In order to address the issues of financial inclusion, the Government of India constituted a ‘Committee on Financial Inclusion’ under the Chairmanship of Dr C. Rangarajan. The Committee submitted its final report to Union Finance Minister on 4 January 2008.

The terms of reference of the committee included:

1. (i) studying the pattern of exclusion from access to financial services disaggregated by region, gender and occupational structure

2. (ii) identifying the barriers confronted by vulnerable groups in accessing credit and financial services including supply, demand and institutional constraints

3. (iii) reviewing the international experience in implementing policies for financial inclusion and to examine their relevance applicability to India.

The committee further suggested:

1. (i) a strategy to extend financial services to small and marginal farmers and other vulnerable groups, including measures to streamline and simplify procedures, reduce transaction costs and make the operations transparent for growth

2. (ii) measures including institutional changes to be undertaken by the financial sector to implement the proposed strategy of financial inclusion

3. (iii) a monitoring mechanism to assess the quality and quantum of financial inclusion including indicators for assessing progress.

To suggest measures to extend the reach of the financial sector to such vulnerable groups by minimizing, if not eliminating the formal and informal barriers to access encountered by such groups.

In the report that Dr Rangarajan submitted, it was maintained that access to finance by the poor and vulnerable groups is a prerequisite for poverty reduction and social cohesion.