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Financial Inclusion & Rural Banking

Banking / Economy Awareness · Institutions, Markets & Economy

Useful for: IBPS Banking

Overview

Financial inclusion brings banking, credit, insurance and pensions to unbanked people, especially in rural areas.

Key points

Pradhan Mantri Jan Dhan Yojana (2014) gives basic savings accounts with RuPay cards.
Regional Rural Banks were set up in 1975 (RRB Act, 1976); ownership Centre 50%, sponsor bank 35%, state 15%.
Kisan Credit Card (1998) gives farmers flexible short-term credit.
Business correspondents provide banking services in villages.
SHG–bank linkage (promoted by NABARD) gives group-based credit.

Explanation

The Lead Bank Scheme assigns a bank to coordinate credit in each district.
Micro-ATMs and AePS bring cash services to villages.
Small finance and payments banks were created for inclusion.
Financial literacy centres teach basic money skills.

Step by step

Identify the institution, rule or instrument asked.
Recall its definition, year, limit or function from a table.
Eliminate options from similar institutions or older rules.

Examples

RRB ownership shares → Centre 50%, sponsor bank 35%, state 15%.
The scheme giving basic accounts from 2014 → PM Jan Dhan Yojana.
Kisan Credit Card was introduced in → 1998.

Traps and advanced points

Trap: Wrong RRB ownership split.
Trap: Dating PMJDY to 2015.
Trap: Mixing KCC and MUDRA.

Quick revision

PMJDY 2014.
RRB 50:35:15.
KCC 1998; BCs; SHG linkage.

Practice MCQs

Which term-description pair is correctly matched for the concept “financial inclusion”?
1. DICGC — access to useful and affordable formal financial services
2. financial inclusion — access to useful and affordable formal financial services
3. EXIM Bank — access to useful and affordable formal financial services
4. IRDAI — access to useful and affordable formal financial services
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Answer: (b) financial inclusion — access to useful and affordable formal financial services. Financial inclusion — access to useful and affordable formal financial services. Includes accounts, payments, credit, insurance and pensions.
In banking/finance, what does “financial inclusion” refer to most accurately?
1. excess of government total expenditure over non-borrowed receipts under the budget definition
2. Gross Domestic Product
3. access to useful and affordable formal financial services
4. directed lending framework for specified sectors/categories
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Answer: (c) access to useful and affordable formal financial services. The correct answer is “access to useful and affordable formal financial services”. Includes accounts, payments, credit, insurance and pensions.
Which banking/finance term is best described as: access to useful and affordable formal financial services?
1. financial inclusion
2. KYC
3. reverse repo / liquidity absorption operations
4. demat account
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Answer: (a) financial inclusion. Financial inclusion — access to useful and affordable formal financial services. Includes accounts, payments, credit, insurance and pensions.
Regional Rural Banks were set up in —
1. 1969
2. 1975
3. 1982
4. 1990
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Answer: (b) 1975. 1975.
RRB ownership share of the Centre is —
1. 35%
2. 50%
3. 15%
4. 100%
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Answer: (b) 50%. Centre 50%, sponsor bank 35%, state 15%.
RRB ownership share of the sponsor bank is —
1. 15%
2. 25%
3. 50%
4. 35%
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Answer: (d) 35%. 35%.
The Kisan Credit Card scheme began in —
1. 1998
2. 2004
3. 2014
4. 1975
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Answer: (a) 1998. 1998.
PM Jan Dhan Yojana began in —
1. 2010
2. 2014
3. 2016
4. 2019
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Answer: (b) 2014. 2014.
Banking agents in villages are called —
1. business correspondents
2. brokers
3. auditors
4. regulators
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Answer: (a) business correspondents. BCs.
SHG–bank linkage is promoted by —
1. NABARD
2. SEBI
3. IRDAI
4. NSE
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Answer: (a) NABARD. NABARD.