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How do financial institutions improve financial inclusion?

What is financial inclusion?

Financial inclusion refers to the efforts made by governments and societies to ensure that basic financial products, such as a bank account, are accessible to all individuals of a country, irrespective of their net worth.

Financial inclusion initiatives not only make financial products accessible, but they also ensure that there are enough literacy programs so every individual knows how to leverage the financial products they have access to.

We will discuss the case of India with some numbers in the below article.

Why do we need financial inclusion?

Financial inclusion ensures that as a country grows bigger, economically backward people, do not get left behind. India grew from being a $300 billion economy in 1990 to a $3 trillion economy in 2021.

This ensured that the set of people who were doing well, middle class and above, went through a period of accelerated upward mobility.

In parallel, our government and RBI, along with the private sector, had to ensure we were doing enough for the lower middle class and below, so they don’t get left behind.

From the liberalisation policies brought about in the early 90s, to financial programs like MNREGA and Jan-Dhan Yojana, to the digitisation of financial programs through AADHAR - our government bodies have consistently rolled out programs which grew our GDP per capita from $368 in 1990 to $2,277 in 2021.

For the source of the above data, click here

Financial inclusion programs in India

Some of the popular financial inclusion initiatives launched by our government over the past few years are:

A. PM Jan-Dhan Yojana account (PMJDY):

All private and public banks are participating/working on participating in this initiative by the Government of India. Under this scheme, any Indian citizen who is at least 10 years old and has never had a bank account, can open an account with leading banks of India with just their Aadhar and voter ID cards.

The bank accounts under PMJDY are: - zero balance - offer a free RuPay debit card - about INR 1 lakh in accidental insurance

As of August 2022:

  • 46.3 crore individuals have opened a bank account for the first time under the PMJDY scheme

  • 56% of these accounts were opened by women (25.7 crores)

  • 67% of these accounts (30.89 crores) are in rural/semi-urban areas where bigger banks typically are not able to reach

  • INR 1,73,954 crore worth of deposits have come into the banking sector for the first time from all Jan-Dhan accounts

For the source of the above data, click here

B. Sukanya Samridhi Yojana (SSY):

Another initiative launched by the government focused on the girl child of every household in India.

Under this scheme, families with a girl child below 10 years can open an account to save money for her. In return, the families get:

  • up to 1.5 lakhs of tax exemption every year under section 80C

  • high-interest rates on their savings, compounding annually (currently 7.6%, was above 8% until recently)

  • Even the interest amount generated from SSY deposits are tax exempted

As of November 2021:

  • 2.7 crore accounts have been opened under Sukanya Samridhi Yojana (SSY)

  • INR 1,19,989 crores have been saved up already for the future of so many girls (approx. INR 44,440 per account)

For the source of the above data, click here

C. Jan-Suraksha schemes: India’s insurance penetration is about 3.2%. One of the lowest in the world. Under the Jan-Suraksha Scheme, the Government of India has launched 3 plans that strive to increase insurance coverage across India.

Increasing access to insurance has a direct impact on the financial stability of households. While the emotional pain of an unfortunate incident can never be compensated for, these schemes help cover the financial damage from a sudden health expense or the demise of an earning member of the family.

The 3 schemes are:

1. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) - Under this scheme, any Indian citizen with a savings account and a valid Aadhar can enrol for life insurance of INR 2 lakhs, by paying a small annual premium of Rs 436.

While the government is extending this through LIC, private banks can also tie up with the government for distribution.

As of April 2022: - 12.76 crore people have enrolled on this scheme - INR 11,522 crore has been paid against 5,76,121 claims

For the source of the above data, click here

2. Pradhan Mantri Suraksha Bima Yojana (PMSBY) - Under this scheme, any Indian citizen with a savings account and a valid Aadhar can enrol for accidental death/full disability insurance of INR 2 lakhs, and partial disability insurance of INR 1 lakh, at just INR 20 per annum!

A tiny sum of INR 20 can save a lot of Indian households from complete financial ruin!

As of April 2022: - 28.37 crore people have enrolled for this scheme - INR 1,930 crore has been paid for 97,227 claims

For the source of the above data, click here

3. Atal Pension Yojana (APY) - Atal Pension Yojana is an attempt by the Indian government to set up a social security infrastructure, where, Indian citizens attaining the age of 60 can receive a monthly pension to manage their expenses, without needing to work after retirement.

An 18-year-old enrolling in the APY scheme will pay INR 210 every month, for a monthly pension of INR 5,000 every month after 60.

If that is not affordable, people enrolling can choose to pay as low as INR 42 per month, for a monthly pension of INR 1,000.

As of April 2022, 4 crore individuals have subscribed to the scheme.

For the source of the above data, click here

D. Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana(AB-PMJAY):

This is a health insurance scheme launched by the Government of India, aimed at providing a health cover of INR 5 lakhs per family per year, for poor and vulnerable families.

This is a completely cashless and paperless scheme, which means, any individual irrespective of educational qualification can access this health cover without any help.

This scheme covers all professionals working as drivers, rag pickers, hawkers, street vendors, beggars and more. Homeless individuals/destitute, and scavenger families are automatically covered.

Under the AB-PMJAY scheme: - 13.44 crore families, or 65 crore people have health insurance cover - 23,000 healthcare providers have been empanelled to ensure easy access - 1.96 crore hospital admissions, worth INR 24,315 crores have already been funded by this scheme

For the source of the above data, click here

E. Pradhan Mantri Mudra Yojana(PMMY):

With a young population like ours, 65% of Indians under the age of 35, India needs jobs to thrive. To create jobs, India needs more entrepreneurs. The PMMY scheme was launched to provide loans of up to INR 10 lakhs, to non-corporate, non-farm, small/micro enterprises.

This scheme targeted 58 crore small businesses, which account for just 4% of institutional funding, supporting 12 crore people. Ensuring they keep creating more jobs in sectors that are vital to our economy, Mudra loans are provided to the Trading, Manufacturing and Service sectors.

PM-Mudra Yojana is classified into 3 categories:

Shishu Yojana - for early-stage businesses with credit line requirements up to INR 50,000. Kishor Yojana - for slightly matured businesses with credit line requirements of between INR 50,000 and INR 5 lakh. Tarun Yojana - for mature businesses with credit line requirements between INR 5 lakh and INR 10 lakh, 10 lakh being the maximum loan one can get through PMMY.

In FY 22-23 alone (basis provisional data), total loans sanctioned via PMMY were about INR 1.80 lakh crores to 2.47 crore beneficiaries.

Between 2015 and 2021, through PMMY, 19.04 crore loan accounts have been sanctioned for women entrepreneurs, disbursing a total of INR 6.36 lakh crore.

For the source of the above and more data, click here

With a significant majority of India still trying to achieve basic financial freedom, banks and financial institutions can take advantage of the above schemes, and create meaningful product propositions. A win-win situation for the private sector, the government and Indian citizens.

If you are exploring the above, or wish to explore financial inclusion as part of your business initiatives, and need support with strategy or execution - reach out to us today at


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