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Income related inequality in financial inclusion and role of banks: Evidence on financial exclusion in India

Author

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  • Rama Pal

    () (Tata Institute of Social Sciences)

  • Rupayan Pal

    () (Indira Gandhi Institute of Development Research)

Abstract

This paper analyzes income related inequality in financial inclusion in India using a representative household level survey data, linked to State-level factors. It shows that (a) the extent of financial exclusion is quite severe among households across all income groups, (b) income related inequality in financial inclusion varies widely across sub-national regions in India, but it is quite high in most of the cases, (c) income related inequality in financial inclusion cannot be considered as synonymous to income inequality. A notable result is that greater availability of banking services fosters financial inclusion, particularly among the poor. This paper also provides estimates of the effects of various socio, economic and demographic characteristics of households on propensity of a household to use formal financial services, and compare that for rural and urban sectors.

Suggested Citation

  • Rama Pal & Rupayan Pal, 2012. "Income related inequality in financial inclusion and role of banks: Evidence on financial exclusion in India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-013, Indira Gandhi Institute of Development Research, Mumbai, India.
  • Handle: RePEc:ind:igiwpp:2012-013
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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2012-013.pdf
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    References listed on IDEAS

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    1. Erreygers, Guido, 2009. "Correcting the Concentration Index: A reply to Wagstaff," Journal of Health Economics, Elsevier, vol. 28(2), pages 521-524, March.
    2. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    3. Wagstaff, Adam, 2009. "Correcting the concentration index: A comment," Journal of Health Economics, Elsevier, vol. 28(2), pages 516-520, March.
    4. James B. Ang, 2010. "Finance and Inequality: The Case of India," Southern Economic Journal, Southern Economic Association, vol. 76(3), pages 738-761, January.
    5. Abu-Bader, Suleiman & Abu-Qarn, Aamer S., 2008. "Financial development and economic growth: The Egyptian experience," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 887-898.
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    1. repec:eee:ecmode:v:69:y:2018:i:c:p:67-81 is not listed on IDEAS

    More about this item

    Keywords

    Financial inclusion; inequality; concentration index; banks;

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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