Financial inclusion strategies

India's National Strategy for Financial Inclusion (NSFI) seeks to make financial services available, accessible, and affordable to all citizens in a transparent manner to ensure inclusive growth. Data reveal that Assam has huge targets to meet for achieving the goals set by the national strategy. The NSFI has identified six key pillars for financial inclusion – universal access to financial services, providing a basic bouquet of financial services, access to livelihood and skill development, financial literacy and education, customer protection and grievance redressal and effective coordination. Penetration of the banking system is a key indicator of financial inclusion. The average population per bank branch in Assam is 10,573. The state has 2948 bank branches including 1501 belonging to public sector banks, 907 private banks, 473 Regional Rural Bank and 67 cooperative bank branches. The state with about 2.37 crore adult population has only 4,275 Automated Teller Machines (ATMs). Official data also reveal that of the 184 credit deficit districts in India, 14 are in Assam. All seven districts governed by the three autonomous councils under the Sixth Schedule in the state- Bodoland Territorial Council, Karbi Anglong Autonomous Council and Dima Hasao Autonomous Council fall in this category. Exclusion from the formal credit system often pushes low-income households to seek credits from the informal credit market which charges exorbitant interests, and many such households are trapped in perpetual financial debt repayment to money lenders and non-banking financial companies. Credit deficit districts are also pointers of the lack of desired entrepreneurial growths in these districts due to poor access to credit. Poor performance of the state in Prime Minister's Employment (PMEGP) Generation Programmes is reflective of the yawning gaps in the financial inclusion achievements. While the national-level performance has surpassed the targets set Assam's performance was a low 34 per cent. The target for the current financial year of the government of India backed credit-linked subsidy scheme has been kept at Rs 152.26 crore, the same target for the previous financial year for the state. The review of the performance of different banks at the State Level Bankers Committee reveals that some of the banks in the state have not sanctioned even a single PMEGP proposal which reflects poorly on the banks' performance in schemes and programmes designed to generate employment and livelihood. Under the Assam State Rural Livelihood Mission (ASRLM), 60,000 Self Help Groups are targeted to be provided bank credit linkage with a total credit disbursement target of Rs 700 crore for the current financial year. Lessons must be learnt from poor PMEGP so that targets under the ASRLM do not remain unachieved. Expanding the banking system network is critical to ensure easy access to financial services for every SHG. Apart from Business correspondence, digital banking can fill the gap of physical brick and mortar branches of banks, but the availability of reliable internet services is critical. The bad experience of several lakhs of women microfinance borrowers who are members of women SHGs in the state defaulting in loan repayment is an eye-opener that the state needs to focus more on financial literacy and educating borrowers to judiciously use the credit disbursed to them. Some of the microfinance institutions violated RBI norms and provided loans to many SHGs even when they had loans at hand to repay. Besides, due to a lack of awareness on credit management and consequences on non-repayment of loans, a large number of borrowers used the loans for household consumptions and were left with no money to repay. If women SHGs provide credit-linkage with banks without empowering them in financial literacy and education implementation will be remain limited to mere achieving the disbursement targets of the banks without achieving the primary objectives of the ASRLM of building the trust of the poor in the banking system. The lack of adequate bank branches within a short distance requires SHG members to make frequent visits to the nearest available branch due to which availing of financial services in remote areas is both time consuming and costly. ASRLM promoting women SHG members as Business Correspondent Agents also called BC Sakhis, is a significant step towards ensuring doorstep banking services to the poor in rural areas far away from bank branches. Expanding the presence of such BCAs to all districts and increasing the number of BC Sakhis will go a long way to improving access to banking and financial services for a vast majority of the population. Easy access to banking services and a formal credit system will also empower the rural poor and low-income households not to fall prey to dubious money lending businesses. All banks, public as well as private, taking a pro-active role in imparting financial literacy to women SHG members across the state to strengthen the ASRLM initiative of grooming more women BC Sakhis in the state can script a spectacular success story of financial inclusion in the state.