Government Policy for Promoting Financial Inclusion in Banking Services
Introduction of Financial Inclusion
‘Financial Inclusion’ is delivery of banking
services at an affordable cost (‘no frills’ accounts), and free face-to-face
money advice to the vast sections of disadvantaged and low income group.
Unrestrained access to public goods and services is the sine-qua- non of an
open and efficient society. As banking services are in the nature of public
good, it is essential that availability of banking and payment services to the
entire population without discrimination is the prime objective of the public
policy. Liberalizing the financial sector may be a good way for developing
countries to stimulate greater dynamism, innovation and competitive pressure.
But by itself it is not enough to promote financial inclusion. Governments need
to create stronger incentives for banks to serve the lower income end of the
market.
The Financial Inclusion
Committee has defined Financial Inclusion as
“the process of ensuring access to financial services and timely and
adequate credit where needed by vulnerable groups such as weaker sections and
low income groups at an affordable cost.”
Financial inclusion
means that ideally, the government wants people to have their housing payments
paid into a bank account and to set up a standing order to pay the rent to
their landlord. This has the advantage of being a safe and secure method of
payment and provides certainly for landlords that rent will be paid. The term
‘Financial Inclusion’ is popular in Indian financial circles especially after
the RBI announced a series of measures in its credit policy for 2006-07 to
include many of the hitherto exclude groups in the banking net. The policy
advocated an active role for the convener banks of the state level bankers
committees (SLBCs) in all States, and these were given the responsibility of
reaching 100 percent financial inclusion in at least one district in their area
of operation.
Financial inclusion is a new term which is used
in our country from recent years. In a developing country like India, with
world second position in population, lack of education, poverty, make the RBI to take certain steps
to the Indian banking system keeping in view the globalize economy. More than
half of the people in our country still live their lives without the most basic
financial products. In this hi-tech development about the 10 percent of the
households don’t have any bank account and a minimum of 20 percent live without
the flexibility of the current account. This situation made RBI to bring
financial services revolution. In recent times the government has taken steps
to provide insurance services to those who are living below poverty line and
providing bank account in the name of old age pension scheme and senior
citizens. Financial inclusion is a key part of the government, social inclusion
policy and it has applied pressure on its departments to review reform and
regulate when and where necessary.
Objectives of Financial Inclusion
The objective
of financial inclusion is to see everyone have access to appropriate
financial products, and the confidence and capability to use them to make a
positive difference to their lives. Financial inclusion is a financial
comparison site for consumers to purchase financial services products such as
general insurance, credit cards, loans and savings accounts. Financial
inclusion has identified several financial organizations who offer competitive deals to the public. The main objectives of financial inclusion
are;
ð Focus on more than just price. Product
features and service measures should also be included.
ð Provide best buy tables that are truly
comprehensive
ð Give more advice to customers-making the
service open to more than just the financial aware.
ð Provide more education for the less
financially aware.
ð Warm customers about potential damage to
their credit ratings
ð Offer more than a “one size fits all”
approach so customers can pick according to need.
ð Provide specialist support for the less
well-off and those with poor credit records through leading advice agency.
Government Policies on Financial Inclusion
The government’s
key goals for financial inclusion are about ensuring that everyone has access
to appropriate financial services, enabling them to:
ð Manage
their money on a day-to-day basis, effectively, securely and confidently;
ð Plan
for the future and cope with financial pressure, by managing their finance to
protect against short-term variations in income and expenditure, and to take
advantage of longer-term opportunities; and
ð Deal
effectively with financial distress, should unexpected events lead to serious
financial difficulty.
The government’s
action plan financial inclusion, “financial inclusion an action plan for 2008-2011, sets out in detail how the
government will use the $ 130 million financial inclusion fund, announced in
the CSR, to achieve its financial inclusion objectives over the next three-year
spending period from April 2008 to March 2011. The action plan sets out a range
of measures –in three priority areas-access to banking, access to affordable
credit, and access to free face-to-face money advice.
Many people,
particularly those living on low incomes, cannot access mainstream financial
products such as bank accounts and low cost loans. This financial exclusion
imposes real costs on individuals and their families-often the most vulnerable
people in our society. It also has costs for the communities in which they
live. Households that operates solely on a cash budget are unable to make
savings via direct debits on utility bills, are more vulnerable to loss or
theft and they are far more likely to use the alternative credit market-and pay
interest many times that of a standard personal loan, often contributing to
spiraling debt. In addition, for those
who do get into debt or who struggle to make payments, the supply of free
face-to-face money advice falls for short of demand.
Extending the reach of
formal financial institutions among the poorest of the poor should mean taking
them out of the clutches of money lenders. The reforms in the financial sector anywhere are meant to
meet two major objectives – profitability of the financial institutions as
business entities; and serving the needs of the real economy – with due
consideration for the principles of equity. But there are obvious
contradictions.
In the race of
profitability, there is an obvious need to reduce operational costs. In the
process, there is a natural exclusion of several sections of the society from
the financial net. Reducing the adverse consequences of such exclusion, and
bringing the maximum number of people under the financial system is the key
concern of financial institutions
throughout the world.
Asset Build Serving Gateway
The anti-poverty lobby and living wage
campaign are well established. A very recent innovation is asset based welfare
policy. It is suggested that increasing an individuals or community’s asset
holding can increase social mobility and offered a positive route. Raising income
is part of the governments welfare positive and financial assets have a
complement role to play. Research shows that people in lower incomes are least
likely to save or hold assets. The saving gateway is one policy the government
is piloting to encourage low income households into savings.
The need of the hour is
to take an asset based welfare policy. The financial institutions must came
into use by each and every individual of our country. Hence, the financial
institutions play a key role in bringing awareness to the rural people
regarding financial inclusion. In our country postal department is also
operating a vital role in the financial inclusion. But there are some
restrictions for operating in certain schemes in post-offices. Voluntary sector
has a key role in promoting initiatives like saving gateway and other community
banking programmes. Similarly some parts of financial sector need to open their
doors more widely become aware of the changing economic trends of the world in
which they work in promote a more out world looking customer centric model to
work alongside their target based profit driven model.
Financial inclusion affords
includes several benefits to the consumer regulates and the economy. Establish
of an account relationship can pave the way for the customer to avail the
benefits of a verity of financial products. Which are not only standardized,
but also provided by institutions that are regulated and supervised by credible regulations, and are hence safer.
The bank accounts can also be used for
multi-purpose activities. The economy benefits as greater financial resources
become transparently available for efficient intermediation and allocation that
have the highest returns. The single gateway of banking accounts can be used
for several purposes and represents a beneficial situation for all the economic
units in the country, improvement in rural infrastructure. We will a lead to
better over all supply chain management, enhance productivity of physical
resources in the rural areas and greater addition in agriculture. These developments would lead to much greater
demand for banking activity in rural areas. Hence the economy begins to grow
rapidly and the banking system will be expected to increasingly provide larger
quantum of funds to existing and emerging enterprises.
Our country has to adopt
international experience for example banks can’t refuse to open a saving or
deposit account under Section 2 of the
Banking Business Act, 1987. In France Section 58 of the Banking Act, 1984
recognized the principles of the
right to a bank account. In USA
federal government introduced the Community Reinvestment Act, 1997. Under this legislation federal bank
regulatory agencies rate banks on their efforts to serve low income
communities. But this did not show any
improvement refinements in this area have actually taking place in the later
half of 1990s. Hence financial inclusion is a concerned even in developed
countries and the legislative measures to achieve it are a common feature.
Financial inclusion is
not an end in itself. Having a bank account, or an insurance coverage, ipso
facto, does not mean an enhancement in the economic position or well being of a
person. But it acts as a facilitator. Poverty is a well-known problem in most
developing countries. But what is needed is to develop mechanisms that ensure
that poverty is not exacerbated by lack of access to financial services. People
need information and advice when they get into debt. Such information and
guidance can best be delivered by appropriate mechanisms. If such effective
mechanisms are put in place, they in turn reinforce the demand for credit.
While attempting to
reach the hitherto excluded sections through a campaign mode is a laudable
initiative, the reality of Indian banking still remains. On one hand, there is
a high skewness in financial assets in favour of urban households. The latest
RBI figures also indicate that the 85 commercial banks, concentrated in urban
centres, account for 78 percent of India’s financial assets while cooperative
banks and regional rural banks account for only nine percent and three percent,
respectively.
Large institutional
intervention, such as in the form of micro finance, has had more of a bandwagon
effect than contributing to the dynamics of the economy. Large employment
oriented rural programmes still suffer largely from inadequacy of backward and
forward linkages. The conventional “credit-technology-market” approach should
undergo a major change in favour of innovative organizational initiatives. It
is in this context that the relevance of meaningful business development
services arises.
The RBI’s initiatives
also are likely to yield much less of their expected benefits unless the programme is properly
restructured to make ripples in the micro-manslayers of the productive
system. On the campaign mode, public sector banks are competing with
each other to achieve high targets. In the process, even the bare minimum that
is available with the poorer sections of the society will be siphoned off as
savings. Some of the banks have come forward with general purpose credit cards
and artisan credit cards which offer collateral free small loans. But does it
actually help the interests of the poor people, especially when globalization
tends to exclude local economics.
For the poor man,
finance is everything as it saves him from day-to-day hardships. But for the
planner, providing enough finance does not always mean good economics. Good
economics demands that he becomes capable of articulating his financial needs.
Financial needs arise out of economic activities that are sustainable. For
this, the poor need not only capital but also real services. It is this logic
that underlies the setting up of the financial inclusion fund, as also linking
up such a fund with initiatives for local economic development.
Public sector banks
would rather think on these lines and support professional institutions and
organizations that can deliver real services as also conceive and implement
capacity building initiatives. Financial inclusion centres may be set up in
such professional institutions. The objectives of financial inclusion can
better be achieved through such
initiatives.
Banks will be encouraged to embrace the concept of total financial inclusion.
Government will request all scheduled commercial banks to follow the example
set by some public sector banks and meet the entire credit requirements of self
help group members, namely,
i). Income generation activities,
ii). Social needs housing education,
marriage etc and
iii). Debt swapping.
First of all, we
will discuss financial inclusion, let us have a understood at the implications
of the financial exclusion.
Significance of Financial Exclusion in India
Financial
Exclusion means bank users and those people who
doesn’t have access to basic financial services like bank current
account, saving account, credit card account, utilization of automatic teller
machines(ATM), and insurance accounts, vehicle loan transactions, and
agriculture loans, professional courses and educational loans, investment
banking, asset management and housing finance, retail banking, electronic bank
facilities etc. Financial exclusion
signifies the lack of access by certain segments of the society to appropriate,
low-cost, fair and safe financial products and services from mainstream
provides. Two major kinds of policy responses have been implemented by
commercial banks in response to
financial exclusion: code of practice and specific legislation. Financial
exclusion is thus a key policy concern, because the options for operating a
household budget, or a micro/ small enterprise, without mainstream financial
services can often be expensive. This process becomes self-reinforcing and can
often be an important factor in social exclusion, especially for communities
with limited access to financial products, particularly in rural areas.
Two
major factors have often been cited as the consequences of financial exclusion.
a)
It complicates day-to-day cash flow management-being
financially excluded means households, and micro and small enterprises deal
entirely in cash and are susceptible to irregular cash flows.
b)
Lack of financial planning and security in the absence
of access to bank accounts and other saving opportunities for people in the
unorganized sector limit their options for providing for themselves for their
old age.
Underpinning financial
exclusion are problems of poverty, ignorance and environment. The problems
underpinning financial exclusion are interlinked and need to be addressed
jointly as well as individually. Financial inclusion is a key part of the
government’s social inclusion policy and it has applied pressure on its
departments to review, reform and regulate where necessary.
The implications
of being financially excluded. Living without financial products is a
significant disadvantage in an age where cash is slowly being replaced by debit
cards and automated transactions, and living on credit is the norm. Having no
insurance exacerbates the effects of theft. Outside of mainstream financial
products, saving options are informal and unreliable. Discounts on utility bills for paying by direct debit
are inaccessible.
Asset-building
and the saving gateway. The anti-poverty lobby and living wage campaign are
well established. A more recent innovation is asset-based welfare policy. It is
suggested that increasing an individual’s asset holding can increase social
mobility and offer a positive route out of financial exclusion and poverty. This financial exclusion has a devastating
cost on individuals, families, entire communities. Financial exclusion lays-down at the core of a framework in which huge
rural areas of the people continue in
poverty with no hope of improving a lot.
Some of the Ingredients in Financial Inclusion
Financial inclusion is about ensuring that everyone has access to
appropriate financial services, enabling them to:
ð Manage their money on a day-to-day basis,
effectively, securely and confidently
ð Plan for the future and cope with financial
pressure, by managing their finances to protect against short-term variations
in income and expenditure and to take advantage of longer-term opportunities;
and
ð Deal effectively with financial distress,
should unexpected events lead to serious financial difficulty. People who
achieve these goals will enjoy significantly improved life outcomes.
ð A small but significant minority of people
are unable to access even the most basic financial services and instead find
themselves trapped outside the financial mainstream.
ð Basic bank accounts can also be used at Post
Offices where cash can be withdrawn at no cost. Basic bank account holders have
full access to branch and counter services and the ATM network.
ð Allowing direct debits as a method of paying
the rent to assist tenants to manage their financial affairs.
Financial Inclusion: Micro-Finance Uplifting Rural Economy
Financial
inclusion is a new buzzword in banking circles. Taking services to the hitherto
unbanked categories in the rural and semi urban areas through various
methodologies such as banking correspondents, banking facilitators, financial
intermediaries, MFIs etc. is an important agenda for national bank for
agricultural and rural development (NABARD). Government of India have already appointed a
committee under the Chairmanship of Dr. C. Rangarajan, Chief Economic Advisor
to the Prime Minister to look into the various aspects of financial inclusion.
In Andhra Pradesh phenomenal success, has already been achieved in the sphere
of financial inclusion for micro credit to rural poor through the SHG Bank
linkage programme. As on 31st March, 2006 there were 5.87 lakh
SHGs in the State out of which 2.24 lakh have been credit linked to banks. This
formed 26 percent of the total SHG bank credit linkage achieved in the country.
The average per group finance stood at Rs. 74,000. NABARD has been closely
involved in entire programme by way of organizing training programmes for SHGs,
banks, conduct of orientation meets, studies, devising accounting systems,
training in book keeping etc. Financial inclusion is also aimed to be achieved
through the formation and financing of Rythu Mitra Groups(RMGs) in the State.
RMGs are groups of small and marginal farmers, tenant farmers, share croppers,
oral lessees etc., who will be benefited with bank credit. Besides, as on the
lines of SHGs, RMGs will also be empowered with transfer of technology, access
to market information, training etc.
While
the banking system in the country has done a phenomenal job in extending credit
to hitherto unbanked areas, they do suffer from some structural problems. There
is a school of thought that although the interest rates from the banking system
are regulated, the actual cost of credit for the farmers is much higher due to
higher transaction costs such as repeated visits to the branches from distant
places. This was one of the reasons why MFIs in the State became very popular
as they could address some of the issues such as delivery of bank credit at the
doorstep of the farmers. It may be a good idea for the banks to borrow some of
the practices followed by MFIs. The time seems to have come when experiments
such as “barefoot banking” may have to be started. All these issues are likely
to be examined by the Rangarajan Committee. RBI has also formed another
committee to examine the feasibility of bringing moneylenders into the ambit of
banking would have been unthinking sometime back. Government of India
is also contemplating to make NABARD as the regulatory authority for the MFIs in
the country.
Changing Trends in the Banking Services
Indian economy
in general and banking services in particular have made rapid strides in the
recent years. However, a sizable section of the population, particularly the
vulnerable groups, such as weaker sections and low income groups, continue to
remain excluded from even the most basic opportunities and services provided by
the financial sector. These services are:
ð
A savings product suited to the pattern of cash
flows of a poor household.
ð
Money transfer facilities.
ð
A non- frills banking account for making and
receiving payments.
ð
Small loans and overdrafts for productive,
personal and other purposes, and
ð
Micro-insurance.
Promoting
financial inclusion- access to banking services affordable credit and free
face-to-face money advice to disadvantage and low income group. Areas of
concern by banks:
ð
The banking industry has shown tremendous growth
in volume and complexity during the last few decades.
ð
Despite making significant improvements in all
the areas relating to financial viability, profitability and competitiveness,
there are concerns that banks have not been able to reach and bring vast
segment of the population, especially the underprivileged sections of the
society, into the fold of basic banking services.
ð
Internationally also efforts are being made to
study the causes of financial exclusion and design strategies to ensure
financial inclusion of the poor and disadvantages.
ð
The reasons may vary from country to country and
so also the strategy but all efforts are needed as financial inclusion can
truly lift the standard of life of the poor and the disadvantaged.
RBI policy
on Financial Inclusion:
ð
When bankers do not give the desired attention
to certain areas, the regulators have to step in to remedy the situation. This
is the reason why the RBI places a lot of emphasis on financial inclusion.
ð
With a view to enhancing the financial
inclusion, as a proactive measure, the RBI in its Annual Policy Statement of
the year 2005-06, while recognizing the concerns in regard to the banking practices that tend
to exclude rather than attract vast sections of population, urged banks to
review their existing practices to align them with the objectives of financial
inclusion.
ð
RBI exhorted the banks, with a view to achieving
greater financial inclusion, to make available a basic banking ‘no frills’
account either with ‘nil’ or very minimum balances as well as charges that
would make such accounts accessible to vast sections of the population.
ð
Banks can take introduction from an account
holder on whom full know your customer (KYC) procedure has been completed and
has had satisfactory transactions with the bank for at least six months.
Photograph of the customer who proposes to open the account and his address
need to be certified by the introducer.
ð
The RBI
has also decided to place details relating to service charges of individual
banks for the most common services in its website.
Committee on Financial Inclusion
The
Government of India constituted a ‘Committee on Financial Inclusion’ under the
Chairmanship of Dr. C. Rangarajan. The committee submitted its report to Union
Finance Minister on 4th January 2008. And he is also Chairman of the Economic
Advisory Council to the Prime Minister. He said that banks must take the
initiative to remove the obstacles that
come in the way of an extended use of facilitators and correspondents. The
major recommendations of the committee include:
ð
To make the banking services available to everyone,
technology has to be leveraged to create channels beyond branch network to
reach the un-banked al over the country.
ð
Technology has to enable the branch to go to the
customer instead of the other way round.
ð
On making rural branches more effective in credit
delivery system, he said rural lending requires a specific type of
organizational ethos, culture and attitude. Rural branches of banks have to be
farmer-friendly.
ð
He suggested that at least one branch of the
lead bank at the block or taluk level can be designated as a nodal branch to
address the issue of exclusion.
ð
Stressing the need for the simplification of the
procedures in relation to granting of loans to small borrowers, he said
‘Saral-type’ of document for the grant of small
loans must be evolved.
ð
Strengthening of the regional rural banks (RRBs)
could be one major policy intervention for promoting greater financial
inclusion. The operations of RRBs could be expanded to 80 hitherto uncovered
districts.
ð
There is need for an attitudinal change, there
is need for a change in organizational structure and there is need for
innovative models of delivery at the doorstep. Financial inclusion is no longer
an option, it is a compulsion. Dr.Rangarajan added.
ð
The financial inclusion committee specifies that
at least 80 percent of the assets of MF NBFCs should be in the form of
micro-credit.
ð
The committee has recommended the formation of a
National Mission on Financial Inclusion comprising representatives from all
stakeholders (the RBI, Central and State Governments), which will aim at
achieving financial inclusion within a specific time frame.
ð
The committee suggested that commercial and
regional rural banks should set themselves a minimum target of covering 250 new
cultivator and non-cultivator households per branch per annum “In five years,
and hope to cover around 50 percent of financially exluded households, say
55.77 million households. The balance can be covered by 2015,” The committed advise commercial banks,
including RRBs, to add at least 250 rural household accounts every year at each
of their rural and semi-urban branches.
ð
To allow individuals such as retired bank
officers, ex-servicemen etc to be appointed as business facilitator or business
correspondent or credit counselor.
ð
The committee endorsed the constitution of two
funds NABARD-the financial inclusion promotion and development funds and the
financial inclusion technology fund each with a corpus of Rs. 500 crores. this
will be contributed by the government, the RBI and BABARD.
ð
The committee recommended an amendment to the
NABARD Act to enable it to provide micro-finance services to the urban poor.
ð
The committee to prepare a strategy for expanding financial services to
vulnerable groups, including marginal farmers.
ð
The success of self help groups has promoted the
committee also to recommend the formation of “Joint Liability Groups” which
would cater to share croppers, oral lessees and tenant farmers whose loan
requirements are much larger but who have no collaterals to offer. “Compared to
an SHG which has 12-15 members, these groups will have fewer members. Small
farmers can pool their holdings and make purchases like fertilizers on common
basis”, Dr. Rangarajan said.
ð
Rangarajan said that he is not in favour of
using money lenders as business correspondents. Ultimately, banks should
endeavour to have a business correspondent touch point in each of the 600,000
villages in the country. Banks should also look at expanding branch network in
under-banked areas, Dr. Rangarajan said.
ð
He said that the move will help access to
financial services to at least 50 percent of the financially-excluded
households by 2012. The remaining households will have to be covered by 2015.
Rangarajan said that a slew of recommendations are expected to be implemented
soon.
ð
In order to provide initial funding support to
give a push to financial inclusion, the committee has proposed setting up two
funds. The financial inclusion promotion and development fund and the financial
inclusion technology fund with an initial corpus of Rs. 5bn each. The
government and the RBI would be contributing 40 percent each of the corpus.
While NABARD would contribute towards the balance 20 percent.
ð
Rangarajan suggested that a portion of the
funds’ money can be used to strengthen the self-help group bank linkage. The
objective of financial inclusion is to
extend the scope of activities of the
organized financial system to include within its ambit people with low incomes,
he said. Through graduated credit, the attempt must be to lift the poor from
one level to another so that they come out of poverty, the former RBI chief
said.
Government Policy Context
The government announced the
establishment of a ‘Financial Inclusion Fund’ to support initiatives to tackle
financial exclusion and the creation of a financial inclusion taskforce to
monitor progress. In January 2007 the Government launched its ‘Now let’s money’
campaign to help people living on low incomes find out about how they can get
bank accounts and low cost loans, and advice on how to manage their money
better.
Give financial
and development support to credit unions and community development financial
initiatives (CDFIs) to enable them to develop affordable loans, savings
services and banking services for residents on low and modest incomes. Support
the work of CDFIs and other agencies that make micro-enterprise advice and
loans available to new and expanding small businesses, thus creating and
protecting local jobs and helping to create sustainable communities.
This
action plan builds on financial inclusion-the way forward, which sets out the
policy framework for financial inclusion in 2008-11, including:
ð
A new financial inclusion fund for 2008-11
ð
An extension to the ‘Financial Inclusion Taskforce’
until March 2011, so that it can continue to monitor and evaluate progress and
advise the Government on financial
inclusion developments, and
ð
A ministerial working group chaired by the
Economic Secretary to the Treasury, with members from the department for work and
pensions, the department for business, enterprise and regulatory reform, the
department for communities and local government, the cabinet office and the
Ministry of Justice to develop an action plan for financial inclusion in
2008-11.
Conclusion
Financial
inclusion in the country like ours which is second biggest in the world
population and like of literacy on par with population growth. Financial
inclusion becomes a far cry. The banking system must also to take it a
challenge and maximum branches must be opened in rural areas. The government
policy on self help groups only helps 2 percent of the population and local
education institution must bring awareness among the rural masses and urban
unemployed youth to utilize the banking services to the maximum for earning the
daily bread and butter. Financial inclusion imparts formal identity and
provides access to the payment system. Therefore, financial inclusion is considered to be critical for achieving
inclusion growth which itself is required for ensuring overall sustainable
growth in the country. Dr.Rangarajan committee brings the vast dramatically change in the Indian banking
services and financial inclusion.
In this
liberalized economy rich become very rich and poor become very poor leading to
inequalities. There are many issues which need to be taken into account when
considering the best course towards financial inclusion. A recent report on
poverty suggests that there has been little change over the last six years in
the number of financially excluded people. There is still a long way to go, but
the need for change becomes ever more acute. One of the main characteristics of
the work should be that it is collaborative and ‘joined-up’, harnessing the
strengths and expertise of all those involved, whether in policy, government,
regulation, education, industry or the voluntary sector.
The health of an
economy depends pretty much on the kind of banking services. Without an
efficient banking services both the
borrowers and saver lose. After a decade of reforms, the banking services are
slowly emerging stronger. Regulations are forcing the banks to adopt better
operational strategies and upgrade their skills. They will also have to enact
new laws and regulations relevant to the new developments. Existing
institutions will have to be geared up to withstand new challenges of future
and new arrangements at the national level. Product innovations, better
information technology and operating mechanisms can enhance the income and
reduce the expenses. With the continued integrating of the Indian markets with
the global markets, the volatility is
rising. To survive this dynamics and the risks arising from the same, banks need to have good models in place to
understand and manage them on a regular basis. Therefore, in the Indian economy
the banking services has been shaped as an instrument of economic development.
It
is high time that banking sector
executives alongwith government officers and voluntary agencies must come
forward in making the people to know about the worthfullness of
banks and their services. Today majority of government job holders,
private sector job holders are financial excluded because they don’t know how
to utilize the finances in a proper
economic way. Financial institutions are not meant for simply crediting
the money and withdrawing the money and
salaries. Financial institutions
are meant for serving the people and growth of the nation. People have
the notion that financial institutions are meant for traders, business persons
and getting more profits. That notion must be change from the minds of the
people and financial institutions must try
the best to utilize their services by the each and every individual.
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