Journal of Rural Development, Vol. 35 No. (2) pp. 167-189 NIRD&PR, Hyderabad. FINANCIAL INCLUSION IN TRIPURA – AN ASSESSMENT Sanjoy Roy* ABSTRACT Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost. Providing access to basic banking services is the first phase of the financial inclusion process. The relevance of financial inclusion in Tripura carries a lot of points. The economy of Tripura plagued by geographical isolation, poor infrastructure facilities, higher incidence of poverty and high unemployement, etc., is agrarian and more than 80 per cent of population lives in the rural areas. The Census-2001 data reveal that proportion of households availing of commercial bankiing services in the State was 26.5 per cent compared to all-India level of 35.5 per cent. There are different estimates on the extent of exclusion but most of the estimates establish that the NER region is financially excluded and the region lies at the bottom. Given the backdrop, the financial inclusion of Tripura is assessed with parameters like the number of branches, number of villages covered, number of accounts opened, expansion of ATM network, credit-deposit ratio, etc., to know the degree of banking penetration in the State. The study shows that physical achievements have reached notable level in Tripura compared with other States but qualitative achievement is still awaited for which banks should emphasise on local opportunities and requirements keeping in view national plan as well as the policy of State government, etc., so that credit penetration reaches the rural poor. * Principal, Netaji Subhas Mahavidyalaya (Government of Tripura), Udaipur, Tripura - 799 120. E-mail: [email protected] 168 Sanjoy Roy Introduction Therefore, financial inclusion is a big necessity for India as a large chunk of the world’s poor The concept of Financial Inclusion is not resides here. Access to finance by the poor and a new one. Nowadays it is a catchphrase and vulnerable groups is a pre-requisite for poverty has attracted the global attention. Lack of reduction and social cohesion. Keeping this in accessible, affordable and appropriate financial view, the Government of India had formed a services has always been a global problem. It committee on Financial Inclusion under the is estimated that about 2.9 billion people chairmanship of Dr. C. Rangarajan, who around the world do not have access to formal submitted the report in January 2008. sources of banking and financial services. India is said to live in its villages, a convincing Significance of financial inclusion statement, considering that nearly 72 per cent Financial inclusion (FI) refers to the of our population lives there. However, a strategy adopted to make banking activities significant proportion of 6,00,000 odd villages and its benefits reach the unbanked areas. It is do not have a single bank branch to boast of, a drive to bring the unprivileged people at par leaving swathes of the rural population in with the mainstream. Financial Inclusion does financial exclusion. Exclusion survey 2003 not restrict itself to credit. It includes financial findings establish that ‘highest number of awareness, knowledge about banks and households (145 million) is excluded from banking, 50 per cent of Indian population does banking facilities provided by banks and the not have bank accounts, only 34 per cent of the advantages of using the banking route. It population is engaged in formal banking, only involves educating people financially; making 17 per cent of population has any credit them financially literate and empowers the exposure especially in remote villages, only poor to take charge of their lives. ‘Apart from 30,000 villages have commercial bank branch, these benefits, FI imparts formal identity, only 10 per cent have life insurance cover, just provides access to the payments system and 9.6 per cent have any non-life insurance’ to savings safety net like deposit insurance. (Chakraborty). RBI has reported that the Hence, FI is considered to be critical for financial exclusion in India leads to the loss of achieving inclusive growth; which itself is GDP to the extent of one per cent required for ensuring overall sustainable (Chattopadhya, 2011). Financially excluded growth in the country’ (Thorat, 2007). Financial people, consistently, depend on money lenders inclusion may be defined ‘as the process of even for their day-to-day needs, borrowing at ensuring access to financial services and timely excessive rates to finally get caught in a debt and adequate credit where needed by trap. In addition, people in far-off villages are vulnerable groups such as weaker sections and unaware of financial products like insurance, low income groups at an affordable cost’ which could protect them in adverse situation. (Rangarajan, 2008). Financial Inclusion, broadly Journal of Rural Development, Vol. 35, No. 2, April - June : 2016 Jrd 35-1 Financial Inclusion in Tripura – An Assessment 169 defined, ‘refers to universal access to a wide are essentially for welfare of the public. It is range of financial services at a reasonable cost. imperative, therefore, that the availability of These include not only banking products but banking and payment services to the entire also other financial services such as insurance populace without discrimination is the avowed and equity products’ (Rajan, 2009). Financial objective of public policy. In our considered Inclusion is depicted in Figure I (Rangarajan, view, providing access to basic banking 2006). The essence of financial inclusion is to services is the first phase of the financial ensure delivery of financial services which inclusion process’ (Chakraborty, 2013). Besides, include - bank accounts for savings and Financial Inclusion also mitigates the transactional purposes, low cost credit for exploitation of vulnerable sections from the productive, personal and other purposes, usurious money lenders by facilitating easy financial advisory services, insurance facilities access to formal credit. (both life and non-life), etc. ‘Banking services Fig -1 Financial Inclusion Savings Bank Insurance Accounts Financial Inclusion Financial Payment & Advice Remittance Affordable Credit Source: Report of the committee for Finacial Inclusion , p-34. The relevance of financial inclusion in SC population, respectively. The economy of Tripura carries a lot of points. Tripura is a tiny Tripura is agrarian and more than 80 per cent north-eastern State with an area of 10,291sq of population lives in the rural areas. The State km (approx) having population of about 38 is characterised by geographical isolation, poor lakh with 31 per cent and 17 per cent as ST and infrastructure facilities, higher incidence of Journal of Rural Development, Vol. 35, No. 2, April - June : 2016 Jrd 35-1 170 Sanjoy Roy poverty, low capital formation, industrial in the credit-deposit ratio continued for all backwardness and high level of these districts between 2000 and 2003 unemployment, etc. The institutional structure (Chavan, 2005). The credit-deposit ratio in the of financial system in the State is not well State was staggering at 30 per cent in March developed. Public sector banks have only 2010 (Proceedings of 96th SLBC Meeting). expanded their network particularly during last Current and Savings Accounts per 100 adult two to three decades. Tripura had an population in 2005 was 36.7 compared to all- underdeveloped banking infrastructure when India average of 59 accounts and a per capita it joined the Indian Union in 1949. In 1956, deposit of ` 7199 compared to all India average when Tripura became a Union Territory, it had of ` 16700 (Thorat, 2006). Credit to Net State only two bank offices, with a coverage of Domestic Product (NSDP) ratio is as low as 18 3,00,000 persons per bank office. compared with all-India average of 62 (Thorat, 2006). The various indicators for Tripura , which In 1969, there were five Scheduled are commonly used for looking at banking Nationalised Commercial Bank (SNCB) development, show that despite improvement branches serving an average population of in the last five years, the level of financial 2,76,000 per bank branch. In March 2007, it rose outreach is low establishing a vast majority of to 186 SNCB branches in the State serving an population outside the access of banking average population of 18,655 per bank branch. services and warranting the initiatives for The Census-2001 data reveal that ‘proportion financial inclusion. of households availing commercial banking services in the State was 26.5 per cent that is Methodology low compared to all India level of 35.5 per Objectives: cent’(Charan, 2005). The use of commercial banking was lowest among ST households. ‘In ● To highlight the measures taken by the 2001, only about 12.2 per cent of the villages Government of India and RBI for in Tripura had a commercial bank branch. Of promoting financial inclusion; the remaining villages, only 15.1 per cent had a branch operating within 5 kilometers. In other ● To study the progress of the initiatives words, the remaining 72 per cent of the taken for financial inclusion in India and villagers had to travel a distance of more than Tripura, and 5 kilometers to reach a bank branch’ (Tripura ● To gauge the effectiveness of financial Human Development Report, 2007). In rural inclusion with gaps in Tripura. Dhalai district, only 11 per cent of all tribal households reported any access to banking The present paper is based on institutions. ‘The credit-deposit ratio for Tripura secondary sources. The information is gathered also underwent a steep fall after 1990. The fall from published speeches of key RBI officials, Journal of Rural Development, Vol. 35, No. 2, April - June : 2016 Jrd 35-1 Financial Inclusion in Tripura – An Assessment 171 articles, journals, newspapers, committee formal sources.