Inaugural address by Shri Shaktikanta Das, Governor, Reserve Bank of India delivered at the Economic Times Financial Inclusion Summit on Thursday, July 15, 2021 on the topic” Financial inclusion – past, present and future” is being analyzed in this article. Well positioned as one of the finest monetary theory practitioners and former bureaucrat, Shri Shaktikanta Das needs no introduction. I am proud to produce below his speech for reference.
Before we analyze the speech, let me know what is the meaning of financial inclusion, the most widely used economic word in parlance today.
World bank website explains it as under:
“Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.”
Now time to embrace his speech. (The article extensively covers his august speech and will quote wherever required from there, proudly)
Starting his quote from Gandhian philosophy of “: “Sarvodaya through Antyodaya – Welfare of all through the upliftment of the weakest”, he defined the focus as one based on inclusiveness and equity which transcend poverty alleviation. Naturally, it is a potent weapon to offer the equality of opportunity for all sections of society including the poor, women, farmers, small enterprises, and others. Not a dole or disbursal of benefits which temporarily removes the symptom but to ensure that the benefits of economic growth percolate down to the poor and excluded sections of the society.
To assess the progress made across the dimensions of Access, Usage and Quality, he observed that India has come a long way in facilitating access to banking services to the last mile and in increasing the usage of financial products. To take forward his argument, he mentioned the National Strategy for Financial Inclusion 2019-2024 (NSFI)1 and National Strategy for Financial Education 2020-20252 (NSFE) which provide a road map for a coordinated approach towards financial inclusion, financial literacy and consumer protection.
We are aware that the National Strategy for Financial Inclusion document lays down several milestones and action plans to be implemented in order to make financial services available, accessible, and affordable to all citizens in a safe and transparent manner to support inclusive growth through a multistakeholder approach.
Directly the speech drags one to the honorable past full of achievements.
Developments so far
The governor drew the attention of the listeners how did we meet the pandemic running wreck with India and the world?
Response to the Pandemic
In India, the second wave of the pandemic has taken a grievous toll both in terms of lives and livelihood. Many of us including the undersigned faced the unknown with trepidation and fear for death which was common among many of my decade’s old friends. Sad but true.
But timely financial support to vulnerable sections through direct benefit transfers (DBT) played a major part in facing the pandemic in April-May 2021.
“One of the important components of the JAM trinity, Aadhaar, the world’s largest initiative to provide biometric identity has facilitated financial inclusion through innovative digital platforms”, was the encouraging statement from the governor.
The NACHAadhaar Payments Bridge (APB) System and PMJDY together helped to transfer cash benefits under Pradhan Mantri Garib Kalyan Yojana and the fact that ₹5.53 lakh crore was transferred digitally across 319 government schemes spread over 54 ministries during 2020-21 was an unbelievable information.
The governor narrated the following steps taken by RBI to meet the dire situation with financial infusion measures:
What about future?
Post Pandemic World: The Way Forward
His last part of the speech centered around the efforts to be triggered to face post pandemic situations.
The governor firmly emphasized the role of financial inclusion in future also to serve the down trodden and the worst affected segment of the society. Let me enlist some of the facts mentioned by him in seriatim.
1. Considering the complementary role played by microfinance in bridging the gaps at the last mile, a consultative document for harmonizing the regulatory frameworks for various regulated lenders in the microfinance space was issued.
2. The primary objective would be to address the concerns relating to over-indebtedness of microfinance borrowers; enable market mechanism to rationalize the interest rates; and empower the borrowers to make an informed decision by enhancing transparency of loan pricing.
3. The scaling up of Centre for Financial Literacy (CFL) project across the country at the block level by March 2024.
4. Recognizing the importance of inculcating financial literacy concepts at a young age, one of the strategic goals of the National Strategy for Financial Education 2020-2025 (NSFE) would be integrating financial literacy content in the curriculum for school children. So far 15 state educational boards have included modules on financial education in their school curriculum. Teaching financial education at gross root level would ensure transformation of villages as financially educated ones and ready to face the future. This would invariably equip them to make financial choices willingly fully aware of their consequences.
5. We do understand that to measure the extent of financial inclusion in the country, it had been decided to construct and periodically publish a “Financial Inclusion Index” (FI Index) which would contain parameters across the three dimensions of financial inclusion viz., Access, Usage and Quality. Work on FI Index would be out shortly, we were told.
How did RBI Governor conclude?
He firmly concluded that the responsibility of all stakeholders will be to ensure that the financial ecosystem (including the digital medium) is inclusive and capable of effectively addressing risks like mis-selling, cyber security, data privacy and trust in financial systems by literacy and financial education from primary school level.
One of the most enlightened RBI Governors ranking among the best in the world, both with administrative experience at the highest bureaucratic levels and also now with RBI, the speech of the present Governor opened up the eyes of the enlightened management of the financial stakeholders at all levels of the society to actually usher in financial inclusion as a formidable force for ensuring the emergence of India among the most diversified and enriched developed world that would serve the forgotten and down trodden population. Surprisingly, this is the most appropriate message since the present economy derives its revival mostly on the strength of our rural population after the pandemic who seem to have understood the financial products much better than the urban ones and most of the big companies have woken up to serve the unlimited potential of the economy by evolving new business plan for rural economy.
Yes, initiation of the best digital products by RBI under the watchful eyes of our present central/state governments have opened the unknown dimensions of our economy.
Like millions, I shall observe with inquisitiveness and unlimited energy like a newly born baby for our economic growth through financial inclusion.
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