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

  • Rama Pal


    (Tata Institute of Social Sciences)

  • Rupayan Pal


    (Indira Gandhi Institute of Development Research)

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.

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Paper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2012-013.

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Length: 46 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:ind:igiwpp:2012-013
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  1. Wagstaff, Adam, 2009. "Correcting the concentration index: A comment," Journal of Health Economics, Elsevier, vol. 28(2), pages 516-520, March.
  2. 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.
  3. James Ang, 2008. "Finance And Inequality: The Case Of India," Monash Economics Working Papers 08/08, Monash University, Department of Economics.
  4. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
  5. Erreygers, Guido, 2009. "Correcting the Concentration Index: A reply to Wagstaff," Journal of Health Economics, Elsevier, vol. 28(2), pages 521-524, March.
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