The new scheme promises a bank account, a debit card and an insurance cover of Rs 100,000 for poor families.
But many believe that including the financially excluded will continue to remain an unsolved puzzle, at least for now, as problems are plenty, with very few credible solutions in sight.
Indian banks have been struggling for decades to make financial inclusion commercially viable.
The nationalisation of banks in 1969 and the thrust on branch building that followed were attempted at promoting financial inclusion.
In recent years, the Reserve Bank of India adopted a more structured approach directing all state-run and private sector banks to submit a board-approved, three-year financial inclusion plan.
It started in April, 2010, and banks were asked to prepare another three-year FIP for the period 2013-16.
Lenders were asked to design self-set targets in respect of opening rural brick-and-mortar branches, hiring business correspondents, covering un-banked villages and offering financial products such as basic savings bank deposit accounts, kisan credit cards and general credit cards.
Yet, more than 40 per cent of the country’s 1.2 billion people continue to remain financially excluded.
A senior banker with a public sector bank, said, requesting anonymity: “It is not that banks have not made any progress in financial inclusion.
“But due to lack of awareness, low financial education and procedural hassles, many still prefer to borrow money from informal sources like money lenders.
“Also, despite the rapid expansion, the number of bank branches in the country is still inadequate.”
He added that creating a bank account will not necessarily ensure financial inclusion as many of these accounts turn dormant within months after being opened.
A survey on financial access in 2011 revealed that India had 10.6 branches and 8.9 automated teller machines per 0.1 million population.
Compared to this, China had 23.8 branches and 49.6 ATMs, while Brazil had 46.2 branches and 119.6 ATMs per 0.1 million people.
To address the proverbial last-mile problem, banks have turned to information and communication technologies and engaging business correspondents to expand their reach.
But it has not been smooth sailing so far, with reports surfacing of devices like hand-held machines -- crucial to the success of this model -- not properly functioning in many areas of the country.
“Connectivity remains an issue in many rural villages,” admitted a senior executive with a large private sector bank.
The government also noted the challenges in a recent communication to banks on financial inclusion.
“Even though the financial inclusion programme was implemented, it was observed
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