Abstract

This paper explores the growing inclusiveness of India's banking sector, tracing its transition from a primarily government-controlled model to a more open and technologically advanced system. It focuses on the role of key initiatives, including the Pradhan Mantri Jan Dhan Yojana, Unified Payment Interface, and Pradhan Mantri Mudra Yojana, in democratizing access to financial services. These programs have demonstrably increased financial inclusion among rural populations, facilitated the growth of micro-enterprises, and promoted women's economic participation. The Reserve Bank of India's strategic policy interventions, alongside the expansion of physical banking infrastructure and the adoption of financial technology, have been pivotal in driving this transformation. This analysis underscores the critical importance of inclusive banking for India's sustainable economic growth, emphasizing its potential to alleviate poverty, generate employment, and bridge financial divides.

Introduction 

The generation to which I belong, is called the Gen X in today’s parlance. Being brought up at a time in a country which was still struggling to get a foothold and carrying the tag of being an underdeveloped nation, we were the generation which has clearly witnessed the transition from the old to the new. A generation which was born in independent India, however faced the challenges of a nation set to grow. The restlessness of achieving something and to take India on to the world map, while still fighting the evils of poverty, population, uncertainty, and lack of education. I sometimes wonder how this story unraveled and how we as a nation are today open to exploring the world and the world to explore us. Facing what I can say is a problem of plenty. Gone are the days when we saw only the humble Bajaj Scooter or an Ambassador car on the roads. Today the challenge is getting a parking space and managing the ever-booming traffic in cities. The perils of development we must face, but the comfort and convenience it brings cannot be traded. 

This development we see around us in the past few decades has been a result of a growth in every sector. However, this would not have been possible without the Banking sector giving it the much-required push. Banking as we see in India has grown and developed multifold since independence. Each regime understood the role Banks would play in the India story being envisaged at that time. 

Be it the early years between 1947–1969, the Banking industry saw a struggle to survive and at the mercy of a few private banks. Even the period between 1969 – 1991 India witnessed Nationalization of Banks, creation of the Regional Rural Banks (RRB), Lead Bank Schemes (LBS) and Priority Sector Lending (PSL). All aiming at bringing in the marginalised sections of the country into an organized channel of Banking. 

The next transformational era started in 1991-2010. This era marked the foray of Indian Banking and economy to a more growth oriented and developmental phase. This phase saw the rise of new age private sector Banks and adoption of global standards such as BASEL Norms. This period obviously coincides with the economy adopting the liberalization, privatization and globalization mantra and opening its doors to the world. The period saw the emergence of new technologies like core banking systems and ATMs, along with the new transaction modes of RTGS etc. The focus on agriculture grew stronger with fresh inclusion with Kisan credit cards (KCC)and Self-Help Groups (SHG). This period was a period of visible transformation with a growing India and the emergence of new global businesses.

The on-going phase marks the watershed in the history of India’s growth and development. What is marked is the unprecedented advancement in the Banking industry, hand in hand with the economy. Aided by the government schemes such as Pradhan Mantri Jan Dhan Yojana (PMJDY), which brought millions into the banking system, by which over 34 crore accounts were opened which approximately INR 89000 crores of balance. The Aadhaar based linking of banking helped to reach the beneficiaries of the Direct Benefit Transfers (DBT) and subsidy payments. The Unified Payment Interface (UPI) has increased the ease of transactions and reduced the reliance on cash, making more and more people participate in the organized channels of Banking. Pradhan Mantri Mudra Yojana (PMMY) has promoted the MSME sector and upliftment of women. The Pradhan Mantri Suraksha Bima Yojana (PMSBY) focused on getting an insurance cover, accidental death or disability cover to the majority of citizens who were not able to afford the insurance safety net. Apart from this the Atal Pension Yojana ( APY) has been oversubscribed since introduction. Overall rise of business and growth in digital banking and fintech innovations has brought India to the forefront.

Over a period of 78 years owing to the sheer size of the country, the commonality of development and equality in growth has been the theme always. The aim is to promote every corner of the country and each citizen. Hence the focus on inclusivity. The Reserve Bank of India (RBI) implemented the National Strategy for Financial Inclusion between 2019-2024 in the year 2020. The aim of this Financial Inclusion Policy was to ensure financial services to all and credit to the needy at a low cost. Apart from providing financial services, the policy aims  to give access to employments through skill development, financial education and awareness to everyone, at the same time protecting customer and having a grievance redressal mechanism. The planning and the vision for this strategy was the efforts of many regulatory bodies and the Central Government i.e.: Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDA) and Pension Fund Regulatory and Development Authority of India (PFRDA). This strategy of inclusion has a multiplier effect and has helped to boost output, generating employment across strata of society, thereby slowly reducing poverty and bringing parity to the incomes of people. The other side effect has been promotion of gender equality and women empowerment.  

This strategy is an outcome of the in-depth study conducted by RBI across various countries and has taken up the best practices from all of them. Realizing that we need (i) a targeted approach (by targeting specific sectors), (ii) strengthening the infrastructure of payment systems, (iii) maintaining strong regulatory supervision, (iv) drive financial literacy, (v) focus on new innovation and adoption of technology, and (vi) proper monitoring and regulation of the inclusion journey.

Financial inclusion is one of the most important part of the developmental journey for India, and the combined efforts of all the ruling governments from time to time, various regulatory bodies, and countrymen have helped in promoting the financial-inclusion web across the nation. The objective is financial freedom for everyone, providing choices of financial services one wants to avail, access to means of skills-based livelihood and employment, financial literacy and proper grievance redressal mechanism and proper coordination. These efforts have not gone in vain, and the impact is visible in the way technology is being used, internet penetration and adoption of financial network for transactions across the country.

According to a blog published by the National Informatics Centre the rise in the UPI transactions has been phenomenal. From a processing over 100 million transactions worth INR 67 billion in 2017,  we witness a steep jump in year 2023-24, with UPI’s total transaction volume crossing at INR 83.75 billion.

The convenience and ease of UPI and the protected payment environment has not just helped the general population but has a predicted growth of 31percent CAGR  by 2026 end. The Digi Dhan Mission (DDM) has facilitated the creation of a digital infrastructure and financial transactions. Below is the volume of digital transactions over the years: 

We are again entering an era what RBI terms as Frictionless Finance. Stressing on change and providing ample support and technological advancement to make availability of finance smooth and easy. RBI has started its own Innovation Hub to enable this vision. Providing thought leadership to solve industry challenges. Unified Lending Interface (ULI), Mule Hunter Ai, Fintech and startups, The Swanari program are some of the areas where they wish to focus on.

Financial inclusion, Banking Penetration and India Growth- Several research works globally show a clear link in the growth and penetration of bank branches, ATMs, Micro loan branches, and banking correspondents.  

According to the Economic Survey 2024-25, India’s monetary and BFSI sectors have performed well in the first three quarters of Financial Year 2024-25.

As per the Ministry of Finance, this Economic Survey shows that credits provided by Bank’s have grown at a steady rate this Financial Year. The Scheduled Commercial Banks (SCBs) have shown a consistent and maintained growth in profits , with profit after tax (PAT) surging by 22.2 per cent and an overall fall in gross non-performing assets (GNPAs), to as low as 2.6 per cent in September 2024, a lowest in the last 12 years. Alongside, there has been an increase in the capital-to-risk weighted asset ratio (CRAR). 

According to the Statista report of 2025 we see a steady growth over the years, with projections till 2029.

The real GDP growth rate at the moment is in decline, however it is projected to remain balanced over the coming few years. According to Statista there has been a shift in the economic growth of developing nations like India. As per the World GDP ranking 2025 list, India stands at the fifth position and is all set to beat Japan in 2025 to reach the fourth position. According to IMF projections, by 2027 India will outdo Germany and secure the third position, only after USA and China. Below are the IMF projections for 2025:

The reason for India’s growth and progress is the political reform of liberalization, globalization and privatization, that started in 1991. It not only encouraged trade but changed the dynamics for monopolies to go out of business. The small-scale industry boomed due to better price controls, laws supporting SME and MSME sector in India.  

GDP growth in India has shown a decline due to Inflation in recent years. At the same time, India sees an increase in employment levels in the service sector, thanks to a boom in outsourcing industry and technology.  India remains an agricultural giant, and our primary sector still are market leaders for wheat and tea production. Below is the GDP rate over the years for India:

The GDP showed a dip during the pandemic year of 2020. However, the economy bounced back in  the year 2021.

As they say, with great freedom comes greater responsibility. India is at a very interesting phase in history of the world. Despite being a very young independent nation, we have achieved a lot. However, this comes with its own set of challenges and problems. As a nation we collectively face inflation as a growing concern. Below is the Statista report :

Similarly, despite the development, we face the perils of unemployment at over 4percent. Though we are a very young nation, with a majority of the workforce at the early stages of their career, most people are largely employed in the unorganized sector. Additionally, the unskilled youth largely remain unemployed or underemployed, whereas the skilled youth prefer to migrate to other countries with better prospects. We face challenges of wage disparities and a major issue of representation. Be it the lower economic groups or gender-based representation, the scenario remains skewed. Reforms in terms of equal opportunities for all, better work standard and sustainability, or impetus to skilled jobs, considering future growth and requirements.

Basis World Bank report of 2024, India is one of the world’s fastest growing economy. Rising the graph each day at a rapid rate of 8.2 percent in FY23/24. The manufacturing sector grew by a staggering 9.9 percent. The service sector grew and faced the challenges of the economy and the pandemic. Growth was seen in infrastructure and real estate investments. Government provides impetus to boost the manufacturing sector, by providing various schemes and better  business environment, improving infrastructure, enhancing tax efficiency , alongside making regulations to ensure the vast geography of the country is covered by a web of  the organized Banking sector. Trade plays a vital role in development of any economy.  India not only excels in the IT, business services and pharma, it has diversified its exports in sectors like textiles, footwear, as well as electronics and green technology products focusing on sustainability. India has formulated the National Logistics Policy and created both physical and digital infrastructure for Trade. Understanding the need for global trade and government focus will help the overall growth of economy with spotlight on Technology and Banking. Inclusivity of trade, finance, equal development across regions, along with Government support has pushed India towards a place in the top ten economies of the world.