Raj Kishore from Muzzafarpur in Bihar works as a cook in Delhi. He is unable to open a bank account and is forced to keep the money he saves in the uncertain custody of a friend. Though he worries about the safety of such an arrangement, he is left with no option.

But there are numerous others like him in a country where millions continue to be excluded from financial services. Surveys show that it is the poorest and the most disadvantaged who've been left out of the huge expansion of financial services over the last decade. If anything, their share has actually shrunk over the years.

Referring to the Invest India Market Solutions (IIMS) survey-2007, the RBI's annual Report on Currency and Finance (RCF) 2007-08 states that 73 per cent of those with an income of less than Rs 50, 000 are dependent on noninstitutional sources like moneylenders, relatives and friends for credit. As one gets richer, dependence on such sources decreases. Among those in the next bracket, earning Rs 50, 000 to Rs 1 lakh annually, 54 per cent are dependent on non-institutional credit sources. In the top bracket, those earning above Rs 4 lakh, over 70 per cent access institutional credit.

The IIMS survey also showed that the smallest proportion of people with a bank account in 2007 were among the poorest (earning less than Rs 50, 000 annually), whether in urban or rural areas — 34 per cent and 27 per cent respectively. Among the richest, the proportion is 98 per cent (urban) and 96 per cent (rural).

In a bid to boost financial inclusion, banks were encouraged to open no-frills accounts. In just two years, the number of such accounts increased from around half a million in March 2006 to 15 million in 2008. But tempering the obvious success and focusing on the hard road ahead, RBI deputy governor Usha Thorat in her September 2008 keynote address on 'Financial Inclusion and Information Technology' said, "Evaluation by external agencies appointed by RBI has shown that while the first stage of opening no-frills accounts has been impressive, due to inadequate follow up, cost of transaction and access constraints, in many cases, the accounts have not been operated upon at all after having been opened. " Keeping this in mind, the RBI has recommended offering services closer to customers through mobile branches and extension counters.

Not that the problem is limited to India. The RCF points out that despite the broad international consensus regarding importance of access to finance as a crucial poverty alleviation tool, it is estimated that globally over two billion people are currently excluded from it (United Nations, 2006). And it's set to get more complicated. By 2020, the task of banking for the unbanked will be truly daunting. Nearly 600 million new customers' accounts will have to be opened and serviced through a variety of channels leveraging IT.

The emphasis on access to formal means of savings is because informal means rarely benefit from interest rate or tax concessions. "Second, informal saving channels are much less secure. Those who can afford it least suffer the highest risk, " stated the RCF. It added that when forced to resort to non-formal lenders the poor were exposed to higher rates of interest and were unable to service the loan or repay it. The poor often ended up losing the property against which the loan was secured. Clearly, financial exclusion could have perilous consequences for the poor.