crore or 54. 46 per cent households were availing of banking services. but that is only one aspect of the financial exclusion story. the statistics on number of individuals or households that are credit - linked makes for an even more gloomy reading. the world bank findex survey ( 2012 ) points out that only about 35 % of indian adults had access to a formal bank account and a meager 8 % borrowed formally in the last 12 months. if we were to broaden the canvas and examine the exclusion in the other financial segments of insurance and securities market, the situation is far worse. initial efforts at financial inclusion 12. having recognised early the social and economic imperatives of broader financial inclusion, both government and the reserve bank have pursued this goal over the last several decades, but with limited success. starting with the nationalization of banks, priority sector lending requirements, launching of lead bank scheme, establishment of regional rural banks ( rrbs ), service area approach, self - help group - bank linkage programme - all these innovative programmes were launched with the aim of taking banking services to the masses. starting in 1990s, however, the focus shifted to strengthening financial institutions as part of financial sector reforms. despite all the above efforts, the extent of financial exclusion has remained staggering. bis central bankers ’ speeches why did these efforts fail? 13. the target driven approach to social banking could be counted as one of the main reasons for the failure of these efforts as these initiatives could never become part of the business strategies of banks. the banks were more interested in somehow trying to meet the lending targets, mostly at subsidized rates of interest, or with subsidy from the government under various government directed schemes. the banks never treated social banking as a viable and profitable business proposition. they always worked under the presumption that the poor can neither pay normal interest rates nor could they earn enough without subsidies ; while in reality the poor continued to pay exorbitant interest rates to informal sources of finance. for any activity to become sustainable and scalable it has to be viable. regrettably, there has never been a concerted effort on the part of the banking system to identify specific business opportunities within these groups and to develop viable business models to realize them. i would like to reiterate our firm belief that banking for poor is viable and scalable only on commercial lines, of course, without an exploitative intent. reform era setback 14. during the period starting mid 1980s and till about 2005

of banks in 1969 gave a boost to expansion of banks and banking in rural areas. the reserve bank hived off a part of its role in agricultural credit to a separate national level institution, viz, agriculture refinance and development corporation ( ardc ) in 1975. soon thereafter, a legislation was enacted to create regional rural banks, with participation from central and state governments and the nationalised banks, which have their network spread almost all over the country. subsequently, the ardc was converted into nabard, which continued to get the lines of credit from the world bank. the world bank ’ s lines of credit were, however, discontinued on the ground that functioning of co - operatives had been less than acceptable. simultaneously, the directed credit in the form of priority sector lending continued and the administered interest rate regime lasted. during the reform period, capital was infused into the rrbs and the nabard. while the priority sector lending continued, the administered interest rate regime was dismantled. to make up for the shortfall in the priority sector lending by the banks, the rural infrastructure development fund ( ridf ) was initiated to ensure the envisaged flow of bank resources to agriculture through the intermediation of the nabard and the state governments. a system of special agricultural credit plan was also introduced. innovations in the area of rural credit included kisan credit cards and encouraging bankshg linkages. it may also be of interest to note that many district and state co - operative banks are yet to meet the applicable minimum capital requirements. more recently, since 2004, vigorous efforts have been made to more than double the credit flow to agriculture. emphasis has been laid on sound credit culture, effective credit delivery and appropriate credit pricing. new instruments for financial inclusion such as general credit cards and no - frills accounts were initiated. micro finance programme was intensified and new guidelines for businessfacilitator model were issued. use of technology for rural banking is being encouraged. special area plans for banking in several states such as uttaranchal, north eastern states, chattisgarh, bihar and andaman - nicobar have been formulated to suit the local conditions. in terms of institutional development, consolidation of the rrbs, revamping of the urban co - operative banks as per the vision document, revival of rural co - operative credit structure as per the vaidyanathan committee recommendations, a plan for restructuring of long - term lending institutions for agriculture, and a revisit to the prescriptions relating to