Previous Year Question
Which one of the following is not the objective of financial inclusion?
To extend financial services to poor population.
To unlock the door of growth potential of weaker section.
Shrinking of banking infrastructure.
To extend financial sector into rural areas.
Correct Answer: C
Detailed Solution
The basic objective of Financial Inclusion is to connect people and areas having limited access to banking and financial services with the formal financial system.
According to the RBI, Financial Inclusion means ensuring that appropriate financial products and services are available to all sections of society, particularly vulnerable and weaker sections, at an affordable cost. These may include savings, payments, credit and other formal financial services.
Option (a) is an objective. Extending banking and other formal financial services to the poor population is a fundamental purpose of Financial Inclusion.
Option (b) is an objective. Access to savings, credit, payments and other financial facilities can expand economic activities, investment and livelihood opportunities for weaker sections. Financial access can therefore help unlock their growth potential.
Option (d) is also an objective. Expansion of banking services into rural and previously unbanked areas is an important component of Financial Inclusion. The RBI's National Strategy for Financial Inclusion emphasised universal access to formal financial service providers and expansion of banking outlets and digital infrastructure.
However, option (c) is exactly the opposite of Financial Inclusion.
If banking infrastructure is shrunk, the number of branches, banking outlets, Business Correspondents and other access points may decline, making it more difficult for financially excluded populations to access services.
In practice, the RBI's strategy has focused on expanding outreach and deepening financial access rather than shrinking banking infrastructure. RBI's 2024-25 data also show the continuing expansion of access through village banking outlets and a very large Business Correspondent network.