Previous Year Question
With reference to India, consider the following:
Nationalisation of Banks.
Formation of Regional Rural Banks.
Adoption of Villages by Bank Branches.
Which of the above can be considered as steps taken to achieve ‘financial inclusion’ in India?
1 and 2
2 and 3
Only 3
1, 2 and 3
Correct Answer: D
Detailed Solution
Financial inclusion means providing people belonging to disadvantaged, low-income and geographically remote sections with access to savings, credit, payments, insurance and other formal financial services at an appropriate cost.
Statement 1 is correct. Nationalisation of banks was an important step towards financial inclusion.
Fourteen major commercial banks were nationalised on 19 July 1969, followed by six more banks in 1980. The objective was to direct banking resources beyond large industries towards agriculture, small industries, weaker sections and rural areas.
Following nationalisation, the branch network expanded in rural and semi-urban areas, while institutional credit to priority sectors received greater emphasis.
Statement 2 is correct. Regional Rural Banks were established to provide banking and credit facilities to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs in rural areas.
The first five RRBs commenced operations on 2 October 1975. The Regional Rural Banks Act, 1976 subsequently provided them with a statutory foundation. Therefore, the book’s reference to 1982 as the year of their formation is incorrect.
Statement 3 is correct. Adoption of villages by bank branches aimed at the intensive expansion of banking and credit facilities in selected villages. The concerned branch assessed local credit requirements and provided institutional finance for agriculture, animal husbandry, rural crafts and other productive activities.
The approach helped reduce rural households’ dependence on informal moneylenders and connected them with the formal banking system. It can therefore be treated as a financial-inclusion measure.