k c chakrabarty : financial inclusion in india – journey so far and way forward keynote address by dr k c chakrabarty, deputy governor of the reserve bank of india, at the finance inclusion conclave, organised by cnbc tv 18, new delhi, 6 september 2013. * * * assistance provided by ms. sushma vij and ms. mruga paranjape, is gratefully acknowledged. 1. mr. m narendra, chairman, indian overseas bank ; mr. y m deosthalee, cmd, l & t finance ; mr. arun tiwari, ed, allahabad bank, ms. shereen bhan, managing editor, cnbc - tv18, delegates to the conclave ; friends from the media fraternity ; ladies and gentlemen! it is a pleasure for me to be present here today at the conclave organized by cnbc tv 18 on the very topical subject of financial inclusion. i am particularly happy that a business news channel which has built up a credible reputation for its reportage and analysis of the financial markets is taking this initiative to lend its voice to the needs and expectations of the unbanked and excluded, yet silent mass of our population. considering the power of the media and its unique ability to influence public opinion and generate awareness, there is immense potential for initiatives such as this to galvanize financial inclusion efforts in india. i heartily congratulate cnbc tv 18 for this creditable endeavor and hope that this is the first in a series of many such initiatives in the days to come. introduction 2. poverty and exclusion continue to dominate socio - economic and political discourse in india as they have done over the last six decades in the post - independence period. poverty reduction has been an important goal of development policy since the inception of planning in india. various anti - poverty, employment generation and basic services programmes have been in operation for decades in india. the ongoing reforms attach great importance to removal of poverty and to addressing the wide variations across states and the rural - urban divide. though the indian economy recorded impressive growth rates until recently, its impact has sadly not fully percolated to the lowest deciles. despite being one of the ten fastest growing economies of the world, india is still home to one - third of the world ’ s poor. further analysis shows that poverty is getting concentrated continuously in the poorer states. 3. in developing economies like ours, the banks, as mobilisers of

meaningful financial inclusion. 9. let me now turn to how financial inclusion can help the society and the economy. financial inclusion has the ability to generate positive externalities : it leads to increase in savings, investment and thereby, spurs the processes of economic growth. it also provides a platform for inculcating the habit of saving money, especially amongst the lower income category that has been living under the constant shadow of financial duress, mainly because of absence of savings, which makes them a vulnerable lot. presence of banking services and products aims to provide a critical tool to inculcate the savings habit. it also creates avenues bis central bankers ’ speeches of formal credit to the unbanked population who are otherwise dependent on informal channels of credit like family, friends and moneylenders. availability of timely, adequate and transparent credit from formal banking channels will allow the entrepreneurial spirit of the masses to increase outputs and prosperity in the countryside. it will open the doors of formal remittance facilities to the low income and unbanked populace who, presently, are forced to use all kinds of informal and costly ways of sending money from one place to another. as we all know, financial inclusion has now been viewed as a remedy to plug gaps and leaks in distribution of government benefits and subsidies through direct benefit transfers to beneficiaries ’ bank accounts rather than through subsidizing products and making cash payments. thus, on the whole, financial inclusion has the potential to bring in the unbanked masses into the formal banking system, channelize their savings, stoke their entrepreneurial ambitions by making available credit and thus give a fillip to the economy. approach to financial inclusion 10. let me now turn to rbi ’ s approach towards financial inclusion. we have adopted a structured, planned and integrated approach towards fi by focusing on both the demand and supply side constraints. some of the defining features of our approach to fi are : we have adopted a bank - led model for fi, but have permitted non - bank entities to partner banks in their fi initiatives. as a philosophy, we have always encouraged banks to pursue fi as a commercial activity and to not view it as social service or charity. the self - sustainability and commercial viability of the fi initiatives are important if banks have to scale up their operations to cover more unbanked areas. we have encouraged banks to leverage technology to attain greater reach and penetration while keeping the cost of providing financial services to the minimum. while we remain technology neutral, we require banks