Understanding financial abandoning from a micro perspective: policy responses to promote inclusion in India

Financial inclusion measures initiated in India to contain financial abandonment have hardly taken the demand side factors at grass roots level into consideration. The authorities of implementation, including the Reserve Bank of India, operate under the presumption that the financial inclusion initiatives have trickled down automatically to the lowest administrative unit at village level and have brought respite into the lives of the hitherto financially excluded sections. However, reality on the ground is entirely different and the situation remains unchanged. Since these measures have had hadly any impct on the financially excluded sections of society, the incidence of financial abandonment remains unchanged at the lowest administrative unit. Surprisingly, people at the grass root level are not familiar and have not even heard about the financial inclusion measures. Therefore, it is unrealistic to expect the necessary change to occur in the absence of any financial institution, like commercial bank or cooperative society at lowest administration unit level. Also, the conspicuous absence of rural credit cooperative societies and selfhelp group organizations has further worsened the situation in rural areas. This paper, besides identifying the failures of the financial inclusion measures from the perspective of the lowest administrative unit, attempts to bring the demand side factors to the forefront, including the business potential that exists for financial institutions, and effective administration of financial services by the formal financial system and other newly emerged institutions like self-help groups.