Development of Financial Inclusion in Rural India – A Conceptual Analysis

India is living in rural areas said by father of our nation. But, the peoples who are living in rural areas not really lived and they are constrained to live with some socio-economic factors. Even though, India is fast growing country as compared with rest of world in all respects except economic status of people. Beginning with First Five Year Plan in 1951, resources were deployed on areas like irrigation and energy, agriculture and community development, transport and communications, industrial development, social services, land development and infrastructure. Initially, the growth rates were around 3-4 per cent which gradually touched a peak of over 9 per cent. Despite economic turbulences, financial scams, population growth, natural calamities, wars, political disturbances, India witnessed several achievements in many areas in the last six decades. But still, there are people who are ignored by banks and financial institutions to get financial services and benefits. It is very important issue before the government to make them inclusive. So, the Reserve Bank of India has set up a commission (Khan Commission) in 2004 to look into financial inclusion and the recommendations of the commission were incorporated into the mid-term review of the policy (2005-06). In the report RBI exhorted the banks with a view of achieving greater financial inclusion to make available a basic “no-frills” banking account. The Eleventh Plan (2007-12) document was divided into three volumes viz., (I) Inclusive Growth (II) Social Sector and (III) Agriculture, Rural Development, Industry, Services and Physical Infrastructure. It addresses on sustained growth and investment aiming at improvement in the quality of life. The percentage of population below the poverty line has come down from 36% in 1993-1994 to 28% in 2004-05 while defining the income. The present paper tries to analyze extent of financial inclusion in India, and evaluate financial inclusion scenario. It further tries to identify reasons of financial exclusion by considering demand side challenges rather than supply side challenges. To understand the people perception of financial inclusion in general context, a survey is conducted in this background it is worthwhile to study the role of banks in Financial Inclusion of the Poor in Karaikal Region, Pondicherry, because the Government of India implemented the pilot project on Financial Inclusion in Niravi in Karaikal Region. This pilot project has spread effect and all the banks at present have their own strategies for Financial Inclusion.