. The Draft Approach paper has correctly identified that to achieve a higher, sustainable
and equitable growth for the country, it would be imperative that domestic savings, particularly

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