Financial Exclusion: A Theoretical Approach

The problem of financial exclusion has gained wide currency in recent times owing to the aggressive persuasion of financial sector reforms in India, downsizing government share in nationalized banks, liberalizing the bank licensing policy and allowing the entry of foreign banks. The unfettered competition injected in to the financial sector with liberal agenda has in fact spawned a number of sea changes in the financial scenario. The vigorous pursuit of profit in place of the objective of “social and development banking” has paved the way for a shift from “mass banking” to “class banking” resulting in the exclusion of a segment of population from the mainstream financial framework, who are regarded as “credit unworthy” in financial parlance. The ICT enabled banking services have also kept some people away from the financial services, leading to the technical exclusion of these people. Financial exclusion is not a new phenomenon, although its dimensions have been changed in tune with the policy and technology related changes in recent times. This paper intends to focus on financial exclusion with a theoretical perspective