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National Strategy for Financial Inclusion

  • 11 Jan 2020
  • 3 min read

Why in News

The Reserve Bank of India (RBI) has planned the National Strategy for Financial Inclusion (NSFI) for the period 2019-2024.

  • It is an ambitious strategy which aims to strengthen the ecosystem for various modes of digital financial services in all Tier-II to Tier VI centres to create the necessary infrastructure to move towards a less-cash society by March 2022.
  • Financial inclusion is a key driver of economic growth and poverty alleviation in the whole world.

Classification of Centres (tier-wise) Population (as per 2011 Census)

  • Tier I - 1, 00,000 and above
  • Tier II - 50,000 to 99,999
  • Tier III - 20,000 to 49,999
  • Tier IV - 10,000 to 19,999
  • Tier V - 5,000 to 9,999
  • Tier VI - Less than 5000

Key Points

  • Vision: ‘A financially aware and empowered India’.
  • Objectives:
    • Create awareness and educate consumers on access to financial services, availability of various types of products and their features.
      • A target has been set that every willing and eligible adult, who has been enrolled under the Prime Minister Jan Dhan Yojana, will be enrolled under an insurance scheme and a pension scheme by March 2020.
    • Change attitudes to translate knowledge into behaviour.
    • Make consumers understand their rights and responsibilities as clients of financial services.
    • Increase outreach of banking outlets to provide banking access to every village within a 5-km radius or a hamlet of 500 households in hilly areas by March 2020.
    • Ensure that every adult had access to a financial service provider through a mobile device by March 2024.
  • Stakeholders: It recognises an indicative list of stakeholders-
    • Financial Consumers.
    • Financial Market players like banks, non-banking financial companies (NBFC) etc.
    • Educational Institutions.
    • Non Governmental Organizations (NGOs).
    • Financial Sector Regulators.
    • Both Central and State governments.
    • Multilateral international players like OECD, G-20, etc.
  • Significance:
    • Steps are needed to strengthen the digital financial services’ ecosystem including increased awareness on usage of digital modes of transactions, increased acceptance infrastructure and a safe environment incorporating the principles of consent and privacy.
    • There is a need to develop a sector-specific action plan to monitor targets and review the progress, along with a strong regulatory and legal framework aimed at protecting the interests of the customers, promoting fair practices and curbing market manipulations.
  • The strategy also envisions to make the Public Credit Registry (PCR) fully operational by March 2022 so that authorised financial entities could leverage it for assessing credit proposals from all citizens.

Source: TH

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