Factors influencing financial inclusion in India

In the modern era, financial institutions serve as facilitators of economic progress and advancement. It is, therefore, necessary that people have equitable access to these financial institutions and the services they offer especially in emerging economies like India. Notwithstanding that the Indian banking sector has grown tremendously over the years in terms of performance and outreach, a large number of people have limited or zero access to the financial services. Financial Inclusion thus emerges as a necessity for it is equally beneficial to the banks as well as to the unserved population vis-a-vis the provision of new avenues for the former and financial services for the latter. In this study, we used panel data covering Indian states over a period of five years, from 2009 to 2013, to assess the factors influencing financial inclusion in the country. This study found that distinct state-effect is prevalent among the Indian states. Further, the number of factories as a proxy for industrialization and outstanding credit as a proxy for loans and advancements significantly reveal that income and employment generating schemes must be launched by the Government of India and the Central Bank of India keeping in mind the underprivileged lot.