Chapter 23: Monetary Policy of RBI and Its Impact on the Financial Inclusion in Rural India

The principal objectives of the monetary policy of India like other countries are growth with stability. However, that “growth” objective was not narrow confined only to the propagation of GDP or per capita GDP. It has also encompassed the qualitative improvement in the living standard of the common people through the encouragement of “priority sector lending” for financial inclusion. Thus the overall credit flow to different sectors of the economy has not only been influenced by the quantitative credit control instruments but also by the qualitative credit control instruments which particularly aimed at embellishing social justice, equity, financial inclusion, etc. Financial inclusion signifies gradual expansion of the outreach of the banking services and credit flow at an affordable cost to the economically poor and the disadvantaged sections of the people in a society. Among several programs undertaken by the government of India for financial inclusion of rural poor during the post-reform period, the monetary policy of the Reserve Bank of India (RBI) is supposed to play the most crucial role. One of the most celebrated rural development schemes that helped in fostering the process of rural development in India is supposed to be the self-help group (SHG) formation under Swarna Jayati Gram Swarojgar Yojana (SGSY) program since 1999 (which had subsequently been replaced by the National Rural Livelihood Mission or NRLM since 2011) that aimed at poverty eradication along with the generation of employment and income opportunities in rural India.